SemGroup ® Corporation (NYSE: SEMG) today announced that it has completed its contribution of the company’s SemStream ®, L.P. business into NGL Energy Partners LP (NYSE: NGL) in exchange for cash and equity interests. This transaction is intended to enhance SemGroup’s investment in natural gas liquids, create additional opportunities for growth and strengthen SemGroup’s financial profile through increased earnings.

As previously announced, all assets of SemStream, L.P. were incorporated in this contribution excluding those of SemStream Arizona Propane, L.L.C. In exchange for these assets, SemGroup Corporation received the following:
  • 8.93 million common units of NGL Energy Partners stock, representing an approximately one third equity interest in the limited partnership:
  • 7.5 percent equity interest in the General Partner of NGL Energy Partners;
  • A cash payment of up to $100,000,000 for working capital, subject to adjustment; and
  • Two seats on the board of directors of the general partner of NGL Energy Partners.

“We are pleased to report on the closing of this transaction which we believe demonstrates the benefits that the NGL MLP structure can deliver for our shareholders,” said Norman Szydlowski, SemGroup President and Chief Executive Officer. “By contributing our SemStream assets to NGL, we are confident that we will improve the stability of SemGroup’s cash flows, reduce earnings volatility, increase earnings and create an additional platform for growth.”

Mr. Szydlowski continued, “Our future cash flows will be derived from the quarterly distributions we receive from NGL Energy Partners. In essence, this transaction converts a seasonal cash flow into a stable distribution leveraged towards growth. As part of the transaction, we will also own 7.5% of the General Partner and associated incentive distribution rights, which means we will receive increasing percentages of cash distributed from operations as the partnership meets certain thresholds,” added Mr. Szydlowski.

The completion of this transaction represents a significant milestone in SemGroup’s long-term strategic plan, which also includes:

  • Near-term construction at Cushing, OK;
  • Increasing capacity at its gas processing facilities in northern Oklahoma to take advantage of active drilling in the Mississippian lime formation; and
  • Our previously announced plan to form our own Master Limited Partnership which is intended to provide a more tax-efficient entity that will be well positioned to create additional value for our stockholders through organic growth projects and acquisitions.

Mr. Szydlowski concluded, “We believe SemGroup has the right mix of assets and the financial strength to participate in growth opportunities in the oil and natural gas production markets. We remain enthusiastic about SemGroup’s prospects and are confident that our strategic initiatives will create substantial value for stockholders.”

About SemGroup

Based in Tulsa, Oklahoma, SemGroup® Corporation (NYSE: SEMG) is a publicly traded midstream service company providing the energy industry the means to move products from the wellhead to the wholesale marketplace. SemGroup provides diversified services for end-users and consumers of crude oil, natural gas, natural gas liquids, refined products and asphalt. Services include purchasing, selling, processing, transporting, terminalling and storing energy.

About NGL Energy Partners LP

NGL Energy Partners LP is a Delaware limited partnership formed in September 2010 through the merger of Hicksgas and NGL Supply. The Partnership owns and operates a vertically integrated energy business with three operating segments: midstream, wholesale supply and marketing and retail propane. For further information visit the Partnership's website at www.nglenergypartners.com.

SemGroup® is registered trademark of SemGroup Corporation.

Forward-Looking Statements

Certain matters contained in this Press Release 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 Press Release including the prospects of our industry, our anticipated financial performance, NGL’s 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, 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 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; any future impairment to goodwill resulting from the loss of customers or business; 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 and NGL’s 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.

Additional Information

This communication does not constitute an offer to buy or solicitation of an offer to sell any securities or a solicitation of any vote, consent or approval. No tender offer for the shares of SemGroup has commenced at this time. If a tender offer is commenced, SemGroup may file a solicitation/recommendation statement with the U.S. Securities and Exchange Commission (“SEC”). Any solicitation/recommendation statement filed by SemGroup that is required to be mailed to stockholders will be mailed to stockholders of SemGroup. In addition, SemGroup may file a proxy statement and other documents with the SEC. Any definitive proxy statement will be mailed to stockholders of SemGroup. INVESTORS AND SECURITY HOLDERS OF SEMGROUP ARE URGED TO READ THESE AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and security holders will be able to obtain free copies of these documents (if and when available) and other documents filed with the SEC by SemGroup through the web site maintained by the SEC at http://www.sec.gov.

A registration statement relating to the common units of the Master Limited Partnership has been filed with the Securities and Exchange Commission, but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This announcement does not constitute an offer to sell, or the solicitation of an offer to buy, any securities. Any offers, solicitations of offers to buy or sales of securities will only be made in accordance with the registration requirements of the Securities Act of 1933 or an exemption therefrom.

Certain Information Regarding Participants

SemGroup and certain of its respective directors and executive officers may be deemed to be participants under the rules of the SEC in any future solicitation of proxies or consents from SemGroup’s stockholders in respect of the matters discussed herein. Security holders may obtain information regarding the names, affiliations and interests of SemGroup’s directors and executive officers in SemGroup’s Annual Report on Form 10-K for the year ended December 31, 2010, which was filed with the SEC on March 31, 2011, and its proxy statement for the 2011 Annual Meeting, which was filed with the SEC on April 21, 2011. These documents can be obtained free of charge from the sources indicated above. Additional information regarding the interests of these participants in any proxy solicitation or consent solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will also be included in future filings with the SEC.

Copyright Business Wire 2010

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