November 8, Third Quarter 2018 Results Earnings Conference Call

Transcription

1 November 8, 2018 Third Quarter 2018 Results Earnings Conference Call

2 Non-GAAP Financial Measures Third Quarter 2018 Results SemGroup s non-gaap measures, Adjusted EBITDA, Cash Available for Dividends (CAFD) and Total Segment Profit, are not GAAP measures and are not intended to be used in lieu of GAAP presentation of their most closely associated GAAP measures, net income (loss) for Adjusted EBITDA and CAFD and operating income for Total Segment Profit. 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. In addition to non-cash items, we have selected items for adjustment to EBITDA which management feels decrease the comparability of our results among periods. These items are identified as those which are generally outside of the results of day to day operations of the business. These items are not considered nonrecurring, infrequent or unusual, but do erode comparability among periods in which they occur with periods in which they do not occur or occur to a greater or lesser degree. Historically, we have selected items such as gains on the sale of NGL Energy Partners LP common units, costs related to our predecessor s bankruptcy, significant business development related costs, significant legal settlements, severance and other similar costs. Management believes these types of items can make comparability of the results of day to day operations among periods difficult and have chosen to remove these items from our Adjusted EBITDA. We expect to adjust for similar types of items in the future. Although we present selected items that we consider in evaluating our performance, you should be aware that the items presented do not represent all items that affect comparability between the periods presented. Variations in our operating results are also caused by changes in volumes, prices, mechanical interruptions and numerous other factors. We do not adjust for these types of variances. CAFD is based on Adjusted EBITDA, as defined above, and reduced for cash income taxes, cash interest expense, preferred stock cash dividends and maintenance capital expenditures, as adjusted for selected items which management feels decrease the comparability of results among periods. CAFD is a performance measure utilized by management to analyze our performance after the payment of cash taxes, servicing debt obligations and making sustaining capital expenditures. Total Segment Profit represents revenue, less cost of products sold (exclusive of depreciation and amortization) and operating expenses, plus equity earnings and is adjusted to remove unrealized gains and losses on commodity derivatives and to reflect equity earnings on an EBITDA basis. Reflecting equity earnings on an EBITDA basis is achieved by adjusting equity earnings to exclude our percentage of interest, taxes, depreciation and amortization from equity earnings for operated equity method investees. For our investment in NGL Energy, we exclude equity earnings and include cash distributions received. Segment profit is the measure by which management assess the performance of our reportable segments. These measures may be used periodically by management when discussing our financial results with investors and analysts and are presented as management believes they provide additional information and metrics relative to the performance of our businesses. 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 non-gaap measures in isolation or as substitutes for analysis of our results as reported under GAAP. Management compensates for the limitations of our non-gaap measures as analytical tools by reviewing the comparable GAAP measures, understanding the differences between the non-gaap measure and the most comparable GAAP measure 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. Because all companies do not use identical calculations, our presentations of non-gaap measures may be different from similarly titled measures of other companies, thereby diminishing their utility. SemGroup does not provide guidance for net income, the GAAP financial measure most directly comparable to the non-gaap financial measure Adjusted EBITDA, because Net Income includes items such as unrealized gains or losses on derivative activities or similar items which, because of their nature, cannot be accurately forecasted. We do not expect that such amounts would be significant to Adjusted EBITDA as they are largely non-cash items. 2

3 Forward-Looking Information Third Quarter 2018 Results 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, our anticipated annual dividend growth rate, management's plans and objectives for future operations, planned capital expenditures, 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 and our current and expected dividends or to fund our other liquidity needs; any sustained reduction in demand for, or supply of, the petroleum products we gather, transport, process, market and store; the effect of our debt level on our future financial and operating flexibility, including our ability to obtain additional capital on terms that are favorable to us; our ability to access the debt and equity markets, which will depend on general market conditions and the credit ratings for our debt obligations and equity; the failure to realize the anticipated benefits of our acquisition of 100 percent of the equity interests in Buffalo Parent Gulf Coast Terminals LLC, the parent company of Buffalo Gulf Coast Terminals LLC and HFOTCO LLC, doing business as Houston Fuel Oil Terminal Company ( HFOTCO ); the loss of, or a material nonpayment or nonperformance by, any of our key customers; the amount of cash distributions, capital requirements and performance of our investments and joint ventures; the consequences of any divestitures of non-strategic operating assets or divestitures of interests in some of our operating assets through partnerships and/or join ventures; the amount of collateral required to be posted from time to time in our commodity purchase, sale or derivative transactions; the impact of operational and developmental hazards and unforeseen interruptions; our ability to obtain new sources of supply of petroleum products; competition from other midstream energy companies; our ability to comply with the covenants contained in our credit agreements, continuing covenant agreement, and the indentures governing our notes, including requirements under our credit agreements and continuing covenant agreement to maintain certain financial ratios; our ability to renew or replace expiring storage, transportation and related contracts; the overall forward markets for crude oil, natural gas and natural gas liquids; the possibility that the construction or acquisition of new assets may not result in the corresponding anticipated revenue increases; any future impairment of goodwill resulting from the loss of customers or business; changes in currency exchange rates; weather and other natural phenomena, including climate conditions; a cyber attack involving our information systems and related infrastructure, or that of our business associates; 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; costs of, or changes in, laws and regulations and our failure to comply with new or existing laws or regulations, particularly with regard to taxes, safety and protection of the environment; the possibility that our hedging activities may result in losses or may have a negative impact on our financial results; general economic, market and business conditions; as well as other risk factors discussed from time to time in our 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. We use our 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. We are present on Twitter and LinkedIn: SemGroup Twitter and LinkedIn 3

4 Third Quarter 2018 Results Continued Execution of Strategic Transformation Focused on Strengthening Balance Sheet and Completing High-Return Projects Secure Cash Flows Drive Quality Earnings Nearly 60% of gross margin supported by take-or-pay contracts 3Q Adjusted EBITDA $96.4 million Declared quarterly dividend of $ per share, supported by strong dividend coverage of 1.4x Balance Sheet Focus and Prudent CAPEX Spending Closed Maurepas sale of 49% minority interest for $350 million in October 2018, resulting in over $1 billion raised to date Year-to-date capex spend: $292 million, updated full-year 2018 guidance to $360 million, up 3% Project Execution and Asset Utilization in Key Regions Gulf Coast: Completed new ship dock #5 and 1.45 mmbbls crude storage tanks - online 3Q 2018 Moore Road Pipeline announced, expected completion 4Q 2019 Continue to successfully recontract HFOTCO terminal including high grading customers Mid-Continent: Optimizing White Cliffs Pipeline with NGL conversion, expected completion 4Q 2019 Continue to progress Cushing terminal recontracting Canada: Pipestone Pipeline announced, expected completion 4Q 2019 Received regulatory approvals for Pipestone Plant Wapiti Plant expected completion early 2019 and Smoke Lake Plant expected completion 4Q Note: Non-GAAP Financial Data Reconciliations are included in the Appendix to this presentation

5 Third Quarter 2018 Results Third Quarter 2018 Results 1Q18 2Q18 3Q18 YTD ($ in millions, except per share) Net Income (loss) $(33.0) $(2.7) $8.4 $(27.3) Adjusted EBITDA Cash Available for Dividends Common Dividend declared per share $ $ $ $1.418 Dividend Coverage Ratio 1.4x 1.4x 1.4x 1.4x Key Highlights Net income improvement primarily due to an unrealized gain on commodity derivatives Adjusted EBITDA down over prior quarter due primarily to Crude Supply & Logistics inventory cost timing Declared common stock dividend of $ per share, dividend coverage of 1.4x Elected non-cash, payment-in-kind (PIK) preferred stock dividend 5 Note: Non-GAAP Financial Data Reconciliations are included in the Appendix to this presentation

6 Segment Profit Third Quarter 2018 Results 1Q18 2Q18 3Q18 YTD ($ in millions) Crude Transportation $34.3 $37.9 $38.1 $110.3 Crude Facilities Crude Supply and Logistics (6.6) (2.0) (7.0) (15.6) HFOTCO SemGas SemCAMS Corporate/Other 11.0 (0.1) (0.9) 10.0 Total Segment Profit $115.4 $117.1 $114.9 $347.4 Third Quarter vs Second Quarter 2018 Crude Transportation was up slightly primarily due to lower operating expenses, partially offset by a decrease in White Cliffs Pipeline volumes due to rail demand Crude Facilities decreased due to timing of take-or-pay recognition and lower terminal utilization Crude Supply & Logistics adversely impacted by inventory cost timing HFOTCO improvement driven by contribution from new assets, somewhat offset by non-recurring items SemGas increase resulting from higher commodity prices and increased volumes SemCAMS results down slightly due to lower opex recoveries 6

7 Narrowing 2018 Adjusted EBITDA Guidance Third Quarter 2018 Results Continuing Portfolio Transformation through 2018 for Long-Term Financial Strength ($ in millions) CAGR of ~18% $385 - $400 $328 $ E ($ in millions) 2018 Adjusted EBITDA $385 - $400 Key Guidance Assumptions FY 2018 Crude White Cliffs Pipeline Average Volumes (mbbl/d) Average Cushing Terminal Utilization % SemGas Average Processing Volumes (mmcf/d) SemCAMS Average Throughput Volumes (mmcf/d) HFOTCO Average Terminal Utilization % Growing earnings while improving quality of earnings Divestments contributed $34 million of 2017 Adjusted EBITDA Additional EBITDA to come online in 2019 already contracted 2018 divestments contribute ~$9 million of 2018 Adjusted EBITDA SemCAMS - KA plant turnaround in 2Q18 Expect no U.S. cash income taxes 7

8 Updated 2018 Capital Expenditures Guidance Total Capital Expenditures Third Quarter 2018 Results 2018 Capex Guidance - $360 million Spending by Strategic Area $492 ($ in millions) $307 $255 $447 $360 $320 Canada Mid-Continent $203 56% $50 14% $52 $45 $ e Maintenance Growth Gulf Coast Maintenance $40 11% $67 19% Key Projects Driving Financial Growth 2018, 2019 and beyond Total Project Cost 2Q18 3Q18 4Q18 1H19 2H HFOTCO Ship Dock 5 & Crude Storage Tanks: $120mm (1) ~7x EBITDA multiple Wapiti Plant: $250mm ~6x EBITDA multiple Smoke Lake Plant: $50mm ~6x EBITDA multiple Pipestone Pipeline: $40mm (2) ~7x EBITDA multiple White Cliffs Pipeline, 12" NGL Pipeline Conversion: $32mm (3) < 4x EBITDA multiple Moore Road Pipeline: $65mm (4) ~4-8x EBITDA multiple 8 1) Expected SemGroup project spend on HFOTCO projects; excludes ~$65 million spent prior to close. The 7x multiple is based on the total project cost of $185 million 2) 2018 guidance includes $10 million expected spend in ) Represents SemGroup's 51% expected spend; total project spend of $60-66 million, minimal capital in ) Moore Road Pipeline multiple range reflects anticipated benefit across HFOTCO system

9 Driving Shareholder Value Third Quarter 2018 Results Transforming Portfolio Executing Opportunities Delivering Shareholder Value 2018 Execution as Promised: 1st Quarter Executed preferred equity raise Completed sale of SemMaterials Mexico 2nd Quarter Completed sale of SemLogistics Funded final HFOTCO payment Announced White Cliffs Pipeline NGL re-purposing Refinanced HFOTCO term loan, lowered interest rate and extended maturity 3rd Quarter Completed new ship dock and crude tanks at HFOTCO 4th Quarter To Date Completed sale of 49% minority interest in Maurepas Pipeline Progressing Wapiti and Smoke Lake Plant construction projects Pipestone Pipeline and Moore Road Pipeline projects began 9

10 Appendix

11 Leverage and Liquidity Third Quarter 2018 Results ($ in millions, unaudited) 9/30/2018 SemGroup (B2 / B+) Pro Forma Revolving Credit Facility - $1.0 Billion due 2021 $ % Senior unsecured notes due % Senior unsecured notes due % Senior unsecured notes due % Senior unsecured notes due Total Pro Forma SEMG Debt $ 1,485 HFOTCO (Ba3 / BB-) Term Loan due Hurricane Ike Bonds due Total HFOTCO Debt $ 824 SemGroup Pro Forma Net Leverage Ratio (max 5.5x) (1) 4.2x Consolidated Pro Forma Net Leverage Ratio (2) 5.4x Pro Forma metrics reflect Maurepas sale proceeds of $350 million received October 2018 HFOTCO Term Loan Refinancing - 2Q 2018 $600 million LIBOR %, reduction of 75 bps Maturity extended to 2025 Covenant-lite Proceeds fully paid and canceled revolver Targeting consolidated leverage of less than 5.0x by year-end 2019 No significant debt maturities until 2021 Consolidated Pro Forma Available Liquidity (3) $ ) SemGroup's net leverage ratio calculated per the senior secured credit facility definitions, which includes a pro-rata portion of projected future annual EBITDA from material projects 2) Calculated as consolidated net debt to LTM consolidated leverage EBITDA. See additional information on slide 20 3) Available liquidity is reduced for outstanding letters of credit

12 Operational Summary Third Quarter 2018 Results 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 Crude Transportation Transportation Volumes (mbbl/d) White Cliffs Pipeline Volumes (mbbl/d) Crude Facilities Average Cushing Terminal Utilization 100% 94% 94% 100% 98% 97% 94% HFOTCO (1) Average Terminal Utilization n/a n/a 98% 98% 97% 97% 96% SemGas (2) Total Average Processing Volumes (mmcf/d) SemCAMS (3) Total Average Throughput Volumes (mmcf/d) Over 95% of total LTM gross margin from fee based cash flows 13% 11% 11% 5% 2% 64% 59% 51% 46% 41% 23% 30% 38% 49% 57% (4) Take-or-Pay Fixed Fee POP/Marketing 12 1) HFOTCO acquisition closed July 17, ) SemGas volumes include total processed volumes - Oklahoma and Texas plants 3) SemCAMS volumes include total processed volumes - K3, KA and West Fox Creek facilities 4) LTM September 30, 2018

13 Third Quarter 2018 Results Consolidated Balance Sheets (in thousands, unaudited, condensed) September 30, 2018 December 31, 2017 ASSETS Current assets $ 801,099 $ 902,899 Property, plant and equipment, net 3,450,756 3,315,131 Goodwill and other intangible assets 630, ,945 Equity method investments 277, ,281 Other noncurrent assets, net 138, ,600 Noncurrent assets held for sale 84,961 Total assets $ 5,297,775 $ 5,376,817 LIABILITIES, PREFERRED STOCK AND OWNERS' EQUITY Current liabilities: Current portion of long-term debt $ 6,000 $ 5,525 Other current liabilities 675, ,036 Total current liabilities 681, ,561 Long-term debt, excluding current portion 2,619,486 2,853,095 Other noncurrent liabilities 87,106 85,080 Noncurrent liabilities held for sale 13,716 Total liabilities 3,388,467 3,718,452 Preferred stock 353,323 Owners' equity 1,555,985 1,658,365 Total liabilities, preferred stock and owners' equity $ 5,297,775 $ 5,376,817 13

14 Third Quarter 2018 Results Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except per share amounts, unaudited, condensed) Q1 Q2 Q3 YTD Q1 Q2 Q3 Q4 FY2017 Revenues $ 661,609 $ 595,794 $ 633,996 $ 1,891,399 $ 456,100 $ 473,089 $ 545,922 $ 606,806 $ 2,081,917 Expenses: Costs of products sold, exclusive of depreciation and amortization shown below 496, , ,871 1,377, , , , ,534 1,514,891 Operating 69,791 90,245 64, ,871 52,083 73,346 62,666 66, ,764 General and administrative 26,477 22,886 21,904 71,267 21,712 26,819 38,389 26, ,779 Depreciation and amortization 50,536 51,755 53, ,889 24,599 25,602 50,135 58, ,421 Loss (gain) on disposal or impairment, net (3,566) 1,824 (383) (2,125) 2,410 (234) 41,625 (30,468) 13,333 Total expenses 639, , ,825 1,826, , , , ,679 2,055,188 Earnings from equity method investments 12,614 14,351 14,528 41,493 17,091 17,753 17,367 15,120 67,331 Operating income (loss) 34,853 31,346 39, ,898 23,389 25,202 (27,778) 73,247 94,060 Other expenses, net 44,805 37,685 33, ,425 33,571 11,966 28,574 39, ,598 Income (loss) from continuing operations before income taxes (9,952) (6,339) 5,764 (10,527) (10,182) 13,236 (56,352) 33,760 (19,538) Income tax expense (benefit) 23,083 (3,613) (2,697) 16, ,625 (37,249) 31,141 (2,388) Net income (loss) (33,035) (2,726) 8,461 (27,300) (10,277) 9,611 (19,103) 2,619 (17,150) Less: cumulative preferred stock dividends 4,832 6,211 6,317 17,360 Net income (loss) attributable to common shareholders $ (37,867) $ (8,937) $ 2,144 $ (44,660) $ (10,277) $ 9,611 $ (19,103) $ 2,619 $ (17,150) Net income (loss) $ (33,035) $ (2,726) $ 8,461 $ (27,300) $ (10,277) $ 9,611 $ (19,103) $ 2,619 $ (17,150) Other comprehensive income (loss), net of income taxes 18,171 6,180 3,352 27,703 6,033 8,952 9,230 (4,102) 20,113 Comprehensive income (loss) $ (14,864) $ 3,454 $ 11,813 $ 403 $ (4,244) $ 18,563 $ (9,873) $ (1,483) $ 2,963 Net income (loss) per common share: Basic $ (0.48) $ (0.11) $ 0.03 $ (0.57) $ (0.16) $ 0.15 $ (0.25) $ 0.03 $ (0.24) Diluted $ (0.48) $ (0.11) $ 0.03 $ (0.57) $ (0.16) $ 0.15 $ (0.25) $ 0.03 $ (0.24) Weighted average shares (thousands): Basic 78,198 78,319 78,353 78,290 65,692 65,749 75,974 78,189 71,418 Diluted 78,198 78,319 78,977 78,290 65,692 66,277 75,974 78,749 71,418 14

15 Third Quarter 2018 Results Non-GAAP Adjusted EBITDA Calculation (in thousands, unaudited) Reconciliation of net income to Adjusted EBITDA: Q1 Q2 Q3 YTD Q1 Q2 Q3 Q4 FY2017 Net income (loss) $ (33,035) $ (2,726) $ 8,461 $ (27,300) $ (10,277) $ 9,611 $ (19,103) $ 2,619 $ (17,150) Add: Interest expense 42,461 35,904 35, ,683 13,867 13,477 32,711 42, ,009 Add: Income tax expense (benefit) 23,083 (3,613) (2,697) 16, ,625 (37,249) 31,141 (2,388) Add: Depreciation and amortization expense 50,536 51,755 53, ,889 24,599 25,602 50,135 58, ,421 EBITDA 83,045 81,320 94, ,045 28,284 52,315 26, , ,892 Selected Non-Cash Items and Other Items Impacting Comparability 10,326 17,690 1,771 29,787 32,383 13,095 64,239 (23,306) 86,411 Adjusted EBITDA $ 93,371 $ 99,010 $ 96,451 $ 288,832 $ 60,667 $ 65,410 $ 90,733 $ 111,493 $ 328,303 Selected Non-Cash Items and Other Items Impacting Comparability Loss (gain) on disposal or impairment, net $ (3,566) $ 1,824 $ (383) $ (2,125) $ 2,410 $ (234) $ 41,625 $ (30,468) $ 13,333 Foreign currency transaction loss (gain) 3,294 2,314 (983) 4,625 (1,011) (747) (2,951) (4,709) Adjustments to reflect equity earnings on an EBITDA basis 4,883 4,886 4,926 14,695 6,709 6,692 6,678 6,811 26,890 M&A transaction related costs 1, ,094 5,453 14,886 1,649 21,988 Pension plan curtailment loss (gain) (3,097) 89 (3,008) Employee severance and relocation expense ,694 Unrealized loss (gain) on derivative activities 2,226 4,409 (4,860) 1, (928) 1,833 (892) 40 Non-cash equity compensation 2,196 3,398 2,738 8,332 2,757 2,803 2,957 1,736 10,253 Loss on early extinguishment of debt 19, ,930 Selected Non-Cash items and Other Items Impacting Comparability $ 10,326 $ 17,690 $ 1,771 $ 29,787 $ 32,383 $ 13,095 $ 64,239 $ (23,306) $ 86,411 15

16 Third Quarter 2018 Results Segment Profit and Adjusted EBITDA (in thousands, unaudited) Segment Profit: Q1 Q2 Q3 YTD Q1 Q2 Q3 Q4 FY2017 Crude Transportation $ 34,310 $ 37,865 $ 38,135 $ 110,310 $ 28,251 $ 29,028 $ 34,585 $ 41,641 $ 133,505 Crude Facilities 9,341 9,683 8,209 27,233 9,564 9,481 8,806 14,116 41,967 Crude Supply and Logistics (6,583) (1,959) (7,005) (15,547) (2,428) (2,173) (1,693) (1,507) (7,801) HFOTCO 30,988 34,804 36, ,953 28,504 33,032 61,536 SemGas 14,277 15,437 19,754 49,468 18,227 19,483 15,555 14,539 67,805 SemCAMS 22,113 21,448 20,543 64,104 16,865 19,038 16,704 23,668 76,274 Corporate and other 10,963 (172) (913) 9,878 8,367 8,296 8,421 8,153 33,237 Total Segment Profit 115, , , ,399 78,846 83, , , ,523 Less: General and administrative expense 26,477 22,886 21,904 71,267 21,712 26,819 38,389 26, ,779 Other income (950) (533) (400) (1,883) (218) (508) (3,390) (516) (4,632) Pension curtailment gain (loss) 3,097 (89) 3,008 Plus: M&A related costs 1, ,094 5,453 14,886 1,649 21,988 Employee severance and relocation ,694 Non-cash equity compensation 2,196 3,398 2,738 8,332 2,757 2,803 2,957 1,736 10,253 Consolidated Adjusted EBITDA $ 93,371 $ 99,010 $ 96,451 $ 288,832 $ 60,667 $ 65,410 $ 90,733 $ 111,493 $ 328,303 16

17 Third Quarter 2018 Results Non-GAAP Adjusted EBITDA Calculation (in thousands, unaudited) 2016 Reconciliation of net income to Adjusted EBITDA: Q1 Q2 Q3 Q4 FY2016 Net income (loss) $ (4,893) $ 10,787 $ (4,632) $ 12,000 $ 13,262 Add: Interest expense 17,577 18,011 18,517 8,545 62,650 Add: Income tax expense (benefit) (21,407) 4,658 11,898 16,119 11,268 Add: Depreciation and amortization expense 24,051 25,055 24,922 24,776 98,804 EBITDA 15,328 58,511 50,705 61, ,984 Selected Non-Cash Items and Other Items Impacting Comparability 62,340 9,121 20,585 4,765 96,811 Adjusted EBITDA $ 77,668 $ 67,632 $ 71,290 $ 66,205 $ 282,795 Selected Non-Cash Items and Other Items Impacting Comparability Loss on disposal or impairment, net $ 13,307 $ 1,685 $ 1,018 $ 38 $ 16,048 Loss (income) from discontinued operations, net of income taxes 2 2 (3) 1 Foreign currency transaction loss 1,469 1, ,088 4,759 Adjustments to reflect equity earnings on an EBITDA basis 9,221 7,138 7,321 5,077 28,757 Remove loss (gain) on sale or impairment of NGL units 39,764 (9,120) 30,644 M&A transaction related costs 3,269 3,269 Employee severance and relocation expense ,128 Unrealized loss (gain) on derivative activities (4,548) 4,477 6,167 (5,107) 989 Non-cash equity compensation 2,866 2,560 1,620 3,170 10,216 Selected Non-Cash items and Other Items Impacting Comparability $ 62,340 $ 9,121 $ 20,585 $ 4,765 $ 96,811 17

18 Third Quarter 2018 Results Reconciliation of Operating Income to Total Segment Profit (in thousands, unaudited) Q1 Q2 Q3 YTD Q1 Q2 Q3 Q4 FY2017 Operating income (loss) $ 34,853 $ 31,346 $ 39,699 $ 105,898 $ 23,389 $ 25,202 $ (27,778) $ 73,247 $ 94,060 Plus: Adjustments to reflect equity earnings on an EBITDA basis 4,883 4,886 4,926 14,695 6,709 6,692 6,678 6,811 26,890 Unrealized loss (gain) on derivatives 2,226 4,409 (4,860) 1, (928) 1,833 (892) 40 General and administrative expense 26,477 22,886 21,904 71,267 21,712 26,819 38,389 26, ,779 Depreciation and amortization 50,536 51,755 53, ,889 24,599 25,602 50,135 58, ,421 Loss (gain) on disposal or impairment, net (3,566) 1,824 (383) (2,125) 2,410 (234) 41,625 (30,468) 13,333 Total Segment Profit $ 115,409 $ 117,106 $ 114,884 $ 347,399 $ 78,846 $ 83,153 $ 110,882 $ 133,642 $ 406,523 18

19 Third Quarter 2018 Results Cash Available for Dividends (in thousands, unaudited) Q1 Q2 Q3 YTD Q1 Q2 Q3 Q4 FY2017 Adjusted EBITDA $ 93,371 $ 99,010 $ 96,451 $ 288,832 $ 60,667 $ 65,410 $ 90,733 $ 111,493 $ 328,303 Less: Cash interest expense 32,530 34,870 36, ,777 17,976 18,396 29,621 35, ,196 Less: Maintenance capital 7,729 11,550 8,635 27,914 8,272 11,850 12,693 9,597 42,412 Less: Cash paid for income taxes 1,800 12, ,300 1,155 1, ,088 7,160 Selected items impacting comparability: Add back: Mexico disposal cash taxes 10,955 10,955 Cash available for dividends $ 51,312 $ 50,645 $ 50,839 $ 152,796 $ 33,264 $ 33,443 $ 48,223 $ 62,605 $ 177,535 Dividends declared $ 37,004 $ 37,022 $ 37,022 $ 111,048 $ 29,584 $ 35,171 $ 35,184 $ 36,961 $ 136,900 Dividend coverage ratio 1.4x 1.4x 1.4x 1.4x 1.1x 1.0x 1.4x 1.7x 1.3x 19

20 Third Quarter 2018 Results Reconciliation of Adjusted EBITDA to Pro Forma Consolidated Leverage EBITDA (in millions, unaudited) Adjusted EBITDA 3Q18 $ Q Q Q LTM Adjusted EBITDA Adjustments 11.9 LTM PF Consolidated Leverage EBITDA $ Acquisition / divestitures adjustment (1) (43.6) Material projects adjustment (2) 44.7 Tax adjustment 13.1 Miscellaneous adjustment (2.3) Total Adjustments (3) $ ) Includes proforma LTM results for Glass Mountain Pipeline, SemMexico, SemLogistics and Maurepas 49% minority interest divestitures 2) Pro-rata portion of projected future annual EBITDA from material projects 3) Consistent with adjustments permitted under SemGroup's senior secured credit facility