NAPTP MLP Conference. Carlin Conner, CEO Bob Fitzgerald, CFO. May 22, 2014

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Transcription:

NAPTP MLP Conference Carlin Conner, CEO Bob Fitzgerald, CFO May 22, 2014

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 1995. All statements, other than statements of historical fact, included in this presentation including the prospects of our industry, our anticipated financial performance, including distributable cash flow, cash distributions, management's plans and objectives for future operations, capital investments, 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, insufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to pay the minimum quarterly distribution; any sustained reduction in demand for crude oil in markets served by our midstream assets; our ability to obtain new sources of supply of crude oil; the amount of collateral required to be posted from time to time in our transactions; competition from other midstream energy companies; our ability to comply with the covenants contained in and maintain certain financial ratios required by our credit facility; our ability to access credit and capital markets; our ability to renew or replace expiring storage contracts; the loss of or a material nonpayment or nonperformance by any of our key customers; the overall forward market for crude oil; the possibility that our hedging activities may result in losses or may have a negative impact on our financial results; weather and other natural phenomena; hazards or operating risks incidental to the gathering, transporting or storing of crude oil; our failure to comply with new or existing environmental laws or regulations; the possibility that the construction or acquisition of new assets may not result in the corresponding anticipated revenue increases; 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. Rose Rock Midstream uses 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 website at ir.rrmidstream.com. Rose Rock Midstream is present on Twitter and LinkedIn, follow us at the links below: Rose Rock Midstream Twitter and LinkedIn 2

Non-GAAP Financial Measures 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

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: 42.6 million Enterprise Value: $3.5 billion Market Cap: $2.8 billion Share Price: $65.01 Yield: 1.5% Current Annualized Dividend: $0.96 Total Assets: $2.6 billion PP&E: $1.1 billion Master Limited Partnership (MLP) IPO December 2011 Units: 26.5 million Enterprise Value: $1.4 billion Market Cap: $1.1 billion Unit Price: $43.30 Yield: 4.6% Current Annualized Distribution: $1.98 Total Assets: $931 million PP&E: $308 million 4 Note: Enterprise Value, Market Cap, Unit/Share Price and Yield as of May 12, 2014. Balance sheet data as of March 31, 2014

Rose Rock Midstream Ownership Structure 5

Business Strategy Capitalize on Organic Growth Opportunities with Existing and New Assets Generate Consistent 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

Crude Business Overview Rose Rock Midstream Cushing 7.6 million barrels of storage 86% under long-term fixed fee contracts with first expiration 2016 2014 average storage rate of $0.37 per month Connectivity to all major inbound/outbound pipelines White Cliffs Pipeline 34% ownership DJ Basin to Cushing, OK 527-mile, 12-inch pipeline 76,000 bpd current capacity 80,000 bpd expansion ~ August 2014 completion Acquired 34% interest from SemGroup in 2013 Operated by Rose Rock Midstream Tampa Pipeline Acquired November 2013 12-mile, 12-inch pipeline from Platteville to Tampa, CO rail facility 5-mile lateral pipeline extension 3Q 2014 completion 7

Crude Business Overview Cont. Rose Rock Midstream 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 620,000 barrels of storage capacity 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 Bakken Shale 17 gathering trucks Transport via truck, third-party pipeline or rail 61,800 barrels of storage capacity Field Services Acquired September 2013 Crude oil trucking fleet (114 trucks) to augment existing midstream services 8

Crude Key Performance Metrics 8 6 4 2 0 1.10 1.10 6.50 6.50 RRMS Cushing Storage 7.6 million Barrels Capacity 0.50 1.10 6.00 1.85 1.10 4.65 3.35 1.10 3.15 2014 2015 2016 2017 2018 120 100 80 60 40 20 0 31.9 RRMS Transportation Volumes (Thousand Barrels per Day) 44.8 49.0 47.9 53.3 55.7 57.3 54.6 57.1 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2011 2012 2013 2014 9.7 30.9 42.7 67.3 Contracted (1) Operational / Marketing Uncontracted Pipeline Volumes (2) Trucking Volumes 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 37.2 Joint Venture Transportation Volumes (Thousand Barrels per Day) 53.7 60.7 63.0 66.5 66.8 66.8 67.3 77.4 72.7 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2011 2012 2013 2014 60 50 40 30 20 10 0 13.2 RRMS Marketing Volumes (Thousand Barrels per Day) 22.7 21.3 20.4 21.2 24.1 22.1 25.6 48.7 49.6 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2011 2012 2013 2014 White Cliffs Pipeline (3) 9 (1) Updated for contract changes effective May 1, 2014; 100% of storage contract volumes included in year of contract expiration (2) Pipeline volumes include KS/OK system, ND transportation and Tampa pipeline (3) White Cliffs Pipeline is currently owned 34% by RRMS and 17% by SEMG; includes Platteville and Healy volumes (4) Glass Mountain Pipeline is owned 50% by SEMG; average volumes for two months operational during Q1 2014

Rose Rock Midstream 2014 Adjusted EBITDA Guidance $92 million to $97 million (1) $110 $90 Adjusted EBITDA (in millions) $92 - $97 $70 $68 $50 $30 $35 $40 $10 2011 2012 2013 2014E 2014 Adjusted EBITDA guidance reflects approximately 40% increase over 2013 10 (1) Non-GAAP Financial Data Reconciliations can be found on the company s website (2) CAGR is based on the midpoint of 2014 Adjusted EBITDA Guidance

Rose Rock s Fee-based Business Model Margin Contribution (1) Margin Descriptions 81 % 19% Fixed Fee Storage fees Transportation fees Unloading fees Gathering and processing fees Marketing Back-to-back marketing transactions Fixed Fee Marketing 11 (1) LTM March 31, 2014 (2) Rose Rock Midstream includes cash distributions from 34% ownership in White Cliffs Pipeline for 3 months and 17% ownership for 9 months

2014 Capex Guidance Rose Rock Midstream 2014 Capital Expenditures - $75 million (1) $63 84% Growth $12 16% Maintenance Project Spend Through 12/31/2013 (in millions) Description Estimated Completion Date 2014 Capex White Cliffs Pipeline Expansion (2) August 2014 32 30 62 Tampa Pipeline lateral 2Q 2014 5 5 Other/undesignated growth projects 28 Maintenance 12 Total $32 $75 Total CapEx 12 (1) Does not include future drop downs from SemGroup or other potential acquisitions (2) Investments in affiliate; reflects our ownership in joint ventures

Rose Rock Midstream Distribution Per LP Unit 2014 Target Coverage Ratio 1.1x-1.2x 2014 Target Distribution Growth 15% year-over-year (1) $0.6000 $0.5000 $0.4000 $0.3625 $0.4025 $0.4300 $0.4400 $0.4500 $0.4650 $0.4950 $0.3000 $0.2000 4Q 4Q 1Q 2Q 3Q 4Q 1Q 2011 2012 2013 2014 37% cumulative increase in distributions since IPO (1) Assumes no further drop downs or acquisitions 13

Rose Rock Midstream Capitalization & Liquidity (in millions) March 31, 2014 December 31, 2013 Total Debt $ 245 $ 245 Total Equity 360 359 Total Book Capitalization $ 605 $ 604 Credit Metrics Net Debt $ 242 $ 230 Total Debt/Capitalization 40% 41% Net Debt/Adjusted EBITDA LTM 3.0x 3.4x Committed Liquidity Cash and Cash Equivalents $ 3 $ 15 Revolver Availability (1) 298 306 Total Liquidity $ 301 $ 321 Available balance sheet capacity to fund acquisitions and drop down transactions Net Debt / Adjusted EBITDA target of 4.0x or better (1) Availability reduced by outstanding letters of credit 14

Future Growth in Drop Downs Rose Rock Midstream s relationship with SemGroup allows for potential future drop downs Asset Description 527-mile crude oil pipeline - 76,000 bpd capacity White Cliffs Pipeline (51% consolidated ownership) (1) Incremental 80,000 bpd expansion ~ August 2014 completion 100,000 barrels of crude oil storage Glass Mountain Pipeline Wattenberg Oil Trunkline Wattenberg Oil Trunkline Extension SemGas SemCAMS SemLogistics Joint venture with NGL Energy Partners 50% ownership 215-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 Four natural gas processing facilities Total processing capacity of 388 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 (1) Rose Rock currently owns 34% effective December 2013 15

Growing today with a focus for tomorrow Safety Disciplined Investment Execution Increase Equity Holders Return K3 Plant Canada Rose Valley I Oklahoma Glass Mountain Pipeline Oklahoma 16