SemGroup Corporation Announces Third Quarter 2016 Results And Dividend

TULSA, Okla., Nov. 07, 2016 (GLOBE NEWSWIRE) -- SemGroup ® Corporation (NYSE:SEMG) today announced its third quarter 2016 financial results and quarterly dividend.

SemGroup reported third quarter 2016 revenues of $327.8 million with a net loss attributable to SemGroup of $7.4 million, or a loss of $0.14 per diluted share. This compares with second quarter 2016 revenues of $287.4 million with net income attributable to SemGroup of $8.0 million, or $0.18 per diluted share. Third quarter 2015 revenues totaled $397.1 million with net income attributable to SemGroup of $4.9 million, or $0.11 per diluted share.

SemGroup's third quarter 2016 Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) was $71.3 million, up approximately 5 percent from $67.6 million in second quarter 2016 but down 6 percent from $75.9 million in third quarter 2015. Adjusted EBITDA is a non-GAAP measure and is reconciled to net income below.

"SemGroup delivered solid results for the third quarter and continued to execute key steps in our growth strategy," said Carlin Conner, president and chief executive officer of SemGroup. "In addition to the acquisition of our former MLP, we also made construction progress on Maurepas Pipeline and announced plans to build a new Canadian sour gas plant, which we expect to be fully contracted by startup. By focusing on regional customer infrastructure gaps, we are capturing growth opportunities in this 'lower for longer' market."

As previously announced, the company closed on its agreement to acquire all of the outstanding common units of its former MLP, Rose Rock Midstream L.P., in an all stock-for-unit transaction. The transaction simplifies SemGroup's corporate capital structure and is expected to deliver important benefits to shareholders.            Recent DevelopmentsIn October, SemGroup's subsidiary SemCAMS announced that it will build a new 200 mmcf/d sour gas processing plant in the Wapiti area of the Montney play in Alberta. The new plant is underpinned by a 15-year, take-or-pay contract for a portion of the capacity. The plant is expected to be fully committed prior to the anticipated startup in mid-2019. The new sour gas plant is estimated to cost $225 million to $250 million.

Third Quarter 2016 DividendThe SemGroup board of directors declared a quarterly cash dividend to common shareholders of $0.45 per share, resulting in an annualized dividend of $1.80 per share. The dividend will be paid on November 28, 2016 to all common shareholders of record on November 18, 2016.

2016 GuidanceConsistent with guidance provided the last two quarters, SemGroup continues to expect its 2016 Adjusted EBITDA to be below the midpoint of its previously announced guidance range, due primarily to the company's sale of NGL Energy Partners LP units.

Earnings Conference CallSemGroup will host a conference call for investors today, November 7, 2016, at 1:30 p.m. ET. The call can be accessed live over the telephone by dialing 1.855.239.1101, or for international callers, 1.412.542.4117. Interested parties may also listen to a simultaneous webcast of the conference call by logging onto SemGroup's Investor Relations website at ir.semgroupcorp.com. A replay of the webcast will be available following the call. The third quarter 2016 earnings slide deck will be posted under Presentations.

About SemGroupBased in Tulsa, Okla., 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.

SemGroup uses its 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, our Twitter account and LinkedIn account.

Non-GAAP Financial MeasuresSemGroup's non-GAAP measure, Adjusted EBITDA, is not a GAAP measure and is not intended to be used in lieu of GAAP presentation of net income (loss), which is the most closely associated GAAP measure. 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 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.

This measure may be used periodically by management when discussing our financial results with investors and analysts and is presented as management believes it provides additional information and metrics relative to the performance of our businesses. This non-GAAP financial measure has important limitations as an analytical tool because it excludes 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.

Forward-Looking StatementsCertain 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, 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, the failure to realize the anticipated benefits of the transaction, consummated on September 30, 2016, pursuant to which we acquired all of the outstanding common units of our subsidiary, Rose Rock Midstream, L.P., not already owned by us; 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 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 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 agreement and the indentures governing our senior notes, including requirements under our credit 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; 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 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.

Condensed Consolidated Balance Sheets (in thousands, unaudited)
  September 30, 2016   December 31, 2015
ASSETS    
Current assets $ 612,484   $ 480,381  
Property, plant and equipment, net 1,696,010   1,566,821  
Goodwill and other intangible assets 188,271   210,255  
Equity method investments 438,194   551,078  
Other noncurrent assets, net 51,573   45,374  
Total assets $ 2,986,532   $ 2,853,909  
LIABILITIES AND OWNERS' EQUITY    
Current liabilities:    
Current portion of long-term debt $ 25   $ 31  
Other current liabilities 415,742   376,996  
Total current liabilities 415,767   377,027  
Long-term debt, excluding current portion 1,030,140   1,057,816  
Other noncurrent liabilities 73,293   222,710  
Total liabilities 1,519,200   1,657,553  
Total owners' equity 1,467,332   1,196,356  
Total liabilities and owners' equity $ 2,986,532   $ 2,853,909  
     

Condensed Consolidated Statements of Operations (in thousands, except per share amounts, unaudited)
  Three Months Ended Nine Months Ended
  September 30, June 30, September 30,
  2016 2015 2016 2016 2015
Revenues $ 327,764   $ 397,065   $ 287,377   $ 929,992   $ 1,072,601  
Expenses:          
Costs of products sold, exclusive of depreciation and amortization shown below 218,503   274,639   176,842   592,292   710,869  
Operating 52,636   53,267   54,707   157,537   167,157  
General and administrative 20,583   23,045   20,775   62,419   78,272  
Depreciation and amortization 24,912   26,022   25,048   74,007   74,430  
Loss (gain) on disposal or impairment, net 1,018   (951 ) 1,685   16,010   1,479  
Total expenses 317,652   376,022   279,057   902,265   1,032,207  
Earnings from equity method investments 15,845   16,237   17,078   55,994   60,699  
Gain (loss) on issuance of common units by equity method investee   136     (41 ) 6,033  
Operating income 25,957   37,416   25,398   83,680   107,126  
Other expenses, net 21,199   17,829   10,807   91,987   33,725  
Income (loss) from continuing operations before income taxes 4,758   19,587   14,591   (8,307 ) 73,401  
Income tax expense (benefit) 11,898   10,006   4,658   (4,851 ) 29,609  
Income (loss) from continuing operations (7,140 ) 9,581   9,933   (3,456 ) 43,792  
Loss from discontinued operations, net of income taxes   (1 ) (2 ) (1 ) (3 )
Net income (loss) (7,140 ) 9,580   9,931   (3,457 ) 43,789  
Less: net income attributable to noncontrolling interests 225   4,707   1,922   11,167   14,153  
Net income (loss) attributable to SemGroup Corporation $ (7,365 ) $ 4,873   $ 8,009   $ (14,624 ) $ 29,636  
Net income (loss) attributable to SemGroup Corporation $ (7,365 ) $ 4,873   $ 8,009   $ (14,624 ) $ 29,636  
Other comprehensive income (loss), net of income taxes (7,051 ) (20,210 ) 6,591   (4,569 ) (23,750 )
Comprehensive income (loss) attributable to SemGroup Corporation $ (14,416 ) $ (15,337 ) $ 14,600   $ (19,193 ) $ 5,886  
Net income (loss) per common share:          
Basic $ (0.14 ) $ 0.11   $ 0.18   $ (0.31 ) $ 0.68  
Diluted $ (0.14 ) $ 0.11   $ 0.18   $ (0.31 ) $ 0.67  
Weighted average shares (thousands):          
Basic 52,642   43,808   45,236   47,269   43,775  
Diluted 52,642   43,971   45,647   47,269   43,969  
                     

Reconciliation of net income to Adjusted EBITDA: (in thousands, unaudited)
  Three Months Ended Nine Months Ended
  September 30, June 30, September 30,
  2016 2015 2016 2016 2015
Net income (loss) $ (7,140 ) $ 9,580   $ 9,931   $ (3,457 ) $ 43,789  
Add: Interest expense 21,032   19,170   18,875   58,842   50,583  
Add: Income tax expense (benefit) 11,898   10,006   4,658   (4,851 ) 29,609  
Add: Depreciation and amortization expense 24,912   26,022   25,048   74,007   74,430  
EBITDA 50,702   64,778   58,512   124,541   198,411  
Selected Non-Cash Items and Other Items Impacting Comparability 20,588   11,171   9,121   92,046   27,546  
Adjusted EBITDA $ 71,290   $ 75,949   $ 67,633   $ 216,587   $ 225,957  
                               

Selected Non-Cash Items and Other Items Impacting Comparability (in thousands, unaudited)
  Three Months Ended Nine Months Ended
  September 30, June 30, September 30,
  2016 2015 2016 2016 2015
Loss (gain) on disposal or impairment, net $ 1,018   $ (951 ) $ 1,685   $ 16,010   $ 1,479  
Loss from discontinued operations, net of income taxes   1   2   1   3  
Foreign currency transaction loss (gain) 659   (385 ) 1,543   3,671   (1,199 )
Remove NGL equity losses (earnings) including loss (gain) on issuance of common units 38   742     (2,153 ) (11,070 )
Remove loss (gain) on impairment or sale of NGL units     (9,120 ) 30,644   (14,517 )
NGL cash distribution   4,752     4,873   14,235  
M&A transaction related costs 3,269       3,269   10,000  
Inventory valuation adjustments including equity method investees   142       1,377  
Employee severance and relocation expense 534   21   836   1,629   42  
Unrealized loss (gain) on derivative activities 6,167   (4,546 ) 4,477   6,096   (3,316 )
Depreciation and amortization included within equity earnings 7,283   6,412   7,138   20,960   19,134  
Bankruptcy related expenses   33       224  
Legal settlement expense   3,394       3,394  
Non-cash equity compensation 1,620   1,556   2,560   7,046   7,760  
Selected Non-Cash Items and Other Items Impacting Comparability $ 20,588   $ 11,171   $ 9,121   $ 92,046   $ 27,546  

 
Contacts:Investor Relations:Alisa Perkins918-524-8081investor.relations@semgroupcorp.comMedia:Kiley Roberson918-524-8594kroberson@semgroupcorp.com

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