Morgan Stanley Midstream MLP and Diversified Natural Gas Corporate Access Event. March 2014

Transcription

1 Morgan Stanley Midstream MLP and Diversified Natural Gas Corporate Access Event March 2014

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, 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 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. SemGroup and Rose Rock Midstream use their 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 websites at ir.semgroupcorp.com and ir.rrmidstream.com. Both companies are present on Twitter and LinkedIn, follow us at the links below: SemGroup Twitter and LinkedIn Rose Rock Midstream Twitter and LinkedIn 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 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 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, thereby diminishing its utility. Reconciliations of net income (loss) to Adjusted EBITDA for the periods presented are included in the appendix of this presentation. Rose Rock Midstream This presentation includes 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. The appendix of this presentation 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 decisionmaking 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 Two Public Companies SemGroup Corporation Rose Rock Midstream C-Corp assets in US, Canada, Mexico & UK General Partner of RRMS Publicly Traded November 2010 Shares: 42.5 million Enterprise Value: $3.6 billion Market Cap: $2.7 billion Share Price: $64.43 Yield: 1.4% Current Annualized Dividend: $0.88 Total Assets: $2.5 billion PP&E: $1.1 billion Master Limited Partnership (MLP) IPO December 2011 Units: 26.7 million Enterprise Value: $1.8 billion Market Cap: $1.0 billion Unit Price: $38.65 Yield: 4.8% Current Annualized Distribution: $1.86 Total Assets: $897 million PP&E: $312 million 4 Note: Enterprise Value, Market Cap, Unit/Share Price and Yield as of February 27, Balance sheet data as of December 31, 2013

5 SemGroup Ownership Structure 5

6 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 Crude and Gas Assets in Key Growth Areas 7

8 Crude Business Overview SemGroup Corporation White Cliffs Pipeline 17% ownership DJ Basin to Cushing, OK 527-mile, 12-inch pipeline 76,000 bpd current capacity 80,000 bpd expansion mid-2014 completion Glass Mountain Pipeline February 2014 completion 210-mile, 140,000 barrels per day pipeline Two laterals Granite Wash and Mississippi Lime Play join and terminate in Cushing Wattenberg Oil Trunkline November 2013 completion 37-mile, 12-inch pipeline and storage in DJ Basin Transports Noble Energy production to White Cliffs Wattenberg Oil Trunkline Extension 4Q 2014 completion 38-mile pipeline extension backed by long-term agreement with Noble Energy 8

9 Crude Business Overview Rose Rock Midstream Cushing 7.6 million barrels of storage 93% under long-term fixed fee contracts with first expiration average storage rate of $0.37 per month Connectivity to all major inbound/outbound pipelines Kansas/Oklahoma System 640-mile gathering and transportation pipeline system Currently operating at full capacity Connects to third-party pipelines, Kansas and Oklahoma refineries and Cushing terminal White Cliffs Pipeline 34% ownership Acquired 17% interest from SemGroup January 2013 Additional 17% interest from SemGroup December 2013 Operated by Rose Rock Midstream Platteville 16-lane truck unloading facility Origin of White Cliffs Pipeline only direct pipeline from DJ Basin to Cushing 230,000 barrels of storage capacity Field Services Acquired September 2013 Crude oil trucking fleet (114 trucks) to augment existing midstream services Tampa Pipeline Acquired November mile, 12-inch pipeline from Platteville to Tampa, CO rail facility Bakken Shale 17 gathering trucks Transport via truck, third-party pipeline or rail 61,800 barrels of storage capacity Tampa Pipeline Lateral 3Q 2014 completion Planning a new 5-mile lateral pipeline segment 9

10 Crude Key Performance Metrics Cushing Storage Capacity 7.6 million barrels Transportation Volumes (2) (Thousand Barrels per Day) Cushing Contracts (1) Uncontracted Operational Capacity Under construction White Cliffs Pipeline Volumes (Thousand Barrels per Day) Marketing Volumes (Thousand Barrels per Day) Healy Platteville (1) 100% of storage contract volumes are included in year of contract expiration (2) Volumes include pipeline revenue barrels and fee-based truck transportation barrels

11 Natural Gas Business Overview SemCAMS (Canada) Located in: Western Canadian Sedimentary Basin sour gas 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 facilities mmcf/d of current capacity 1,200 miles of gathering lines Significant growth in Mississippi Lime Play Rose Valley I 200 mmcf/d capacity March 2014 Rose Valley II 200 mmcf/d capacity 1Q

12 SemGas Northern Oklahoma Processing Mississippi Lime Play Northern Oklahoma System 4Q Q Q 2016 Processing Capacity 165 mmcf/d 365 mmcf/d 565 mmcf/d Miles of Pipeline ~600 # of Rigs in Dedicated Acreage ~15 Avg. Processing Volumes 157 mmcf/d Average Processed Volume (mmcf/d)

13 SemGroup Capitalization & Liquidity (in millions) December 31, 2013 December 31, 2012 Total Consolidated Debt $ 615 $ 206 Owner's Equity 1,214 1,022 Total Book Capitalization $ 1,829 $ 1,228 Consolidated Credit Metrics Net Debt $ 536 $ 126 Total Debt/Capitalization 34% 17% Net Debt/Adjusted EBITDA LTM 2.8x 0.9x Committed Liquidity Cash and Cash Equivalents $ 79 $ 80 Revolver Availability SemGroup Rose Rock Midstream Total Liquidity $ 811 $ 280 Conservative leverage ratio provides financial flexibility Consolidated Net Debt / Adjusted EBITDA target of 3.5x or better Available liquidity to fund future growth opportunities 13

14 SemGroup Corporation 2014 Capital Expenditure Guidance 2014 Capital Expenditures $415 million (1) $219 53% $52 12% $133 32% Natural Gas Crude Other Growth Projects Maintenance and Regulatory $11 3% More than 85% of capital expenditures are focused on growth capital Mid-teens or higher returns on organic growth projects in key asset plays Maintenance and Regulatory capital focused on pipeline integrity (1) Includes Rose Rock Midstream and excludes potential acquisitions 14

15 SemGroup Corporation 2014 Capital Expenditure Guidance (in millions) Segment Description Estimated Completion Date Project Spend Through 12/31/ Capex 2015 Capex Crude-RRMS White Cliffs Pipeline expansion (1) mid Crude-RRMS Tampa Pipeline lateral 2Q Crude-SEMG Glass Mountain Pipeline and truck unloading facilities (1)(2) February Crude-SEMG Wattenberg Oil Trunkline extension 4Q Crude-SEMG White Cliffs Pipeline expansion (1) mid SemGas Northern Oklahoma gas gathering and processing expansion varies 142 SemGas Cryo Plant redeployment 2Q SemCAMS Montney and Duvernay Pipeline growth varies SemCAMS K3 Plant projects varies Other/undesignated growth projects varies Maintenance, refurbishment & regulatory 52 Total $254 $415 $300 - $350 Total CapEx Delivering organic growth with mid-teen or higher returns 15 (1) Investments in affiliate; reflects our ownership in joint ventures (2) Includes amounts paid to acquire additional ownership

16 2013 Results & Updated 2014 Guidance SemGroup Corporation (in millions, unaudited) 2013 Initial Guidance (1) 2013 Actuals Adjusted EBITDA $165 - $175 $189.0 Capital Expenditures $400 $751 Dividend Growth 10% 16% Rose Rock Midstream (in millions, unaudited) 2013 Initial Guidance (2) 2013 Actuals Adjusted EBITDA $56 - $60 $68.5 Capital Expenditures $60 $109 Distribution Growth 10% - 15% 15% Crude SEMG 2014 Guidance $245 - $265 million Average crude price $94.20 Glass Mountain Pipeline in service February 2014 RRMS Average Cushing storage rate - $0.37 bbl/month White Cliffs Pipeline 15% to 20% increase in volumes over previous year SemGas Average natural gas NYMEX price $3.93/mmbtu Average NGL basket price - $0.89/gallon 120% increase in Northern Oklahoma volumes over previous year SemCAMS Slight volume increases over previous year Planned K3 Plant turnaround 2Q 2014 RRMS 2014 Guidance $92 - $97 million Average crude price - $94.20 Average Cushing storage rate - $0.37 bbl/month White Cliffs Pipeline - 12% to 20% increase in volumes 16 (1) Guidance range and Capex were updated November 12, 2013, to $180-$190 and $825 million, respectively (2) Guidance range and Capex were updated November 12, 2013, to $63-$66 and $113 million, respectively (3) Assumes no further drop downs

17 SemGroup Segment Results Year Ended Segment Adjusted EBITDA (1) (in millions, unaudited) 4Q Q Q Q 2013 Dec Dec Crude (2) $ 31.0 $ 25.1 $ 24.6 $ 25.9 $ $ 85.8 SemGas SemCAMS SemLogistics (0.1) (1.0) (0.6) 0.1 (1.6) 1.5 SemMaterials Mexico SemStream Corporate and Other (4.3) (3.4) (3.7) (3.5) (14.9) (14.1) Total Adjusted EBITDA (1) $ 57.8 $ 52.1 $ 43.6 $ 35.5 $ $ Key Highlights (4Q 2013 vs 3Q 2013) - Adjusted EBITDA increased approximately 11% Crude increased $5.9 million $3.5 million increase in marketing due to higher volumes and quality differentials 15% increase in White Cliffs Pipeline volumes SemGas increased $1.9 million Largely related to Northern Oklahoma processing volumes increase of 9.5% due to additional production SemCAMS decreased $2.2 million Primarily due to pipeline curtailments and lower volumes 17 (1) Non-GAAP Financial Data Reconciliations are included in the Appendix to this presentation (2) Crude segment includes fully consolidated Rose Rock Midstream and 51% ownership in White Cliffs Pipeline

18 SemGroup s Fee-based Business Model Margin Contribution (1) Fixed Fee Variable Fee Marketing 86 % SemGas (2) 35% 65% SemCAMS 100% 9 % 5 % Fixed Fee Variable Fee Marketing SemLogistics 100% SemMaterials Mexico 100% White Cliffs Pipeline 100% Rose Rock Midstream (3) 81% 19% Margin Descriptions Fixed Fee Storage fees Transportation fees Unloading fees Gathering and processing fees Variable Fee Gas processing percent of proceeds Marketing Back-to-back marketing transactions 18 (1) LTM December 31, 2013 (2) 4Q % fixed fee, 51% variable fee (3) Rose Rock Midstream includes cash distributions from 17% ownership in White Cliffs Pipeline

19 Future Growth in Drop Downs Rose Rock Midstream s relationship with SemGroup allows for potential future drop downs Asset Description White Cliffs Pipeline (51% ownership) Glass Mountain Pipeline Wattenberg Oil Trunkline Wattenberg Oil Trunkline Extension SemGas SemCAMS SemLogistics 527-mile crude oil pipeline - 76,000 bpd capacity Incremental 80,000 bpd expansion Mid-year 2014 completion 100,000 barrels of crude oil storage Joint venture with NGL Energy Partners 50% ownership 210-mile, 140,000 barrel per day crude oil pipeline and storage February 2014 completion 37-mile, 12-inch pipeline and storage in DJ Basin to move crude oil from Noble Energy production to White Cliffs Pipeline November 2013 completion 38-mile, 12-inch pipeline extension and storage in DJ Basin to move crude oil from Noble Energy production to White Cliffs Pipeline 4Q 2014 completion Three natural gas processing facilities Total processing capacity of 188 mmcf/d ~1,300 miles of gathering lines Two sour and two sweet natural gas processing plants Total capacity of 694 mmcf/d ~600 miles of transport and gathering lines 8.7 million barrels of owned multi-product storage Two deep water jetties 100% fixed-fee gross margin 19