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SemGroup Corporation Reports Fourth Quarter and Full Year 2014 Results

Full Year Adjusted EBITDA Increased 52%

2015 Adjusted EBITDA Guidance Initiated at $320 to $360 Million

TULSA, Okla., Feb. 26, 2015 (GLOBE NEWSWIRE) -- SemGroup® Corporation (NYSE:SEMG) today announced its financial results for the three months ended December 31, 2014.

SemGroup's adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) was $83.2 million for the fourth quarter 2014, compared to $79.4 million for the third quarter 2014 and $57.8 million for the fourth quarter 2013, an increase of approximately 5% over the previous quarter and up 44% year-over-year. Adjusted EBITDA, which is a non-GAAP measure, is reconciled to net income below.

"SemGroup delivered another quarter of solid results, consecutively increasing financial performance and dividend payout to finish 2014 strong," said Carlin Conner, president and chief executive officer of SemGroup. "We are well positioned for continued growth with a diverse footprint of assets located in some of the most active oil and gas basins in the country. As we move forward in 2015 and beyond, the ability to build and operate significant midstream systems will be a differentiator and our track record speaks for itself."

Fourth Quarter 2014 Adjusted EBITDA Highlights

Compared to the Third Quarter 2014

  • Crude Adjusted EBITDA increased $10.2 million
    • $11 million increase in marketing margin related to higher volumes and realized gains on derivatives
    • $4 million increase in transportation margin as a result of higher volumes
    • $4 million decrease due to increased expenses, primarily related to field services operations
  • SemGas Adjusted EBITDA increased $1.1 million
    • Higher volumes were partially offset by lower commodity price realizations
  • SemCAMS Adjusted EBITDA decreased $7.4 million
    • $3 million increase in G&A expense
    • $2 million decrease related to lower capital fee recoveries
    • $2 million decrease related to timing of operating expense recoveries

SemGroup reported revenues for fourth quarter 2014 of $547.2 million with net income attributable to SemGroup of $8.1 million, or $0.18 per diluted share, compared to revenues of $594.2 million with a net income attributable to SemGroup of $25.3 million, or $0.59 per diluted share, for the third quarter 2014. For the fourth quarter 2013, revenues totaled $457.3 million with a net income attributable to SemGroup of $3.3 million, or $0.08 per diluted share.

Full Year 2014 Highlights

  • SemGroup invested approximately $356 million in growth projects
  • SemGroup dividends increased by 40%
  • Expanded SemGroup's U.S. gas processing position in the Mississippi Lime play of Northern Oklahoma and accelerated the implementation of a new 200 mmcf/d plant by nine months to mid-2015
  • Major projects remain on time and on budget
  • Completed final drop down of White Cliffs Pipeline to Rose Rock Midstream

Adjusted EBITDA for the year ended December 31, 2014, totaled $287.4 million, up 52% from $189.0 million for the year ended December 31, 2013. For the year ended December 31, 2014 SemGroup reported revenues of $2.1 billion with a net income attributable to SemGroup of $29.2 million, or $0.68 per diluted share, compared to revenues of $1.4 billion with a net income attributable to SemGroup of $48.1 million, or $1.13 per diluted share, for the year ended December 31, 2013.

Fourth Quarter 2014 Dividend and Dividend Guidance

The SemGroup board of directors declared a quarterly cash dividend to common shareholders of $0.34 per share, resulting in an annualized distribution of $1.36 per share. This represents a 13% increase from the previous quarterly dividend of $0.30 and a 40% increase year-over-year. The dividend will be paid on March 20, 2015 to all common shareholders of record on March 9, 2015. The company is targeting a dividend growth rate for 2015 of 50% to 60% year-over-year and an annual growth rate of approximately 30% to 40% over the next three years.

2015 Adjusted EBITDA and Capex Guidance

SemGroup anticipates 2015 consolidated Adjusted EBITDA guidance of between $320 and $360 million, an increase of approximately 18% over 2014 results of $287.4 million. The company also expects to deploy more than $775 million in capital investments in 2015, with more than 90% allocated to growth projects.

Recent Updates

  • On February 13, 2015, Rose Rock closed on the previously announced agreement to acquire the remaining crude oil assets of SemGroup, which included the Wattenberg Oil Trunkline System and SemGroup's 50% interest in the Glass Mountain Pipeline, for a purchase price of $325 million consisting of cash and 1.75 million Rose Rock Midstream common LP units.

Rose Rock priced 2.3 million common units representing limited partner interest at $40.32 per common unit, which included the underwriters' 30-day option to purchase up to an additional 300,000 common units.

Earnings Conference Call

SemGroup will host a joint conference call with Rose Rock Midstream®, L.P. (NYSE:RRMS) for investors tomorrow, February 27, 2015, at 11 a.m. ET. The call can be accessed live over the telephone by dialing 1.888.317.6003, or for international callers, 1.412.317.6061. The pass code for the call is 9662874. 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 fourth 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, 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, our ability to generate sufficient cash flow from operations to enable us to pay our debt obligations or to fund our other liquidity needs; 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; the effect of our debt level on our future financial and operating flexibility, including our ability to obtain additional capital; the ability of our subsidiary, Rose Rock Midstream L.P. (NYSE:RRMS), to make minimum quarterly distributions; the operations of NGL Energy Partners LP (NYSE:NGL), which we do not control; 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; cyber attacks involving our information systems and related infrastructure; 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; and the possibility that our hedging activities may result in losses or may have a negative impact on our financial results; 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)
December 31, 2014 December 31, 2013
ASSETS
Current assets $ 479,280 $ 534,014
Property, plant and equipment, net 1,256,825 1,105,728
Goodwill and other intangible assets 231,391 236,859
Equity method investments 577,920 565,124
Other noncurrent assets, net 44,386 28,889
Total assets $ 2,589,802 $ 2,470,614
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 40 $ 37
Other current liabilities 391,622 499,177
Total current liabilities 391,662 499,214
Long-term debt, excluding current portion 767,092 615,088
Other noncurrent liabilities 211,611 142,449
Total liabilities 1,370,365 1,256,751
Total owners' equity 1,219,437 1,213,863
Total liabilities and owners' equity $ 2,589,802 $ 2,470,614
Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)
Three Months Ended Year Ended
December 31, September 30, December 31,
2014 2013 2014 2014 2013
Revenues $ 547,237 $ 457,328 $ 594,235 $ 2,122,579 $ 1,427,016
Expenses:
Costs of products sold, exclusive of depreciation and amortization shown below 411,655 339,468 458,063 1,623,358 1,020,100
Operating 67,034 60,772 69,377 246,613 223,585
General and administrative 23,963 23,710 23,296 87,845 78,597
Depreciation and amortization 27,498 24,846 25,200 98,397 66,409
Loss (gain) on disposal of long-lived assets, net 11,959 (109) 1,376 32,592 (239)
Total expenses 542,109 448,687 577,312 2,088,805 1,388,452
Earnings from equity method investments 15,827 12,788 14,223 64,199 52,477
Gain on issuance of common units by equity method investee 2,121 26,873 18,772 29,020 26,873
Operating income 23,076 48,302 49,918 126,993 117,914
Other expenses (income), net (2,196) 17,646 (6,368) 28,422 69,415
Income from continuing operations before income taxes 25,272 30,656 56,286 98,571 48,499
Income tax expense (benefit) 12,569 24,051 24,090 46,513 (17,254)
Income from continuing operations 12,703 6,605 32,196 52,058 65,753
Income (loss) from discontinued operations, net of income taxes 4 (6) (1) 59
Net income 12,707 6,599 32,196 52,057 65,812
Less: net income attributable to noncontrolling interests 4,633 3,319 6,934 22,817 17,710
Net income attributable to SemGroup Corporation $ 8,074 $ 3,280 $ 25,262 $ 29,240 $ 48,102
Net income attributable to SemGroup Corporation $ 8,074 $ 3,280 $ 25,262 $ 29,240 $ 48,102
Other comprehensive income (loss), net of income taxes (17,669) 2,752 (10,331) (24,287) (1,555)
Comprehensive income (loss) attributable to SemGroup Corporation $ (9,595) $ 6,032 $ 14,931 $ 4,953 $ 46,547
Net income per common share:
Basic $ 0.19 $ 0.08 $ 0.59 $ 0.69 $ 1.14
Diluted $ 0.18 $ 0.08 $ 0.59 $ 0.68 $ 1.13
Weighted average shares (thousands):
Basic 43,492 42,530 42,708 42,665 42,339
Diluted 43,807 42,888 43,013 42,967 42,646
Reconciliation of net income to Adjusted EBITDA:
(in thousands, unaudited)
Three Months Ended Year Ended
December 31, September 30, December 31,
2014 2013 2014 2014 2013
Net income $ 12,707 $ 6,599 $ 32,196 $ 52,057 $ 65,812
Add: Interest expense 14,650 9,171 14,807 49,044 25,142
Add: Income tax expense (benefit) 12,569 24,051 24,090 46,513 (17,254)
Add: Depreciation and amortization expense 27,498 24,846 25,200 98,397 66,409
EBITDA 67,424 64,667 96,293 246,011 140,109
Selected Non-Cash Items and Other Items Impacting Comparability 15,783 (6,869) (16,868) 41,430 48,909
Adjusted EBITDA $ 83,207 $ 57,798 $ 79,425 $ 287,441 $ 189,018
Selected Non-Cash Items and
Other Items Impacting Comparability
(in thousands, unaudited)
Three Months Ended Year Ended
December 31, September 30, December 31,
2014 2013 2014 2014 2013
Loss (gain) on disposal of long-lived assets, net $ 11,959 $ (109) $ 1,376 $ 32,592 $ (239)
Loss (income) from discontinued operations, net of income taxes (4) 6 1 (59)
Foreign currency transaction loss (gain) 302 (660) 128 (86) (1,633)
Remove NGL equity earnings including gain on issuance of common units (387) (26,168) (14,290) (31,363) (33,996)
Remove gain on sale of NGL units (7,463) (26,748) (34,211)
NGL cash distribution 5,942 4,952 6,450 23,404 18,321
Inventory valuation adjustments including equity method investees 7,781 7,781
Mid-America Midstream Gas Services acquisition cost 3,600
Employee severance expense 101 29 90 220 38
Unrealized loss (gain) on derivative activities (1,078) 785 (411) (1,734) (974)
Change in fair value of warrants (10,076) 9,406 5,550 13,423 46,434
Depreciation and amortization included within equity earnings 6,404 2,304 4,887 18,992 9,520
Bankruptcy related expenses 317 567 116 1,310 567
Charitable contributions 81 3,298 3,379
Recovery of receivables written off at emergence (664)
Non-cash equity compensation 1,904 2,019 2,686 8,386 7,330
Selected Non-Cash Items and Other Items Impacting Comparability $ 15,783 $ (6,869) $ (16,868) $ 41,430 $ 48,909

2015 Adjusted EBITDA Guidance Reconciliation
(in millions, unaudited)
Mid-point
Net income $ 121.5
Add: Interest expense 64.0
Add: Income tax expense 8.0
Add: Depreciation and amortization 109.0
EBITDA $ 302.5
Selected Non-Cash and Other Items Impacting Comparability 37.5
Adjusted EBITDA $ 340.0
Selected Non-Cash and Other Items Impacting Comparability
Depreciation and amortization included within equity earnings 25.0
Non-cash equity compensation 12.5
Selected Non-Cash and Other Items Impacting Comparability $ 37.5
(1) Guidance is on a cash basis for equity investments in NGL, includes fully consolidated Rose Rock Midstream

CONTACT: Investor Relations: Alisa Perkins 918-524-8081 investor.relations@semgroupcorp.com Media: Kiley Roberson 918-524-8594 kroberson@semgroupcorp.com

Source:SemGroup Corporation;Rose Rock Midstream