SemGroup Corporation Announces First Quarter 2017 Results

5/4/2017

TULSA, Okla., May 04, 2017 (GLOBE NEWSWIRE) -- SemGroup® Corporation (NYSE:SEMG) today announced first quarter 2017 revenues of $456.1 million with net loss attributable to SemGroup of $10.3 million, or $0.16 per diluted share. This compares with fourth quarter 2016 revenues of $402.2 million with net income attributable to SemGroup of $12.0 million, or $0.18 per diluted share. First quarter 2016 revenues totaled $314.9 million with net loss attributable to SemGroup of $13.9 million, or $0.32 per diluted share. The net loss in first quarter 2017 was primarily due to a $19.9 million charge related to the refinancing of bonds. The refinancing resulted in lowered borrowing costs and extended maturity.

SemGroup's first quarter 2017 Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) was $60.7 million, compared to $66.2 million in fourth quarter 2016 and $77.7 million in first quarter 2016. Adjusted EBITDA is a non-GAAP measure and is reconciled to net income below.

"In the first quarter, we continued to execute on a number of large projects including our Maurepas Pipeline, which we expect to be completed late second quarter 2017. In addition, we progressed on our Wapiti sour gas plant in Alberta and our STACK play crude extension of the Glass Mountain Pipeline," said SemGroup President and Chief Executive Officer Carlin Conner. "We are excited to have just announced a new natural gas pipeline to connect the extremely active STACK play to our Rose Valley processing plant. This gas project is another great example of how we are leveraging our existing footprint to capture regional opportunities to serve customers and optimize our operations."

Recent Developments
This week, SemGroup announced plans to build a natural gas pipeline to connect its processing complex in northern Oklahoma to the active STACK play in the central portion of the state. The Canton Pipeline is backed by a firm commitment from an investment-grade counterparty and has an initial capacity of 200 million cubic feet per day. With additional compression, the pipeline could be expanded up to 400 million cubic feet per day to serve other producers in the area. The 24-inch-diameter natural gas pipeline will extend approximately 50 miles from SemGroup's Rose Valley gas processing facility in Woods County to north central Blaine County. The pipeline is expected to be in service by year-end 2017.

First Quarter 2017 Dividend and Dividend Guidance
The Board of Directors of SemGroup 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 May 26, 2017 to all common shareholders of record on May 15, 2017.

Management reaffirms that dividends will be reviewed annually in December of each year targeting an 8 percent dividend CAGR through 2020. Based upon our current projections, management expects to recommend to the Board of Directors in December 2017 a dividend increase in the range of 6 to 10 percent on an annualized basis.

2017 Financial Guidance
SemGroup is reaffirming its previously announced 2017 guidance of between $270 million and $310 million in Adjusted EBITDA. 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.

Management expects to deploy approximately $500 million of capital expenditures in 2017, which includes $60 million of maintenance projects.

Earnings Conference Call
SemGroup will host a conference call for investors at 11 a.m. Eastern tomorrow, May 5, 2017. The call can be accessed live over the telephone by dialing 855-239-1101, or for international callers, 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 www.semgroupcorp.com. A replay of the webcast will be available following the call. The first quarter 2017 slide deck will be posted under presentations.

About SemGroup
Based 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 www.semgroupcorp.com, our Twitter account and LinkedIn account.

Non-GAAP Financial Measures
SemGroup’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 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.

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 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, 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)

  March 31, 2017  December 31, 2016 
ASSETS  
Current assets$672,770 $635,874 
Property, plant and equipment, net1,834,400 1,762,072 
Goodwill and other intangible assets182,994 185,208 
Equity method investments432,389 434,289 
Other noncurrent assets, net54,173 57,529 
Total assets$3,176,726 $3,074,972 
LIABILITIES AND OWNERS' EQUITY  
Current liabilities:  
Current portion of long-term debt$27 $26 
Other current liabilities535,795 488,329 
Total current liabilities535,822 488,355 
Long-term debt, excluding current portion1,140,637 1,050,918 
Other noncurrent liabilities85,922 89,734 
Total liabilities1,762,381 1,629,007 
Total owners' equity1,414,345 1,445,965 
Total liabilities and owners' equity$3,176,726 $3,074,972 
   

 

Condensed Consolidated Statements of Operations
(in thousands, except per share amounts, unaudited)

 Three Months Ended
 March 31,December 31,
 201720162016
Revenues$456,100 $314,851 $402,172 
Expenses:   
Costs of products sold, exclusive of depreciation and amortization shown below348,998 196,947 281,139 
Operating52,083 50,192 54,564 
General and administrative21,644 21,060 21,490 
Depreciation and amortization24,599 24,051 24,776 
Loss on disposal or impairment, net2,410 13,307 38 
Total expenses449,734 305,557 382,007 
Earnings from equity method investments17,091 23,071 17,763 
Loss on issuance of common units by equity method investee (41) 
Operating income23,457 32,324 37,928 
Other expenses, net33,639 58,622 9,809 
Income (loss) from continuing operations before income taxes(10,182)(26,298)28,119 
Income tax expense (benefit)95 (21,407)16,119 
Income (loss) from continuing operations(10,277)(4,891)12,000 
Loss from discontinued operations, net of income taxes (2) 
Net income (loss)(10,277)(4,893)12,000 
Less: net income attributable to noncontrolling interests 9,020  
Net income (loss) attributable to SemGroup Corporation$(10,277)$(13,913)$12,000 
Net income (loss) attributable to SemGroup Corporation$(10,277)$(13,913)$12,000 
Other comprehensive income (loss), net of income taxes6,033 (4,109)(10,783)
Comprehensive income (loss) attributable to SemGroup Corporation$(4,244)$(18,022)$1,217 
Net income (loss) per common share:   
Basic$(0.16)$(0.32)$0.18 
Diluted$(0.16)$(0.32)$0.18 
Weighted average shares (thousands):   
Basic65,692 43,870 65,754 
Diluted65,692 43,870 66,326 

 

2016 Quarterly Financial Data
(in thousands, except per share amounts, unaudited)

 First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
Total revenues$314,851 $287,377 $327,764 $402,172 $1,332,164 
Loss on disposal or impairment, net13,307 1,685 1,018 38 16,048 
Other operating costs and expenses292,250 277,379 316,644 381,969 1,268,242 
Total expenses305,557 279,064 317,662 382,007 1,284,290 
Earnings from equity method investments23,071 17,078 15,845 17,763 73,757 
Loss on issuance of common units by equity method investee(41)   (41)
Operating income32,324 25,391 25,947 37,928 121,590 
Other expenses, net58,622 9,944 18,684 9,809 97,059 
Income (loss) from continuing operations before income taxes(26,298)15,447 7,263 28,119 24,531 
Income tax expense (benefit)(21,407)4,658 11,898 16,119 11,268 
Income (loss) from continuing operations(4,891)10,789 (4,635)12,000 13,263 
Income (loss) from discontinued operations, net of income taxes(2)(2)3  (1)
Net income (loss)(4,893)10,787 (4,632)12,000 13,262 
Less: net income attributable to noncontrolling interests9,020 1,922 225  11,167 
Net income (loss) attributable to SemGroup$(13,913)$8,865 $(4,857)$12,000 $2,095 
Earnings (loss) per share—basic$(0.32)$0.20 $(0.09)$0.18 $0.04 
Earnings (loss) per share—diluted$(0.32)$0.19 $(0.09)$0.18 $0.04 

Prior quarter amounts above have been restated from the amounts originally reported to correct for an immaterial error identified by management in the fourth quarter related to an under capitalization of interest on certain capital projects.  Previously reported interest expense, included in "other expense, net" above, has been decreased by $1.4 million, $0.9 million and $2.5 million for the quarters ended March 31, June 30 and September 30, 2016, respectively, with a corresponding increase to net income.  Earnings per basic share was increased by $0.03, $0.02 and $0.05 per share for the quarters ended March 31, June 30 and September 30, 2016, respectively.  Capitalized interest recorded for the fourth quarter of 2016 includes an immaterial out of period adjustment of $6.3 million related to under capitalization of interest in the prior year.

 


Reconciliation of Net Income to Adjusted EBITDA:
(in thousands, unaudited)

 Three Months Ended
 March 31,December 31,
 201720162016
Net income (loss)$(10,277)$(4,893)$12,000 
Add: Interest expense13,867 17,577 8,545 
Add: Income tax expense (benefit)95 (21,407)16,119 
Add: Depreciation and amortization expense24,599 24,051 24,776 
EBITDA28,284 15,328 61,440 
Selected Non-Cash Items and Other Items Impacting Comparability32,383 62,348 4,765 
Adjusted EBITDA$60,667 $77,676 $66,205 


Selected Non-Cash Items and
Other Items Impacting Comparability
(in thousands, unaudited)

 Three Months Ended
 March 31,December 31,
 201720162016
Loss on disposal or impairment, net$2,410 $13,307 $38 
Loss from discontinued operations, net of income taxes 2  
Foreign currency transaction loss 1,469 1,088 
Remove NGL equity losses (earnings) including loss (gain) on issuance of common units(3)(2,191)6 
Remove loss on impairment or sale of NGL units 39,764  
NGL cash distribution 4,873  
Employee severance and relocation expense558 259 499 
Unrealized loss (gain) on derivative activities27 (4,548)(5,107)
Depreciation and amortization included within equity earnings6,712 6,539 5,071 
Non-cash equity compensation2,757 2,874 3,170 
Loss on early extinguishment of debt19,922   
Selected Non-Cash Items and Other Items Impacting Comparability$32,383 $62,348 $4,765 

 

 

Contacts:
Investor Relations:
Alisa Perkins
918-524-8081
investor.relations@semgroupcorp.com

Media:
Tom Droege
918-524-8560
tdroege@semgroupcorp.com

Primary Logo

 

Source: SemGroup Corporation
SemGroup®, SemCrude®, SemGas®, SemStream®, SemMaterials MexicoMR , White Cliffs Pipeline®, and Rose Rock Midstream® are registered trademarks of SemGroup Corporation. ©2017 SemGroup. All Rights Reserved. Terms & Conditions