Citi s 2012 MLP/Midstream Infrastructure Conference. August 22-23, 2012

Transcription

1 Citi s 2012 MLP/Midstream Infrastructure Conference August 22-23, 2012

2 Forward-looking Information Certain matters contained in this presentation 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 All statements, other than statements of historical fact, included in this presentation 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 presentation, 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. 2

3 Non-GAAP Financial Measures SemGroup Adjusted EBITDA is presented in this presentation for certain periods. Adjusted EBITDA is not a U.S. 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 presentation 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 presentation. 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 can be found on SemGroup s website Rose Rock Midstream This presentation and the accompanying schedules include the non-gaap financial measures of Adjusted gross margin, Adjusted EBITDA and distributable cash flow, which may be used periodically by management when discussing our financial results with investors and analysts. Rose Rock Midstream s website- provides reconciliations of these non-gaap financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP. Adjusted gross margin, Adjusted EBITDA and distributable cash flow are presented as management believes they provide additional information and metrics relative to the performance of our business. Operating income (loss) is the GAAP measure most directly comparable to Adjusted gross margin, net income (loss) and cash provided by (used in) operating activities are the GAAP measures most directly comparable to Adjusted EBITDA, and net income (loss) is the GAAP measure most directly comparable to distributable cash flow. Our non-gaap financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. These non-gaap financial measures have important limitations as analytical tools because they exclude some, but not all, items that affect the most directly comparable GAAP financial measures. You should not consider Adjusted gross margin, Adjusted EBITDA or distributable cash flow in isolation or as substitutes for analysis of our results as reported under GAAP. Because Adjusted gross margin, Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of these non-gaap financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. Management compensates for the limitation of Adjusted gross margin, Adjusted EBITDA and distributable cash flow as analytical tools by reviewing the comparable GAAP measures, understanding the differences between Adjusted gross margin, Adjusted EBITDA and distributable cash flow, on the one hand, and operating income (loss), net income (loss) and net cash provided by (used in) operating activities, on the other hand, and incorporating this knowledge into its decision-making processes. We believe that investors benefit from having access to the same financial measures that our management uses in evaluating our operating results. 3

4 SemGroup Corporation (NYSE: SEMG) Listed on NYSE November 2010 C-Corp Owns RRMS General Partner Total Equity Value (1) $ 1,449 Enterprise Value $ 1,645 Debt/Adjusted EBITDA LTM 1.0x Total Committed Liquidity $ Adjusted EBITDA (2) $ Adjusted EBITDA G (3) $125 - $135 39% Total Return to SEMG Shareholders (4) Rose Rock Midstream, L.P. (NYSE: RRMS) IPO December 2011 MLP Owner/Operator of all RRMS assets Total LP Equity Value (1) $ 472 Enterprise Value $ 472 Yield 5.4% Debt/Adjusted EBITDA No Debt Total Committed Liquidity $ Adjusted EBITDA $ Adjusted EBITDA G (3) $38 - $40 45% Total Return to RRMS Unitholders (4) (1) In millions, except per unit amounts. Current unit price as of 8/14/2012 (2) SemGroup Consolidated (3) 2012 Adjusted EBITDA Guidance (4) Source NASDAXQ OMX and FactSet, SEMG November 30, 2009 to August 14, 2012 and RRMS December 14, 2011 to August 14,

5 SEMG Ownership Structure Public 7.0 mm Common Units Rose Rock Midstream GP, LLC Incentive Distribution Rights 2% GP Interest NYSE: SEMG Public 41.9 mm Shares Outstanding 40.9% LP Interest SemStream SemCAMS SemGas SemLogistics SemMaterials Mexico White Cliffs Pipeline NYSE: RRMS 18% LP Interest (2) NGL Energy Partners LP (NYSE: NGL) (1) 1.4 mm RRMS Common Units; 8.4 million Subordinated Units (2) 9.13 mm NGL Common Units; 6.42% interest in the 0.1% GP As of June 30,

6 Our Business Strategy Capitalize on Organic Growth Opportunities with Existing and New Assets Generate Consistent Operating Margins, Earnings and Cash Flows Maintain Financial Flexibility and Utilize Leverage Prudently Grow Our Business Through Strategic and Accretive Asset Acquisitions Mitigate Commodity Price Exposure Focus on Fee-Based Activities 6

7 Strategically Positioned in Key Growth Areas Primary assets located in the Liquids Fairway in the Mid-Continent Region Montney/Duvernay Canadian sour and sweet gas processing Bakken liquids gathering and marketing DJ Basin/Niobrara White Cliffs Pipeline and Wattenberg Oil Trunkline Mississippi Lime Play gas processing Mississippi Lime Play/Granite Wash Glass Mountain Pipeline Cushing Interchange Scalable storage capacity Bakken Shale DJ Basin Mississippi Lime Play Granite Wash Montney/ Duvernay Shale Williston Basin Niobrara Shale 7

8 Crude Business Overview Rose Rock Midstream Storage 7 million barrels in Cushing, OK 5-7 year contracts first expiration 2015 Connectivity to all major inbound/outbound pipelines Transportation 640 miles of pipeline in Kansas and Oklahoma Capacity of 40,000+ barrels per day Marketing Trucks and third-party pipelines North Dakota Proprietary pipeline in Kansas and Oklahoma Back-to-back transactions mitigate price exposure and net open positions White Cliffs Pipeline 51% ownership and operator 527 miles, 70,000+ barrels per day capacity 20,000 barrels per day take or pay Platteville, CO 10,000 barrels per day leased volume Healy, KS Glass Mountain Pipeline 210-mile, 140,000 barrels per day pipeline Two laterals Granite Wash and Mississippi Lime Play join and terminate in Cushing 4Q 2013 completion Wattenberg Oil Trunkline 37-mile, 12-inch pipeline and storage in DJ Basin 4Q 2013 Transports from Noble Energy production to White Cliffs Pipeline 8

9 Cushing is a Liquidity Hub Designated point of delivery for NYMEX crude oil futures contracts Cushing Commentary North American Oil Flow Continues to serve as the primary crude oil hub in the U.S. Growing volumes (Canada, unconventional plays) have led to strong storage levels Activity levels remain strong Significant takeaway capacity under development Cushing storage demand will continue to be strong; WTI discount expected to narrow Blending hub to handle various qualities of crude Cushing Is Here to Stay Alberta Basin Powder River Basin Platteville Alberta Oil Sands Bakken Shale Permian Basin Williston Basin Niobrara Denver Basin Eagle Ford Shale Cushing Houston Existing Major Crude Pipelines TransCanada Keystone Pipeline (Completed) TransCanada Keystone Pipeline (Proposed) Magellan Pipeline (Proposed) White Cliffs Pipeline Seaway Crude Pipeline Reversal Glass Mountain Pipeline ONEOK Pipeline (Proposed) Pony Express/Banner Pipeline (Converted or Proposed) Port Arthur Legend 9

10 Natural Gas Business Overview SemCAMS (Canada) Located in: Montney Shale liquids rich sour gas Duvernay Shale liquids rich sweet gas Two sour and two sweet natural gas processing plants Current operational capacity 694 mmcf/d 600 miles of transport and gathering lines SemGas (U.S.) Natural gas gathering and processing services Located in liquids rich oil plays Three processing plants 78 mmcf/d of capacity 800 miles of gathering lines 10

11 Track Record of Value Creation Agreement with Eagle Energy Company to gather and process natural gas in the Mississippi Lime Play in Oklahoma Announced Cushing expansion 1.95 million additional barrels Contributed SemStream to NGL Energy Partners for cash and equity interests Announced plans for Joint Venture with Chesapeake and Gavilon Agreement finalized for Glass Mountain Pipeline Joint Venture with Chesapeake and Gavilon November 2010 March 2011 June 2011 November 2011 December 2011 February 2012 March 2012 May 2012 SemGroup stock begins trading on NYSE Accomplished planned refinancing- 40% cash interest savings over 2010 Launched IPO for MLP, Rose Rock Midstream RRMS stock begins trading on NYSE Completed 1.95 million barrel Cushing expansion Announced plans with Noble to build Wattenberg Oil Trunkline in Colorado 39% Total Return to SEMG Shareholders: November 30, 2009 to August 7, 2012 Source: FactSet 11

12 SEMG Total Shareholder Return 50% SEMG 40% 30% 20% 10% 0% -10% -20% 8/01/ /03/ /01/2011 2/01/2012 4/16/2012 6/15/2012 8/01/2012 SemGroup Corp SEMG Peer Comp(1) S&P % 29% 9% (1) SemGroup Peer Comp includes: KMI, OKE, TRGP, WMB Source: FactSet 12

13 RRMS Total Unitholder Return 50% 40% RRMS 30% 20% 10% 0% -10% 12/1/2011 2/01/2012 4/02/2012 6/01/2012 8/01/2012 Rose Rock Midstream L.P. (1) RRMS Peer Comp Alerian 45% 19% 6% (1) RRMS Peer Comp includes: BPL, GLP, HEP, MMP, NS, OILT, SXL, TLLP, TLP Source: FactSet 13

14 Strong Platform for Growth Organic Growth Drop Downs from SemGroup 3 rd Party Acquisitions Substantial infrastructure demands in emerging resource plays 14

15 2012 Capex Guidance 2012 Capital Expenditures - $180 million $5 3% $21 12% $4 2% $150 83% 2012 Guidance Growth Maintenance Refurbishment Environmental/ Regulatory $23 13% $13 7% $30 17% $50 28% 2012 Guidance $33 18% $31 17% Crude - RRMS Crude - SEMG SemGas SemCAMS Corp and Other Maintenance, Refurbishment & Regulatory Capitalizing on Attractive Growth Opportunities 15

16 Future Growth in Drop Downs (in millions) Asset Description Total Assets 12/31/11 Adjusted EBITDA FY 2011 White Cliffs Pipeline (51% ownership) 527-mile crude oil pipeline 70,000 barrels per day capacity 100,000 barrels of crude oil storage $ $ 25.6 Glass Mountain Pipeline (25% ownership) Joint venture with Chesapeake and Gavilon 210-mile, 140,000 barrel per day crude oil pipeline and storage $ 47.0 (1) $ 10.0 (2) Wattenberg Oil Trunkline 37-mile, 12-inch pipeline and storage in DJ Basin to move crude oil from Noble Energy production to White Cliffs Pipeline $ 39.0 (1) NA SemGas Three natural gas processing plants Total capacity of 78 mmcf/d 800 miles of gathering lines $ 94.9 $ 15.1 SemCAMS Two sour and two sweet natural gas processing plants Total capacity of 694 mmcf/d 600 miles of transport and gathering lines $ $ 36.0 SemLogistics 8.7 million barrels of owned multi-product storage Two deep water jetties 100% fixed fee gross margin $ $ 10.8 (1)Total capital expenditure for project (2)Expected normalized EBITDA 16

17 Key Investment Considerations Strategically Located Assets that Provide a Strong Platform for Growth Ability to add strategic infrastructure in growing unconventional oil and gas plays Attractive Growth Opportunities Investing $180 million in new Capex in 2012, and an additional $200 million in 2013 Newer crude assets result in low maintenance costs Available Liquidity for Growth Debt < 1.0x Plenty of cash or liquidity Operational Flexibility to Our Customers Provide critical transportation and storage capacity to connect growth plays to key commercials markets Broad suite of midstream service offerings Stable Cash Flow Approximately 85% of LTM gross margin generated from fee-based services Experienced, Knowledgeable Management Team with a Proven Track Record Averages more than 27 years of experience in the industry Strong relationships throughout the U.S. oil and gas industries 17

18 Appendix

19 SemGroup s Fee-based Business Model Gross Margin Contribution* 6% 9% 85% Business Unit Fixed Fee Variable Fee Marketing SemGas 6% 94% SemCAMS 100% SemLogistics 100% SemMaterials Mexico 100% White Cliffs Pipeline 100% Rose Rock Midstream 73% 27% *LTM 6/30/2012; excluding SemStream Margin Descriptions Fixed Fee Storage fees Transportation fees Gathering and processing fees Variable Fee Gas processing percent of proceeds Gas processing percent of index Marketing Back-to-back marketing transactions 19

20 SemGroup Results Segment Adjusted EBITDA (in millions, unaudited) (1) Assets 2Q 2012 YTD 2012 (2) Crude (3) SemGas SemCAMS RRMS, White Cliffs Pipeline, Glass Mountain Pipeline, Wattenberg Oil Trunkline $19.8 $ 40.4 Northern Oklahoma processing & gathering, Sherman processing & gathering Sweet and sour processing plants & gathering SemLogistics Multi-product storage (0.5) 0.4 SemMaterials Mexico SemStream 15 asphalt terminals providing product and services NGL Energy Partners equity, Arizona propane distribution Corp & Other (3.0) (5.3) Total Adjusted EBITDA $ 30.0 $ 58.6 (1) See SemGroup Corporation website for non-gaap reconciliation (2) Year to date June 30, 2012 (3) Crude segment includes fully consolidated Rose Rock Midstream and 51% ownership in White Cliffs Pipeline. Glass Mountain Pipeline and the Wattenberg Oil Trunkline are under construction. 20

21 2012 Capex Guidance $5 3% $21 12% $4 2% $150 83% 2012 Guidance 2012 Capital Expenditures - $180 million Growth Maintenance Refurbishment Year-to-Date Spend - $44 million Environmental/ Regulatory $23 13% $13 7% $30 17% $50 28% 2012 Guidance $33 18% $31 17% Crude - RRMS Crude - SEMG SemGas SemCAMS Corp and Other Maintenance, Refurbishment & Regulatory (USD $ Millions) Segment Description Estimated Completion Date 2012 Capex 2013 Capex Total CapEx (1) Normalized Annual EBITDA (2) EBITDA Multiple Crude-RRMS Cushing Storage 1.95 MMbbl tank expansion Complete $ 6 $ - $ 26 $ x Crude-RRMS Six additional unloading bays in Platteville 4Q x Crude-RRMS New 20" pipeline in Cushing 1Q x Crude-RRMS Cushing Storage 250 Mbbl tank expansion 1H x Crude-SEMG Glass Mountain Pipeline 4Q x Crude-SEMG Wattenberg Oil Trunkline 4Q SemGas Nash 20 MMCF/day cryoplant 3Q x SemGas N. Oklahoma expansion 125 mmcf/day plant & well connects 1Q x SemGas Debottlenecking of systems & various well connects x SemCAMS Inlet liquid handling - K3 plant 1Q x SemCAMS Wapiti Sweetening Plant TBD TBD Other/undesignated growth projects (3)(4) varies Maintenance, refurbishment & regulatory Total $180 $200 $728 Timing/other variance -$10 +$20 -$20 +$50 Total Capex Range (1) Includes capex for projects started prior to 2014 (2) Realization of normalized EBITDA multiple varies depending on project (3) Includes numerous smaller projects not specified above (4) Does not include potential White Cliffs Pipeline expansion $170 - $200 $180 - $250 21

22 RRMS Ownership Structure Public 7.0 mm Common Units Rose Rock Midstream GP, LLC Incentive Distribution Rights 100% Interest 1.4 mm Common Units 8.4 mm Subordinated Units 2% GP Interest 40.9% LP Interest 57.1% LP Interest NYSE: RRMS 100% Interest Rose Rock Midstream Operating, LLC 100% Interest Storage 44% Transportation 23% Marketing 23% Other 10% Based on year to date June 30,2012 Adjusted gross margin 22

23 RRMS Strategically Located Assets Cushing 7 million barrels of storage 96% under long-term fixed fee contracts with third partiesfirst expiration 2015 All tanks constructed since 2008 Capacity to receive or deliver 240,000 barrels per day Connectivity to all major inbound/outbound pipelines Growth Additional 250,000 barrels ~1H 2013 completion Additional land for future expansion of ~6 million barrels New 20 inch receipt/delivery pipeline ~2013 completion KS/OK Pipeline and Storage Cushing Storage Kansas/Oklahoma System 640-mile gathering and transportation pipeline system 670,000 barrels of associated storage 18 truck unloading stations Capacity to transport over 40,000 barrels per day Connects to third-party pipelines, Kansas and Oklahoma refineries and Cushing terminal 23

24 RRMS Strategically Located Assets Bakken Shale 8,200 barrels per day 30-day evergreen contracts Two truck unloading facilities 17 gathering trucks Transport via truck, rail or third party pipeline 61,800 barrels of storage capacity Growth New drilling activity increasing growth beyond available takeaway capacity resulting in additional pipeline and rail capacity needed Potential additional capacity on Enbridge pipeline Platteville Ten-lane truck unloading facility built in 2009 Origin of White Cliffs Pipeline only direct pipeline from DJ Basin to Cushing 220,000 barrels of storage capacity Growth Increasing production in DJ Basin and Niobrara Shale expected to increase throughput Building six additional truck unloading lanes and 10,000 barrels of storage capacity by end 2012 Bakken Operation Platteville Facility 24

25 Cushing Market Overview Pipelines Into Cushing Pipelines Out of Cushing Rose Rock Midstream White Cliffs Pipeline Keystone Spearhead (Canadian) Plains (5) Oxy Sunoco Blueknight Parnon Cushing ConocoPhillips (2) Plains BP Ozark W. Tulsa Sunoco BlueKnight Seaway (Gulf Coast) Oxy Osage Proposed Pipelines Into Cushing Glass Mountain Pipeline Plains Magellan ONEOK Pony Express Pipeline Proposed Pipelines Out of Cushing Keystone Magellan 25

26 SemLogistics Largest independent petroleum products storage facility in U.K. Receive product from the Middle East and Europe and deliver to Europe, West Africa and the United States 8.7 million barrels of storage Two deep water jetties Ability for build-bulk, break-bulk, storage, blending and water processing/treatment 67% of tanks are multi-product or dual purpose 100% fixed fee Gross Margin Customers structural, traders and compulsory strategic storage Approval to build nine new tanks; 1.5 million barrels of storage (on hold) 2Q 2012 average utilization 26% 26

27 SemMaterials México Provide asphalt products and services 15 in-country terminals 2 National labs Importing product to diversify suppliers Diversified customer base 2Q volumes increased 10% 27