June 6, 2018 Overview & Tour
Non-GAAP Financial Measures SemGroup s non-gaap measures, Adjusted EBITDA and Total Segment Profit, are not GAAP measures and are not intended to be used in lieu of GAAP presentation of net income (loss) and operating income, respectively, which are the most closely associated GAAP measures. 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 non-recurring, 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. 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
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, 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
Highly Experienced Executive Management SemGroup Executive Management Carlin Conner Chief Executive Officer Robert Fitzgerald Chief Financial Officer Timothy Sullivan Vice President Corporate Planning & Strategic Initiatives Joined SemGroup in April 2014 and has over 25 years of experience in the terminal industry Previously served as managing director of Oiltanking GmbH, an independent global storage provider based in Germany Helped build Oiltanking s Houston Ship Channel Position and led the MLP, h was eventually sold to Enterprise Products Partners Joined SemGroup in November 2009 and has 30 years of experience in the Energy Industry Previously served as Chief Financial Officer of Windsor Energy Group, a private independent oil and gas company 20 years of experience with BP Amoco and Amoco Corporation, working in various financial and operations position in Houston, Tulsa, Denver and Chicago Joined SemGroup in April 2010 and has over 35 years of experience in the Energy Industry Previously served as Chief Operating Officer of SemGas LP and Director of Global Gas and Power Origination at Williams Power Company 19 years of experience at Koch Industries, working in various capacities in its natural gas division HFOTCO Management Shaun Revere Chief Executive Officer Blake Trahan Vice President Marketing & Sales Mickey Franco Director, Terminal Services Joined HFOTCO in October 2012 with 25 years of experience in the terminal industry Extensive knowledge of petroleum trading business as President of Mabanaft Inc. Direct experience in bulk liquid terminal industry through previous experiences with GATX and Oiltanking GmbH Joined HFOTCO in November 2012 with 29 years of commercial and business development experience in petroleum logistics Previously commercial and BD roles at L&R Chartering, Oiltanking and Chevron/Unocal Commercial leadership has resulted in hundreds of millions of dollars invested in tanks, marine docks and infrastructure to service a variety of customers including major oil companies. Joined HFOTCO in December 1991 and has over 26 years of experience in various departments within the terminal. Extensive knowledge of the terminal with about 5 years experience in Operations, 6 years in Maintenance, 10 years in IT/SCADA and 5 years experience in Scheduling/Customer Service. Strong understanding of terminal business processes. Executive Management has, on average, over 25 years of experience in the energy midstream and terminal industry 4
Carlin Conner SemGroup CEO 5
Key Areas of Operation and Growth CANADA Unmatched H 2 S gas processing platform in liquids-rich Western Canadian Sedimentary Basin. CANADA MID-CONTINENT MID-CONTINENT Unmatched H 2 S gas processing platform in liquids-rich Western Canadian Sedimentary Basin. Crude, NGL and gas processing assets in the DJ GULF and COAST Anadarko Basins. Strategic position on Houston GULF Ship COAST Channel with product Strategic storage, position refinery on Houston connectivity Ship Channel with product and deepwater storage, refinery marine connectivity access. Crude, NGL and gas processing assets in the DJ and Anadarko Basins. and deepwater marine access. 6
Adjusted EBITDA ($ in millions) Financial Growth Aligned with Stable Fee-Based Assets $450 $385 - $415 100% $400 $350 $300 $250 $200 $150 $100 $50 $287 23% $305 30% $283 38% $328 49% 58% 80% 60% 40% 20% $0 2014 2015 2016 2017 2018E Take-or-Pay % of Gross Margin 0% 7 NOTE: Non-GAAP Financial Data Reconciliations are included in the Appendix to this presentation Take-or-pay % of gross margin: LTM March 31, 2018, pro forma for full-year HFOTCO acquisition and Maurepas Pipeline
Driving Shareholder Value Stable and growing cash flows with ~60% take-or-pay Dividend growth rate of 5% with ample coverage Significant long-term upside in Canada and U.S. Gulf Coast Simplified Portfolio Clear Path to Long-Term Growth 8
Shaun Revere HFOTCO CEO 9
10 Refining Overview
Crude Oil Characteristics Crude oils are blends of hydrocarbon molecules Classified and valued dependent on density, sulfur content and acidity Density commonly measured in API gravity (relative density of crude to water) API gravity greater than 10 is lighter, floats on water API gravity less than 10 is heavier, sinks in water Sulfur content determines if crude is sweet or sour Sweet = Sulfur content less than 0.7% Sour = Sulfur content greater than 0.7% Acidity is measure by Total Acid Number (TAN) High acid crudes are those with TAN greater than 0.7 Acid crudes are corrosive to refinery equipment Require greater investment to process significant volumes or higher TAN levels Different crude types combined with varying refinery designs drive need for exports 11
Basic Refining Concepts Distillation Tower Gasoline Vapors End Products { LPG Naphtha Reformer { Gasoline Kerosene { Jet Fuel Diesel Distillate { Diesel Fuel Medium Weight Gas Oil Heavy Gas Oil Cracking Units Alkylation Unit { LPG { Gasoline { Motor Gasoline { Jet Fuel { Diesel Fuel Residual Oil Coker { Industrial Fuel { Asphalt Base 12 Source: EIA & SemGroup Research
13 U.S. Refineries
U.S. Product Demand Heavy Fuel Oil 3% Other 16% Demand (MBPD) Jet Fuel 9% Gasoline 47% Gasoline Diesel Jet Fuel 10,066 5,315 1,868 Diesel 25% Heavy Fuel Oil Other 651 3,365 Total : 21,265 14 Source: EIA - 2017
Gulf Coast Refinery Production Volume PADD III Refiners Texas Gulf Coast Refiners Crude Runs 8,871 MBPD Hydrocarbon Gas Liquid Produced 416 MBPD Gasoline Produced 851 MBPD Heavy Fuel Oil Produced 518 MBPD Distillate Produced 3,692 MBPD Other Produced 1,132 MBPD Crude Runs 4,370 MBPD Hydrocarbon Gas Liquid Produced 214 MBPD Gasoline Produced 376 MBPD Distillate Produced 1,757 MBPD Heavy Fuel Oil Produced 280 MBPD Other Produced 563 MBPD 10,000 5,000 0 5,000 Volume (MBPD) 10,000 5,000 0 5,000 Volume (MBPD) 15 Source: EIA - 2017
PADD III Exports 0 200 400 600 800 1,000 1,200 Heavy Fuel Oil Jet Fuel Diesel Gasoline Crude = 225 Thousand Barrels per Day 16 Source: EIA 2017
17 HFOTCO Overview
Unique Position on the Houston Ship Channel Ship & Barge Docks 5 ship docks capable of handling vessels with 45 foot draft (1) 7 barge docks capable of accommodating 23 barges simultaneously Land 330 acres of waterfront land on the Houston Ship Channel 12 acres of undeveloped land at Moore Road Junction, hub for multiple pipelines Pipelines, Truck & Rail Three crude oil pipelines to four refineries (2) 72 rail car bays 14 truck bays Storage tanks 144 tanks ranging in size from 10 to 400 thousand barrels 16.8 million barrels of storage capacity Additional 1.45 million barrels currently under construction (expected in-service date of July 2018) 18 1) Fifth ship dock is currently under construction, expected completion mid-2018 2) HFOTCO owns two pipelines
HOFTCO Value Proposition Location Strategically located on Houston Ship Channel Proximity to 2.5 million barrels per day of refining capacity Deep draft docks to handle largest vessels that can traverse Houston Ship Channel Connectivity Pipeline connections to local area refineries Crude oil receipts and delivery Liquidity Critical for heated product customers Access to blend components Access to volumes to fill cargos Flexibility Tanks have ability to switch between products stored Multiple modes to source blend components Ability to blend on vessels adds efficiency 19
HFOTCO s Role in the Refinery Process HFOTCO is a critical partner to the Gulf Coast refining complex HFOTCO has 18.3 million barrels of storage (1) Crude = 6.9 million barrels (1) Heated = 10.9 million barrels Other = 0.4 million barrels At 2.5 million barrels per day the Houston/Texas City refining complex represents 13% of total U.S. refinery capacity Provides crude feedstock support by receiving domestic and imported crude oil and delivering to the refineries Inbound crude via pipelines, barges and vessels Outbound crude via pipelines and vessels Connects refineries to product markets, particularly for heavy gas oil and residual fuel oil products Residual fuel oil used as fuel for power plants, feedstock for refineries and bunker fuel for ships Other heavy oil products include vacuum gas oil, asphalt and carbon black These products are stored at higher temperatures (>120 F) and require specialty assets Supports refiners, producers and other crude aggregators for crude oil exports 20 1) As of July 2018 with completion of 1.45 million barrel expansion
HFOTCO Product Handling Capabilities Crude Oil Residual Fuel Oil Vacuum Gas Oil Carbon Black Asphalt Power Generation Refinery Feed Bunker Fuel Tires Plastics Paint Colorant Ink Motor Fuels Jet Fuels Intermediate Refinery Feed Gasoline Diesel Roads 21
Versatile Connectivity Barge Barge Pipeline Truck HFOTCO Pipeline Refineries Rail Car Vessel Vessel 22
Strong Connectivity to the Houston Refinery Complex Connects directly or indirectly to crude pipelines serving the Eagle Ford, Permian, Bakken, Midcontinent and Canada Keystone Pipeline Ho-Ho Pipeline Longhorn Pipeline Bridgetex Pipeline East Houston Junction Moore Road Junction Speed Junction Pasadena Junction EPD South Texas Crude Pipeline EPD Eagle Ford Pipeline Genoa Junction Seaway Pipeline HFOTCO Existing Pipeline HFOTCO Planned Pipeline 23
Volume (MMBBLs) Significant Throughput Growth 120 HFOTCO Throughput (MMBBLs) 2013 vs 2017 Total HFOTCO Throughput (MMBBLs) 2013 vs 2017 100 80 2013 60 Total 40 2017 20 0 Vessel Pipeline Barge Rail Car Truck 2013 90.8 66.2 67.7 5.5 0.9 2017 101.7 94.4 83.5 4.9 2.4 0 100 200 300 400 Volume (MMBBLs) Total Barrels Handled (1) 2013 274.6 million barrels 2017 323.6 million barrels Equivalent to filling the Superdome 14.5 times or 20,613 Olympic swimming pools 24 1) Total Barrels Handled Include: Tank to Tank Transfers and Bunker Barges
Solid Customer Base Approximately 88% of HFOTCO s revenue is generated by take-or-pay contracts The remaining 12% based on predictable streams related to ancillary services that derive from basic storage functions (heating, throughput fees, etc.) Diversified Long-Term Investment Grade National Oil Company 6% Major Refiner 17% Niche Trader 13% Major Oil 48% Major Trader 16% < 9 Years 37% 9-18 Years 11% > 18 Years 52% A 32% BBB 41% AA 3% Non-Rated 24% Top 10 customers comprise ~68% of rental revenues No customer accounts for more than 10% of rental revenues Loyal customer base with weighted-avg. tenure of ~18 years 52% of customers have been with HFOTCO for over 18 years 75% of the contracted capacity is with diversified investment grade counterparties Non-Rated / Non-Investment Grade customers include several large global private companies 25 LTM March 31, 2018
HFOTCO Contract Overview 88% of revenues generated by take or pay contracts Additional revenues generated from ancillary services Tank Heating Pipeline Fees Excess Throughput Truck and Rail Car Handling Fees Vessel Handling Fees Zero direct commodity price exposure Contracts take various forms Monthly Tank Fee Throughput Based 26
27 International Maritime Organization 2020 Impact
International Maritime Organization 2020 Global bunker fuel sulfur reduction to 0.5% from 3.5% Will drive decreased fuel oil demand and increased diesel demand Spread between low and high sulfur products will widen Increased diesel demand Higher refinery runs Greater volume of all products How ship owners will adapt Switch to low sulfur fuels Diesel / Middle distillates LNG Utilize blended fuel Install scrubbers Non-Compliance 28
Impacts to HFOTCO Heavy Fuel Oil still produced Lower values will arb volumes to other uses or destruction Refiners unbalanced so molecules will still need logistic assets to store and transport Higher crude runs create potential for more terminal throughput Blend-Capable assets required for low sulfur fuel blends VGO one of the possible blend components HFOTCO has been successful in diversifying heated portfolio Becoming a VGO hub Fuel Oil and related components reduced by more than 30% since 2013 29
30 HFOTCO Future
HFOTCO in the Future Growth focused on water front facilities Recently closed ~ 19 acres of adjacent land Moore Road pipeline Connectivity to Cushing Market Link, Zydeco and others Negotiating connection agreements Right of way secured Additional 1.25 million barrels of tanks permitted Long-Term lease of water front property for Ship Dock #6 Additional land available for expansion to accommodate import / export of all hydrocarbons Conversion of tanks can be relatively inexpensive 31
32 Safety Rules of The Road on The Tour
33 Appendix
Non-GAAP Adjusted EBITDA Calculation (in thousands, unaudited) 2018 2017 Reconciliation of net income to Adjusted EBITDA: Q1 Q1 Q2 Q3 Q4 FY2017 Net income (loss) $ (33,035) $ (10,277) $ 9,611 $ (19,103) $ 2,619 $ (17,150) Add: Interest expense 42,461 13,867 13,477 32,711 42,954 103,009 Add: Income tax expense (benefit) 23,083 95 3,625 (37,249) 31,141 (2,388) Add: Depreciation and amortization expense 50,536 24,599 25,602 50,135 58,085 158,421 EBITDA 83,045 28,284 52,315 26,494 134,799 241,892 Selected Non-Cash Items and Other Items Impacting Comparability 10,326 32,383 13,095 64,239 (23,306) 86,411 Adjusted EBITDA $ 93,371 $ 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) $ 2,410 $ (234) $ 41,625 $ (30,468) $ 13,333 Foreign currency transaction loss (gain) 3,294 (1,011) (747) (2,951) (4,709) Adjustments to reflect equity earnings on an EBITDA basis 4,883 6,709 6,692 6,678 6,811 26,890 M&A transaction related costs 1,156 5,453 14,886 1,649 21,988 Pension plan curtailment loss (gain) (3,097) 89 (3,008) Employee severance and relocation expense 137 558 312 104 720 1,694 Unrealized loss (gain) on derivative activities 2,226 27 (928) 1,833 (892) 40 Non-cash equity compensation 2,196 2,757 2,803 2,957 1,736 10,253 Loss on early extinguishment of debt 19,922 8 19,930 Selected Non-Cash items and Other Items Impacting Comparability $ 10,326 $ 32,383 $ 13,095 $ 64,239 $ (23,306) $ 86,411 34
Non-GAAP Adjusted EBITDA Calculation (in thousands, unaudited) FY2016 FY2015 FY2014 Reconciliation of net income to Adjusted EBITDA: Net income $ 13,262 $ 42,812 $ 52,057 Add: Interest expense 62,650 69,675 49,044 Add: Income tax expense 11,268 33,530 46,513 Add: Depreciation and amortization expense 98,804 100,882 98,397 EBITDA 185,984 246,899 246,011 Selected Non-Cash Items and Other Items Impacting Comparability 96,811 58,383 41,430 Adjusted EBITDA $ 282,795 $ 305,282 $ 287,441 Selected Non-Cash Items and Other Items Impacting Comparability Loss on disposal or impairment, net $ 16,048 $ 11,472 $ 32,592 Loss from discontinued operations, net of income taxes 1 4 1 Foreign currency transaction loss (gain) 4,759 (1,067) (86) Adjustments to reflect equity earnings on an EBITDA basis 28,757 32,965 11,033 Remove loss (gain) on sale or impairment of NGL units 30,644 (14,517) (34,211) M&A transaction related costs 3,269 10,000 Inventory valuation adjustments including equity method investees 3,187 7,781 Employee severance and relocation expense 2,128 90 220 Unrealized loss (gain) on derivative activities 989 2,014 (1,734) Change in fair value of warrants 13,423 Bankruptcy related expenses 224 1,310 Charitable contributions 3,379 Legal settlement expense 3,394 Recovery of receivables written off at emergence (664) Non-cash equity compensation 10,216 10,617 8,386 Selected Non-Cash items and Other Items Impacting Comparability $ 96,811 $ 58,383 $ 41,430 35