Investor Presentation. Third Quarter 2015

Transcription

1 Investor Presentation Third Quarter 2015

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, 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 or to fund our other liquidity needs; 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; the effect of our debt level on our future financial and operating flexibility, including our ability to obtain additional capital; the ability of our subsidiary, Rose Rock Midstream L.P. (NYSE: RRMS), to make minimum quarterly distributions; the operations of NGL Energy Partners LP (NYSE: NGL), which we do not control; 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; cyber attacks involving our information systems and related infrastructure; 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; and the possibility that our hedging activities may result in losses or may have a negative impact on our financial results; 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 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 Rose Rock Midstream C-Corp assets in US, Canada, Mexico & UK General Partner of RRMS Publicly Traded November 2010 Shares: 44.6 million Enterprise Value: $2.8 billion Market Cap: $1.8 billion Share Price: $39.49 Yield: 4.6% Current Annualized Dividend: $1.80 Total Assets: $2.9 billion PP&E: $1.5 billion Master Limited Partnership (MLP) IPO December 2011 Units: 36.8 million Enterprise Value: $1.6 billion Market Cap: $889 million Unit Price: $24.15 Yield: 10.9% Current Annualized Distribution: $2.64 Total Assets: $1.3 billion PP&E: $426 million Note: Enterprise Value, Market Cap, Unit/Share Price and Yield as of November 6, Balance sheet data as of September 30,

5 SemGroup Ownership Structure Note: NGL Common Units are as of September 30,

6 Strategic Initiatives Focus on Stable, Fee-Based Business Focused fee-based business with long-term minimum commitments Maintain minimal commodity price exposure Optimize Existing Asset Base Improve operational efficiency and maximize asset utilization Leverage commercial capabilities to expand third-party business Pursue Organic & Strategic Opportunities Financial Strength Identify and execute on low-risk, high-return growth projects Continue to expand footprint to new areas (e.g. Gulf Coast) Jointly pursue strategic opportunities Methodically drop-down assets to the MLP Strong balance sheets with current liquidity of nearly $1 billion No need for capital market access in 2016 SemGroup is a strong strategic sponsor for Rose Rock Collectively focused on creating long-term value 6

7 Crude and Gas Assets in Key Growth Areas 7

8 Crude Business Overview DJ Basin White Cliffs Pipeline 51% ownership DJ Basin to Cushing, OK Two 527-mile, 12-inch pipelines 150,000 bpd current capacity Expanding capacity to approximately 215,000 bpd Expected completion first half 2016 Wattenberg Oil Trunkline 75-mile, 12-inch pipeline and storage in DJ Basin Transports Noble Energy production to White Cliffs Platteville Truck Unloading Facility 30-lane truck unloading facility Origin of White Cliffs Pipeline 330,000 barrels of storage capacity 4 new truck unloading bays and 100,000 barrels of additional storage Completed July new truck unloading bays and 5,000 barrels of additional storage Completed October 2015 Tampa Pipeline 12-mile, 12-inch pipeline from Platteville to Tampa, CO rail facility c 8

9 Crude Business Overview Oklahoma/Kansas Assets Cushing Storage 7.6 million barrels of storage 86% 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 Approximately 600-mile gathering and transportation pipeline system Currently operating at full capacity Connects to third-party pipelines, Kansas and Oklahoma refineries and Cushing terminal 650,000 barrels of storage capacity Field Services Glass Mountain Pipeline 50% ownership 215-mile pipeline Two laterals Granite Wash and Mississippi Lime Play join and terminate in Cushing 140,000 bpd current capacity Isabel Pipeline Expected Completion 1Q mile, 8-inch crude oil pipeline from Isabel Junction, KS to Alva, OK Connects Kansas barrels to Glass Mountain Pipeline Crude Oil Trucking Fleet Fleet of approximately 270 crude oil trucks Servicing the Bakken, DJ/Niobrara, Eagle Ford, Granite Wash, Mississippi Lime, Permian and Utica plays 9

10 Crude Key Performance Metrics 1.10 Crude Cushing Storage 7.6 million Barrels Capacity Crude Transportation Volumes (Thousand Barrels per Day) Contracted (1) Operational / Marketing Uncontracted Pipeline Volumes (2) Wattenberg Oil Trunkline Field Services (3) Joint Venture Transportation Volumes (Thousand Barrels per Day) Crude Marketing Volumes (Thousand Barrels per Day) White Cliffs Pipeline Volumes (4) Glass Mountain Pipeline Volumes (5) 10 (1) 100% of storage contract volumes are included in year of contract expiration (2) Pipeline volumes include KS/OK system, ND transportation and Tampa pipeline (3) White Cliffs Pipeline is owned 51% by RRMS; reflects 100% throughput (4) Glass Mountain Pipeline is owned 50% by RRMS; average volumes for 1Q 2014 for two months operational; reflects 100% throughput (5) Includes intercompany trucking volumes

11 SemGas Natural Gas Business SemGas Areas of Operation Northern Oklahoma Average Processed Volume (mmcf/d) Located in liquids rich oil plays Five processing facilities mmcf/d of current capacity 1,300 miles of gathering lines Inventory of drilled but uncompleted wells to support production volumes Anticipate maintaining 3Q 2015 processing volumes through Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q Processing Volumes Capacity 11

12 SemCAMS Natural Gas Business Average Throughput Volume (mmcf/d) SemCAMS Areas of Operation Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q K3 KA Capacity Located in: Western Canadian Sedimentary Basin sour gas Montney liquids rich sour gas Duvernay liquids rich sweet gas 600 miles of transport and gathering lines Strong incumbent position to serve industry s growing infrastructure needs 12

13 Maurepas Pipeline Overview Project Construct, own and operate three pipelines for Motiva Enterprises, LLC in St. James, LA connecting Motiva's refineries 24-inch, 34 mile crude oil pipeline connected to LOCAP, crossing the Mississippi River and terminating at Motiva's Norco refinery; 12-inch, 35 mile intermediates pipeline between Motiva's Norco and Convent refineries; and 6-inch, 35 mile intermediates pipeline between Motiva's Norco and Convent refineries; and This project is supported by long-term transportation agreements with Motiva and is expected to be operational in the fourth quarter of 2016 The pipeline project is a significant part of an overall refinery optimization project Strategic Rationale First step in establishing a SemGroup presence in US Gulf Coast crude markets and it provides a more balanced risk profile through geographic diversity, new customer base and potential for product expansion Platform for future participation in the build-out of infrastructure in the Gulf Coast Accomplishes strategic goal of becoming more refinery facing Furthers SemGroup s drop down inventory to Rose Rock Project Progress 90% of planning process complete Majority of Right-of-Way acquired, permits in process and major equipment has been ordered 13

14 14 Maurepas Pipeline Area Map

15 2015 Updated Capital Expenditure Guidance (1) 2015 Capital Expenditures $650 million $245 38% $355 54% $45 7% Natural Gas Crude Other Growth Projects Maintenance $5 1% Project update - Platteville expansion completed - Maurepas Pipeline on-track for a Q completion Growth capex guidance reduced $90 million to reflect timing of capital spend Reduced capex guidance $35 million primarily a result of a decrease in SemGas well connects More than 90% of capital expenditures are focused on growth capital Targeting EBITDA multiples of 5-8x on organic growth projects in key asset plays (1) Guidance updated November 5,

16 2015 Updated Capital Expenditure Guidance (1) (in millions) Segment Description SemGroup Estimated Completion Date 2015 Capex 2016 Capex Crude Maurepas Pipeline 4Q SemGas Northern Oklahoma gas gathering & processing expansion varies SemCAMS Wapiti Pipeline Expansion varies SemCAMS K3 Plant projects varies SemCAMS KA Plant projects varies Other/undesignated growth projects varies Maintenance Total SemGroup $500 Rose Rock Midstream Crude White Cliffs Pipeline capacity expansion (2) 1H Crude Isabel Pipeline 1Q Crude Platteville truck unloading expansion October Crude Wattenberg Oil Trunkline extension 1Q Other/undesignated growth projects 30 Maintenance Total Rose Rock Midstream $150 Total $650 $500-$600 Total Project 16 (1) Guidance updated November 5, 2015 (2) Investments in affiliate; reflects our ownership in joint ventures

17 Third Quarter 2015 Adjusted EBITDA (1) 3Q Q Q months ending 9/30/15 9 months ending 9/30/14 Crude (2) $ 42.2 $ 43.8 $ 41.6 $ $ SemGas SemCAMS SemLogistics (0.8) SemMaterials Mexico SemStream Corporate and Other (4.1) (3.7) (6.4) (14.2) (11.9) SemGroup $ 76.0 $ 80.0 $ 70.0 $ $ Rose Rock Midstream $ 41.9 $ 44.7 $ 42.1 $ $ 82.8 $350 $300 $250 $200 $150 $116 SEMG Adjusted EBITDA (1) (in millions) $135 $189 $287 $305-$315 $200 $150 $100 $50 $35 $40 RRMS Adjusted EBITDA (1) (in millions) $69 $128 $175-$185 $ E $ E 17 (1) Non-GAAP Financial Data Reconciliations can be found on the company website (2) SemGroup includes fully consolidated Rose Rock Midstream (3) Prior period financial information has been recast to reflect the effects of the dropdown of the Wattenberg Oil Trunkline (4) CAGR is based on the midpoint of 2015 Adjusted EBITDA Guidance

18 Leverage & Liquidity (in millions, unaudited) Revolving credit facility - December 2018 Revolving credit facility - September 2018 SemGroup Rose Rock September 30, 2015 September 30, % Senior unsecured notes $ % Senior unsecured notes $ % Senior unsecured notes Total consolidated debt $300.0 $750.0 Compliance leverage ratio (1) 1.08x 3.96x Liquidity: Cash and cash equivalents Revolver availability (2) Total liquidity $641.5 $590.1 Nearly $1.2 Billion of Combined Liquidity (1) Calculated per credit agreement definitions (2) Revolver availability less outstanding letters of credit 18

19 SemGroup s Fee-based Business Model Margin Contribution (1) 88% Fixed Fee Variable Fee Marketing SemGas (2) 72% 28% SemCAMS 100% SemLogistics 100% 6% 6% Fixed Fee Variable Fee Marketing SemMaterials Mexico 100% White Cliffs Pipeline 100% Rose Rock Midstream (3)(4) 85% 15% 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 19 (1) LTM September 30, 2015 (2) SemGas 3Q 2015 margin contribution 73% fixed fee, 27% variable fee (3) Rose Rock Midstream includes White Cliffs and Glass Mtn Pipeline proportionate cash distributions (4) Marketing margin reduced by intercompany trucking expense

20 SemGroup Corporation Dividend Growth (1) 2015 Target Dividend Growth 50-60% year-over-year (1) Assumes no further drop downs to Rose Rock or 3rd party acquisitions 20

21 Rose Rock Midstream Distribution Growth (1) 2015 Target Annual Coverage Ratio 1.1x-1.2x 2015 Target Distribution Growth 15-20% year-over-year (1) Assumes no further drop downs from SemGroup or 3rd party acquisitions 21

22 Company Highlights Prudent organic capital investment at 5-8x EBITDA multiples Capital spending can be accomplished without accessing capital markets Clean balance sheet provides significant financial flexibility SemGroup s strong sponsor support for Rose Rock creates value for both entities 22