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SemGroup Corporation Reports Third Quarter 2012 Results

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TULSA, Okla., Nov. 8, 2012 (GLOBE NEWSWIRE) -- 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.

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.

The SemGroup Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=14815

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 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.

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
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
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)
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
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
CONTACT: Investor Relations: Alisa Perkins 918-524-8081 investor.relations@semgroupcorp.com Media: Liz Barclay 918-524-8158 lbarclay@semgroupcorp.com

Source:SemGroup Corporation