UBS MLP One-on-One Conference. January 2014

Transcription

1 UBS MLP One-on-One Conference January 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 contemplated drop-down transaction between SemGroup and Rose Rock, 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 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; 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: 2 SemGroup Twitter and LinkedIn Rose Rock Midstream Twitter and LinkedIn

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 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 Two Public Companies SemGroup Corporation NYSE: SEMG Rose Rock Midstream NYSE: RRMS C-Corp assets in US, Canada, Mexico & UK General Partner of RRMS Publicly Traded November 2010 Shares: 42.9 million Enterprise Value: $3.3 billion Market Cap: $2.7 billion Share Price: $63.37 Yield: 1.3% Current Annualized Dividend: $0.84 Total Assets: $2.4 billion PP&E: $1.1 billion Master Limited Partnership (MLP) IPO December 2011 Units: 29.0 million Enterprise Value: $1.2 billion Market Cap: $1.1 million Unit Price: $37.67 Yield: 4.7% Current Annualized Distribution: $1.80 Total Assets: $773 million PP&E: $313 million Note: Enterprise Value, Market Cap, Unit/Share Price and Yield as of January 8, Balance sheet data as of September 30,

5 5 SemGroup Ownership Structure

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 7 Crude and Gas Assets in Key Growth Areas

8 SemGroup Corporate Crude Business Overview White Cliffs Pipeline DJ Basin to Cushing, OK 527-mile, 12-inch pipeline 76,000 bpd capacity 80,000 bpd expansion mid-2014 completion Glass Mountain Pipeline 210-mile, 140,000 barrels per day pipeline Two laterals Granite Wash and Mississippi Lime Play join and terminate in Cushing January 2014 completion Wattenberg Oil Trunkline 37-mile, 12-inch pipeline and storage in DJ Basin Transports Noble Energy production to White Cliffs November 2013 completion 8

9 Rose Rock Midstream Crude Business Overview Cushing 7.6 million barrels of storage 93% under long-term fixed fee contracts with first expiration 2016 Connectivity to all major inbound/outbound pipelines KS/OK Pipeline and Storage Kansas/Oklahoma System 640-mile gathering and transportation pipeline system Capacity to transport more than 40,000 barrels per day Connects to third-party pipelines, Kansas and Oklahoma refineries and Cushing terminal Cushing Storage Field Services Acquired Barcas Field Services September 2013 Crude oil trucking fleet (114 trucks) to augment existing midstream services Tampa Pipeline Acquired from Noble Energy for $8.3 million November mile, 12-inch pipeline from Platteville to Tampa, CO rail facility 9

10 Rose Rock Midstream Crude Business Overview Bakken Shale 17 gathering trucks Transport via truck, third-party pipeline or rail 61,800 barrels of storage capacity Bakken Operation 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 Platteville Facility White Cliffs Pipeline White Cliffs Pipeline Acquired 17% interest from SemGroup January 2013 Acquired additional 17% interest from SemGroup December 2013 Operated by Rose Rock Midstream 10

11 Crude Key Performance Metrics Cushing Storage Capacity 7.6 million barrels in 2013 Transportation Volumes (2) (Thousand Barrels per Day) Cushing Contracts (1) Uncontracted Operational Capacity Under construction White Cliffs Pipeline Volumes (Thousands Barrels per Day) Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Marketing Volumes (Thousand Barrels per Day) Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 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

12 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 capacity 1,200 miles of gathering lines Significant growth in Mississippi Lime Play 125 mmcf/d of capacity completed May mmcf/d capacity First Quarter 2014 Additional 200 mmcf/d in First Quarter

13 SemGas Northern Oklahoma Processing Mississippi Lime Play Northern Oklahoma System 3Q Q Q 2016 Processing Capacity 165 mmcf/d 365 mmcf/d 565 mmcf/d Miles of Pipeline ~400 # of Rigs in Dedicated Acreage ~15 Avg. Processing Volumes 143 mmcf/d Average Processed Volume (mmcf/d) Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Capacity Processing Volumes Mississippi Lime Acquisition Capital Spending Purchase Price $300 million Plant I and II Completion $75 million $50 million Gathering System $30 million $65 million ~ $100-$150 million Total $405 million $65 million ~ $150-$200 million 13 Expected 2016 plant utilization ~ 70% average for the year

14 SemGroup Capitalization & Liquidity (in millions) September 30, 2013 December 31, 2012 Total Consolidated Debt $ 540 $ 206 Owner s Equity 1,254 1,022 Total Book Capitalization $ 1,794 $ 1,228 Consolidated Credit Metrics Net Debt $ 475 $ 126 Total Debt/Capitalization 30% 17% Net Debt/Adjusted EBITDA LTM 2.7x 0.9x Committed Liquidity Cash and Cash Equivalents $ 65 $ 80 Revolver Availability SemGroup (1) Rose Rock Midstream (1) Total Liquidity $ 674 $ 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 (1) Revolver availability reduced by outstanding letters of credit 14

15 2013 Capex Guidance SemGroup and Rose Rock Midstream 2013 Capital Expenditures $825 million YTD Spend - $633 million $143 17% $104 13% $437 53% $30 4% $58 7% $53 6% 83% committed to US crude and natural gas projects Includes 2013 acquisitions Low multiple organic growth projects in key asset plays Maintenance/Regulatory capex focused on pipeline integrity Crude - RRMS Crude - SEMG SemGas SemCAMS Other Growth Projects Maintenance, Refurbishment and Regulatory 15

16 2013 Capex Guidance SemGroup and Rose Rock Midstream (USD in millions) Segment Description Estimated Completion Date 2013 Capex 2014 Capex (1) Total CapEx (1) Normalized Annual EBITDA (2) EBITDA Multiple Crude-RRMS New 20" pipeline in Cushing February 2013 $5 $14 $3 5.0x Crude-RRMS Cushing Storage 250K bbl tank expansion March x Crude-RRMS Cushing Storage 350K bbl operational tank expansion 4Q x Crude-RRMS White Cliffs Pipeline Expansion (3) 2Q (4) Crude-RRMS Barcas Trucking acquisition trucks September x Crude-RRMS Tampa Pipeline Acquisition November (5) 8 Crude-SEMG Glass Mountain Pipeline (3) January (6) x Crude-SEMG Glass Mountain Pipeline-Truck Unloading Facilities (3) January x Crude-SEMG Wattenberg Oil Trunkline November (5) 39 Crude-SEMG White Cliffs Pipeline Expansion (3) (4) 2Q SemGas Mississippi Lime Gas Gathering and Processing acquisition Varies ~9-10x SemGas N. Oklahoma expansion 125 mmcf/day plant & well connects (8) May x SemGas Cryo Plant Redeployment 1Q SemCAMS K3 Inlet Liquid Handling 4Q x SemCAMS Montney and Duvernay Pipeline growth SemCAMS K3 Plant Projects ~4.0x SemCAMS Wapiti Sweetening Plant Other/undesignated growth projects (9) varies Maintenance, refurbishment & regulatory 30 Total $825 $300 - $400 (7) 16 (1) Includes capex for projects started prior to 2014 (2) Realization of normalized EBITDA varies depending on project (3) Investments in affiliate; reflects our ownership in joint ventures (4) Estimated capex; normalized annual EBITDA not shown due to FERC rates not yet filed (5) Normalized annual EBITDA is not provided due to partnership agreements (6) Includes amounts paid to acquire additional ownership (7) Beginning in 2016 following project completion (8) Plant online 2Q 2013 capital includes future well connects (9) Includes numerous smaller projects not specified above

17 Third Quarter Results & Updated 2013 Guidance Adjusted EBITDA (1) Nine Months Ended (in millions, unaudited) 3Q 2013 Sept 2013 SemGroup (2) $52.1 $131.2 Rose Rock Midstream $15.7 $47.5 $180 - $190 million (1) Previous guidance $165-$175 million Crude Rose Rock Midstream guidance increase SemGas SEMG Updated Guidance Mississippi Lime acquisition August 2013 Increased N. Oklahoma volumes related to producer activities RRMS Updated Guidance $63 - $66 million (1) Previous guidance $56-$60 million Transportation Barcas Field Services acquisition September 2013 Tampa Pipeline acquisition November 2013 Marketing Increased marketing volumes Other - Increased Cushing throughput 17 (1) Non-GAAP Financial Data Reconciliations are included in the Appendix to this presentation (2) SemGroup includes fully consolidated Rose Rock Midstream and 51% ownership in White Cliffs Pipeline

18 SemGroup Segment Results Segment Adjusted EBITDA (1) (in millions, unaudited) 3Q Q Q 2013 Sept Sept Crude (2) $ 25.1 $ 24.6 $ 25.9 $ 75.7 $ 61.6 SemGas SemCAMS SemLogistics (1.0) (0.6) 0.1 (1.4) 0.4 SemMaterials Mexico SemStream Corp and Other (3.4) (3.7) (3.5) (10.7) (8.8) Key Highlights 3Q 2013 vs 2Q Adjusted EBITDA increased approximately 20% Crude increased $0.5 million Increased slightly as a result of additional marketing volumes combined with a partial quarter impact of the Barcas Field Services acquisition, offset by a decrease in pipeline transportation margins SemGas increased $2.4 million Mississippi Lime volumes increased by over 48% SemCAMS increased $3.9 million $2.3 million - timing of maintenance capital recovery fees and lower operational expenses $1.4 million - higher capital fees from volume growth SemMaterials Mexico increased $1.5 million Primarily from higher demand resulting in a 35% volume increase Nine Months Ended Total Adjusted EBITDA (1) $ 52.1 $ 43.6 $ 35.5 $ $ (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

19 SemGroup s Fee-based Business Model Margin Contribution (1) 87% 9% 4% Fixed Fee Variable Fee Marketing Fixed Fee Variable Fee Marketing SemGas 22% 78% SemCAMS 100% SemLogistics 100% SemMaterials Mexico 100% White Cliffs Pipeline 100% Rose Rock Midstream (2) 83% 17% Margin Descriptions Fixed Fee Storage fees Transportation fees Gathering and processing fees Variable Fee Gas processing percent of proceeds Marketing Back-to-back marketing transactions (1) LTM 9/30/2013 (2) Rose Rock Midstream includes cash distributions from 17% ownership in White Cliffs Pipeline 19

20 Future Growth in Drop Downs Rose Rock Midstream s relationship with SemGroup allows for potential future drop downs (in millions) White Cliffs Pipeline (51% ownership) Asset Description 527-mile crude oil pipeline 76,000 bpd capacity Incremental 80,000 bpd expansion Mid-2014 completion 100,000 barrels of crude oil storage Adjusted (*) EBITDA LTM $ 53 Glass Mountain Pipeline Wattenberg Oil Trunkline SemGas SemCAMS SemLogistics Joint venture with NGL Energy Partners 50% ownership 210-mile, 140,000 barrel per day crude oil pipeline and storage Operational January mile, 12-inch pipeline and storage in DJ Basin to move crude oil from Noble Energy production to White Cliffs Pipeline In-service November 2013 Three natural gas processing facilities Total processing capacity of 188 mmcf/d ~1,200 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 $ 20 (1) NA (2) $ 25 (3) $ 37 $ 20 (1) Expected normalized EBITDA (2) EBITDA not disclosed due to confidentiality (3) Includes 5 months of EBITDA related to the 125 mmcf/d plant; online May 2013 (*) As of September 30, 2013