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Sem group investor presentation september 2018 final
- 1. Investor Presentation Second Quarter2018 Results September 2018
- 2. 2 Non-GAAP Financial Measures SemGroup’snon-GAAP measures, Adjusted EBITDA, Cash Available for Dividends (CAFD) and Total Segment Profit, are not GAAP measures and are not intended to be used in lieu of GAAP presentation of their most closely associated GAAP measures, net income (loss) for Adjusted EBITDA and CAFD and operating income for Total Segment Profit. 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. CAFD is based on Adjusted EBITDA, as defined above, and reduced for cash income taxes, cash interest expense, preferred stock cash dividends and maintenance capital expenditures, as adjusted for selected items which management feels decrease the comparability of results among periods. CAFD is a performance measure utilized by management to analyze our performance after the payment of cash taxes, servicing debt obligations and making sustaining capital expenditures. 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.
- 3. 3 Certain matters containedin 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 Forward-Looking Information
- 4. 4 • 1,700 milescrude pipelines • 8.8 million barrels crude oil storage capacity • 200 crude oil trucks/trailers • 1,000 miles gas gathering pipelines • 4 gas processing plants (600 mmcf/d total) • 680,000 dedicated gas gathering acres from key producers MID-CONTINENT • 4 natural gas processing plants • 600 miles natural gas gathering pipelines • 200 mmcf/d Wapiti Gas Plant under construction • Smoke Lake Plant announced • 1 bcf/d total processing capacity(1) with significant sulphur recovery Unique platform in liquids-rich Montney and Duvernay • 330 acres on Houston Ship Channel • 18.2 million barrels product storage • Connectivity to Gulf Coast refining complex • Pipeline connectivity to all major basins • Deepwater marine access • Rail and truck loading and unloading • Maurepas Pipeline serving refineries Strategic position in North America’s largest energy complex CANADA GULF COAST t DJ Basin, STACK, Cushing and Northeast OK Diversified Operations Across Midstream Value Chain 1) Pro forma with new plants
- 5. 5 Over 70% ofSemGroup's pro forma revenue is derived from investment grade counterparties 97% of total LTM gross margin from fee-based cash flows Investment Grade Non-Investment Grade 72% 28% Company Strengths 1) LTM June 30, 2018, pro forma for full-year HFOTCO acquisition and Maurepas Pipeline 2) Counterparty ratings LTM June 30, 2018; excludes divested assets, SemLogistics and SemMaterials Mexico Counterparty Strength(2) Stable Cash Flows SemGroup derives a significant portion of cash flows from fixed-fee, contracted arrangements from credit-worthy counterparties Take-or-Pay Fixed Fee POP/Marketing 2014 2015 2016 2017 2018 23% 30% 38% 49% 57% 64% 59% 51% 46% 40% 13% 11% 11% 5% 3% (1)
- 6. 6 Financial Growth Alignedwith Stable Fee-Based Assets NOTE: Non-GAAP Financial Data Reconciliations are included in the Appendix to this presentation 1) Take-or-pay % of gross margin: LTM June 30, 2018, pro forma for full-year HFOTCO acquisition and Maurepas Pipeline (1)
- 7. 7 Ñ Secure CashFlows Drive Earnings • 2Q Adjusted EBITDA $99 million, up 6% over prior quarter, on higher crude and gas volumes in the Mid-Continent • On target with full-year 2018 guidance of $385 to $415 million • Dividend Coverage of 1.4x Ñ Balance Sheet Focus and Prudent CAPEX Spending • Raised over $1 billion of capital to date; additional capital raise remains a high priority • Refinanced HFOTCO term loan, lowered interest rate and extended maturity • Year-to-date capex spend: $217 million, full-year 2018 guidance of $350 million Ñ Project Execution and Asset Utilization in Key Regions • Gulf Coast: Completed new ship dock and 1.45 mmbbls crude storage tanks • Mid-Continent: Optimizing White Cliffs Pipeline with NGL conversion; and capturing growing STACK and Mississippi Lime liquid-rich gas • Canada: Wapiti Plant expected online in early 2019; Smoke Lake Plant expected completion 4Q 2019 Continued Execution of Strategic Transformation Note: Non-GAAP Financial Data Reconciliations are included in the Appendix to this presentation Focused on Strengthening Balance Sheet and Completing High-Return Projects
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- 9. 9 1Q 2Q 3Q4Q 1Q 2Q 414 349 414 452 441 382 Ñ 600 miles of transport and gathering pipelines Ñ Strong incumbent position to serve industry’s growing infrastructure needs Ñ Wapiti Sour Gas Plant - under construction(4) Ñ Smoke Lake Gas Plant - announced December 2017(5) SemCAMS Areas of Operations SemCAMS Natural Gas Business Average Throughput Volume(1) (mmcf/d) 1) SemCAMS volumes include total processed volumes - K3, KA and West Fox Creek facilities 2) Scheduled plant turnaround at K3 3) Scheduled plant turnaround at KA 4) Expected completion early 2019 5) Expected completion 4Q 2019 (2) 2017 2018 (3)
- 10. 10 Canada: SemCAMS -New Gas Plants Producer activity driven by condensate demand Ñ 200 mmcf/d sour gas processing plant Ñ Supported by 120 mmcf/d, 15-year contract Ñ Project cost ~ USD $225 - $250 million Ñ 6x EBITDA multiple Ñ Plant completion ~ early 2019 Wapiti Plant - Montney Smoke Lake Plant - Duvernay Ñ 60 mmcf/d sweet & sour gas processing plant Ñ Supported by 15-year contract, 90% of capacity contracted Ñ Project cost ~ USD $50 million Ñ 6x EBITDA multiple Ñ Plant completion ~ 4Q 2019 Excess sour gas processing-key competitive advantage 10
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- 12. 12 SemGas Areas ofOperation Ñ Located in liquids rich oil plays Ñ Four processing facilities ~600 mmcf/d of current capacity • ~1,000 miles of gathering pipelines Ñ STACK Canton Pipeline - delivers STACK volumes to Rose Valley plant SemGas Natural Gas Business Northern OK Avg Processing Volumes(1) (mmcf/d) 1) SemGas volumes include total processed volumes - Oklahoma and Texas plants 1Q 2Q 3Q 4Q 1Q 2Q 287 277 265 252 305 367 2017 2018
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- 14. 14 DJ Basin Ñ WhiteCliffs Pipeline - 51% ownership • DJ Basin to Cushing, OK • Two 527-mile, 12-inch pipelines • 215,000 bpd current capacity • Currently ships two crude types ▪ DJ Basin crude/condensate ▪ Kansas common • May 2018, announced repurposing one of the pipelines to NGL service(1) Ñ Wattenberg Oil Trunkline • 75-mile, 12-inch pipeline and storage in DJ Basin • Transports Noble Energy production to White Cliffs • 360,000 barrels of storage capacity • 4-bay truck unloading facility at Briggsdale, CO Ñ Platteville Truck Unloading Facility • 30-lane truck unloading facility • Origin of White Cliffs Pipeline • 350,000 barrels of storage capacity Crude Business Overview 1) See slide 16 for additional project detail
- 15. 15 Ñ Cushing Storage •7.6 million barrels of storage • Connectivity to all major inbound/outbound pipelines Ñ Kansas/Oklahoma System • 450-mile gathering and transportation pipeline system • Connects to third-party pipelines, Kansas and Oklahoma refineries and Cushing terminal • 560,000 barrels of storage capacity Ñ Isabel Pipeline • 48 mile, 8-inch crude oil pipeline from Isabel Junction, KS to Alva, OK Crude Business Overview Oklahoma/Kansas Assets Field Services Ñ Crude Oil Trucking Fleet • Fleet of ~200 crude oil transport trucks and trailers • Servicing the Bakken, DJ/Niobrara, Eagle Ford, STACK, Granite Wash & Mississippi Lime Crude Operational Summary 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Crude Transportation Transportation Volumes (mbbl/d) 179 182 190 193 182 188 White Cliffs Pipeline Volumes (mbbl/d) 111 107 105 92 107 135 Crude Facilities Average Cushing Terminal Utilization 100% 94% 94% 100% 98% 97%
- 16. 16 Mid-Continent: DJ BasinNGL Take-Away Solution Long-Term Contract with DCP Midstream Project de-risks White Cliffs Pipeline & positions upside value White Cliffs Pipeline NGL Conversion Ñ Diversify one 12” pipeline to NGL service Ñ Supported by 50,000 bpd, 10-year contract with DCP Ñ Transport NGLs from DJ Basin to Mt Belvieu Ñ Capacity of 90k bpd, expandable to 120k bpd Ñ SEMG capex spend of ~$30 to 33 million Ñ < 4x EBITDA multiple, on contracted cash flows Ñ Project Completion ~ 4Q 2019 16
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- 18. 18 Unique Position onthe Houston Ship Channel 1) HFOTCO owns two pipelines 2) HFOTCO acquisition closed July 17, 2017 18 Ñ Land • 300 acres of waterfront land on the Houston Ship Channel • 12 acres of undeveloped land at Moore Road Junction, hub for multiple pipelines Ñ Storage tanks • 155 tanks ranging in size from 10 to 400 mbbls • 18.2 mmbbls of storage capacity Ñ Ship & Barge Docks • Five ship docks which can receive up to Suez-max vessels with 45-foot draft • Seven barge docks (accommodating 23 barge simultaneously) Ñ Pipelines, Truck & Rail • Three crude oil pipelines to four refineries(1) • 72 rail spots • 14 trucks spots HFOTCO Operational Summary 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 Average Terminal Utilization(2) n/a n/a 98% 98% 97% 97%
- 19. 19 Strategic Gulf CoastPosition Drives Growth Ñ 1.45 million barrels of new crude storage Ñ Ship Dock #5 Ñ Backstopped by investment-grade refiner, 10-year contract Ñ Strong connectivity to Gulf Coast refining complex Ñ Multi-modal inbound and outbound capabilities Ñ Project cost ~$185 million; ~$120 million funded by SemGroup Ñ 7x EBITDA multiple Ñ Project Completed June 2018 Houston Fuel Oil Terminal Multiple future growth projects largely driven by exports 19
- 20. 20 Strong Connectivity tothe Houston Refinery Complex 20 Ñ Connects directly or indirectly to crude pipelines serving the Eagle Ford, Permian, Bakken, Midcontinent and Canada
- 21. 21 Ñ HFOTCO terminalcurrently services nearly 30 active customers Ñ Current storage demand exceeds available tankage Ñ Average customer tenure ~15 years, illustrating operational flexibility and customer service Ñ HFOTCO terminal currently consists of 18.2 million barrels of storage Ñ Strategically located asset on the Houston Ship Channel with connectivity to the largest U.S. energy hub Nearly 90% of revenues generated by take-or-pay contracts HFOTCO Terminal and Customers 18.2 million barrels of capacity (1) 1) Based on LTM June 30, 2018 throughput Diversification Focus Ñ Nearly 2 million barrels of heated storage has been converted to crude oil since 2014 Ñ Excluding crude, approximately 50%(1) of product throughput derived from non-fuel oil products, such as VGO, asphalt, carbon black and clean products Customer Base
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- 23. 23 1) Callprice based on predetermined fixed return on Alinda’s investment, including capital contributions Maurepas Pipeline Ñ Maurepas Pipeline • 24-inch, 35 mile crude oil pipeline connected to LOCAP at St. James and terminating at Norco refinery • 12-inch, 35 1/2 mile intermediates pipeline between Convent and Norco refineries • 6-inch, 35 1/2 mile intermediates pipeline between Norco and Convent refineries Ñ Recent Announcements - August 2018 • Sell 49% interest in Maurepas for $350 million to Alinda Capital • Transaction structured as sale of Class B interests, values Maurepas at ~13x • SEMG has 5 year call-option to acquire Alinda’s interest(1) • Expected to close by year-end 2018 U.S. Gulf Coast
- 24. 24 Execution as promised: •Funded final HFOTCO payment • Announced White Cliffs Pipeline NGL re-purposing • Completed new ship dock and crude tanks at HFOTCO • Wapiti and Smoke Lake Plant projects on track • Raised over $1 billion of capital through asset sales, joint ventures and preferred equity Transforming Portfolio Executing Opportunities Delivering Shareholder Value 24 Driving Shareholder Value Clear Path to Long-Term Growth
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- 26. 26 Note: Non-GAAPFinancial Data Reconciliations are included in the Appendix to this presentation ($ in millions, except per share) Net Income (loss) $(33.0) $(2.7) $(35.7) Adjusted EBITDA 93.4 99.0 192.4 Cash Available for Dividends 51.3 50.6 101.9 Common Dividend declared per share $0.4725 $0.4725 Dividend Coverage Ratio 1.4x 1.4x 1.4x Consolidated Leverage Ratio 4.1x 5.6x Ñ Key Highlights • Net loss improved quarter over quarter primarily due to lower income tax and interest expense pertaining to non-recurring items recognized during the first quarter • Adjusted EBITDA increased 6% over the prior quarter due to stronger crude volumes and margins, as well as the absence of a one-time insurance claim write-off recognized during the first quarter • Declared common stock dividend of $0.4725 per share, dividend coverage of 1.4x • Elected non-cash, payment-in-kind (PIK) preferred stock dividend • Targeting consolidated leverage of 5.0x or lower by year-end 2019 Second Quarter 2018 Results 2Q181Q18 YTD
- 27. 27 ($ in millions) CrudeTransportation $34.3 $37.9 $72.2 Crude Facilities 9.3 9.7 19.0 Crude Supply and Logistics (6.6) (2.0) (8.6) HFOTCO 31.0 34.8 65.8 SemGas 14.3 15.4 29.7 SemCAMS 22.1 21.4 43.5 Corporate/Other 11.0 (0.1) 10.9 Total Segment Profit $115.4 $117.1 $232.5 Segment Profit Ñ Second Quarter vs First Quarter 2018 • Crude Transportation increased $3.6 million driven by higher White Cliffs Pipeline volumes • Crude Facilities was relatively flat as storage and throughput volumes remained consistent • Crude Supply and Logistics improved due to location differentials • HFOTCO increased due to the absence of a $4 million write-off of an insurance claim during 1Q • SemGas increased primarily due to higher STACK volumes • SemCAMS results were flat; volumes decreased due to planned KA plant turnaround • Corporate/Other down due to the absence of divested assets, SemLogistics and SemMexico 2Q181Q18 YTD
- 28. 28 Leverage and Liquidity ($in millions, unaudited) 6/30/2018 SemGroup (B2 / B+) Revolving Credit Facility - $1.0 Billion due 2021 $ 375 5.625% Senior unsecured notes due 2022 400 5.625% Senior unsecured notes due 2023 350 6.375% Senior unsecured notes due 2025 325 7.250% Senior unsecured notes due 2026 300 Total SEMG Debt $ 1,750 HFOTCO (Ba3 / BB-) Term Loan due 2025 600 Hurricane Ike Bonds due 2050 225 Total HFOTCO Debt $ 825 SemGroup Net Leverage Ratio (max 5.5x)(1) 4.6x Consolidated Net Leverage Ratio(2) 5.6x Consolidated Available Liquidity(3) $ 652 Ñ HFOTCO Term Loan Refinancing • $600 million • LIBOR + 2.75%, reduction of 75 bps • Maturity extended to 2025 • Covenant-lite • Proceeds fully paid and canceled revolver Ñ Preferred Equity Offering - 1Q18 • Offering size - $350 million • Dividend - 7% • Conversion Price - $33.00 per share Ñ Targeting consolidated leverage of 5.0x or lower by year-end 2019 Ñ No significant debt maturities until 2021 1) SemGroup's net leverage ratio calculated per the senior secured credit facility definitions, which includes a pro-rata portion of projected future annual EBITDA from material projects 2) Calculated as consolidated net debt to LTM consolidated leverage EBITDA, see additional information on slide 39 3) Available liquidity is reduced for outstanding letters of credit
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- 30. 30 ($inmillions) 2016 2017 2018E $283 $328 $385- $415 2016 - 2018 CAGR of ~20% 2018 Adjusted EBITDA Guidance ($ in millions) 2018 Adjusted EBITDA $385 - $415 Continuing Portfolio Transformation through 2018 for Long-Term Financial Strength Ñ Growing earnings while improving quality of earnings Ñ Divestments contributed $34 million of 2017 Adjusted EBITDA Ñ Additional EBITDA to come online in 2019 already contracted Key Guidance Assumptions Crude White Cliffs Pipeline Average Volumes (mbbl/d) 100-110 Average Cushing Terminal Utilization 95-100% SemGas Average Processing Volumes (mmcf/d) 375-400 SemCAMS Average Throughput Volumes (mmcf/d) 425-440 HFOTCO Average Terminal Utilization 95-100% Ñ 2018 divestments contribute ~$9 million of 2018 Adjusted EBITDA Ñ SemCAMS - KA plant turnaround in 2Q18 Ñ Assume no U.S. cash taxes
- 31. 31 Key Projects DrivingFinancial Growth 2018, 2019 and beyond 2018 Capital Expenditures Guidance Projects 2Q18 3Q18 4Q18 1H19 2H19 2020+ HFOTCO Ship Dock 5 & Crude Storage Tanks: $120mm(1) ~7x EBITDA multiple Wapiti Plant: $250mm ~6x EBITDA multiple Smoke Lake Plant: $50mm ~6x EBITDA multiple White Cliffs Pipeline, 12" NGL Pipeline Conversion: $32mm(2) < 4x EBITDA multiple Maintenance Growth Total Capital Expenditures ($inmillions) 2016 2017 2018e $52 $45 $40 $255 $307 $447 $492 $310 $350 Canada Mid-Continent Gulf Coast Maintenance 2018 Capex Guidance - $350 million Spending by Strategic Area $193 55% $50 14% $67 19% $40 11% 1) Expected SemGroup project spend on HFOTCO projects; excludes ~$65 million spent prior to close. The 7x multiple is based on the total project cost of $185 million 2) Represents SemGroup's 51% expected spend; total project spend of $60-66 million, minimal capital in 2018 12%
- 32. 32 Consolidated Balance Sheets (inthousands, unaudited, condensed) June 30, 2018 December 31, 2017 ASSETS Current assets $ 695,864 $ 902,899 Property, plant and equipment, net 3,415,505 3,315,131 Goodwill and other intangible assets 639,142 655,945 Equity method investments 276,120 285,281 Other noncurrent assets, net 145,044 132,600 Noncurrent assets held for sale — 84,961 Total assets $ 5,171,675 $ 5,376,817 LIABILITIES, PREFERRED STOCK AND OWNERS' EQUITY Current liabilities: Current portion of long-term debt $ 6,000 $ 5,525 Other current liabilities 608,196 761,036 Total current liabilities 614,196 766,561 Long-term debt, excluding current portion 2,534,894 2,853,095 Other noncurrent liabilities 90,937 85,080 Noncurrent liabilities held for sale — 13,716 Total liabilities 3,240,027 3,718,452 Preferred stock 347,130 — Owners' equity 1,584,518 1,658,365 Total liabilities, preferred stock and owners' equity $ 5,171,675 $ 5,376,817
- 33. 33 Consolidated Statements ofOperations and Comprehensive Income (Loss) (in thousands, except per share amounts, unaudited, condensed) 2018 2017 Q1 Q2 YTD Q1 Q2 Q3 Q4 FY2017 Revenues $ 661,609 $ 595,794 $ 1,257,403 $ 456,100 $ 473,089 $ 545,922 $ 606,806 $ 2,081,917 Expenses: Costs of products sold, exclusive of depreciation and amortization shown below 496,132 412,089 908,221 348,998 340,107 398,252 427,534 1,514,891 Operating 69,791 90,245 160,036 52,083 73,346 62,666 66,669 254,764 General and administrative 26,477 22,886 49,363 21,712 26,819 38,389 26,859 113,779 Depreciation and amortization 50,536 51,755 102,291 24,599 25,602 50,135 58,085 158,421 Loss (gain) on disposal or impairment, net (3,566) 1,824 (1,742) 2,410 (234) 41,625 (30,468) 13,333 Total expenses 639,370 578,799 1,218,169 449,802 465,640 591,067 548,679 2,055,188 Earnings from equity method investments 12,614 14,351 26,965 17,091 17,753 17,367 15,120 67,331 Operating income (loss) 34,853 31,346 66,199 23,389 25,202 (27,778) 73,247 94,060 Other expenses, net 44,805 37,685 82,490 33,571 11,966 28,574 39,487 113,598 Income (loss) from continuing operations before income taxes (9,952) (6,339) (16,291) (10,182) 13,236 (56,352) 33,760 (19,538) Income tax expense (benefit) 23,083 (3,613) 19,470 95 3,625 (37,249) 31,141 (2,388) Net income (loss) (33,035) (2,726) (35,761) (10,277) 9,611 (19,103) 2,619 (17,150) Less: cumulative preferred stock dividends 4,832 6,211 11,043 — — — — — Net income (loss) attributable to common shareholders $ (37,867) $ (8,937) $ (46,804) $ (10,277) $ 9,611 $ (19,103) $ 2,619 $ (17,150) Net income (loss) $ (33,035) $ (2,726) $ (35,761) $ (10,277) $ 9,611 $ (19,103) $ 2,619 $ (17,150) Other comprehensive income (loss), net of income taxes 18,171 6,180 24,351 6,033 8,952 9,230 (4,102) 20,113 Comprehensive income (loss) $ (14,864) $ 3,454 $ (11,410) $ (4,244) $ 18,563 $ (9,873) $ (1,483) $ 2,963 Net income (loss) per common share: Basic $ (0.48) $ (0.11) $ (0.60) $ (0.16) $ 0.15 $ (0.25) $ 0.03 $ (0.24) Diluted $ (0.48) $ (0.11) $ (0.60) $ (0.16) $ 0.15 $ (0.25) $ 0.03 $ (0.24) Weighted average shares (thousands): Basic 78,198 78,319 78,259 65,692 65,749 75,974 78,189 71,418 Diluted 78,198 78,319 78,259 65,692 66,277 75,974 78,749 71,418
- 34. 34 Non-GAAP Adjusted EBITDACalculation (in thousands, unaudited) 2018 2017 Reconciliation of net income to Adjusted EBITDA: Q1 Q2 YTD Q1 Q2 Q3 Q4 FY2017 Net income (loss) $ (33,035) $ (2,726) $ (35,761) $ (10,277) $ 9,611 $ (19,103) $ 2,619 $ (17,150) Add: Interest expense 42,461 35,904 78,365 13,867 13,477 32,711 42,954 103,009 Add: Income tax expense (benefit) 23,083 (3,613) 19,470 95 3,625 (37,249) 31,141 (2,388) Add: Depreciation and amortization expense 50,536 51,755 102,291 24,599 25,602 50,135 58,085 158,421 EBITDA 83,045 81,320 164,365 28,284 52,315 26,494 134,799 241,892 Selected Non-Cash Items and Other Items Impacting Comparability 10,326 17,690 28,016 32,383 13,095 64,239 (23,306) 86,411 Adjusted EBITDA $ 93,371 $ 99,010 $ 192,381 $ 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) $ 1,824 $ (1,742) $ 2,410 $ (234) $ 41,625 $ (30,468) $ 13,333 Foreign currency transaction loss (gain) 3,294 2,314 5,608 — (1,011) (747) (2,951) (4,709) Adjustments to reflect equity earnings on an EBITDA basis 4,883 4,886 9,769 6,709 6,692 6,678 6,811 26,890 M&A transaction related costs 1,156 648 1,804 — 5,453 14,886 1,649 21,988 Pension plan curtailment loss (gain) — — — — — (3,097) 89 (3,008) Employee severance and relocation expense 137 211 348 558 312 104 720 1,694 Unrealized loss (gain) on derivative activities 2,226 4,409 6,635 27 (928) 1,833 (892) 40 Non-cash equity compensation 2,196 3,398 5,594 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 $ 17,690 $ 28,016 $ 32,383 $ 13,095 $ 64,239 $ (23,306) $ 86,411
- 35. 35 (in thousands, unaudited)2018 2017 Segment Profit: Q1 Q2 YTD Q1 Q2 Q3 Q4 FY2017 Crude Transportation $ 34,310 $ 37,865 $ 72,175 $ 28,251 $ 29,028 $ 34,585 $ 41,641 $ 133,505 Crude Facilities 9,341 9,683 19,024 9,564 9,481 8,806 14,116 41,967 Crude Supply and Logistics (6,583) (1,959) (8,542) (2,428) (2,173) (1,693) (1,507) (7,801) HFOTCO 30,988 34,804 65,792 — — 28,504 33,032 61,536 SemGas 14,277 15,437 29,714 18,227 19,483 15,555 14,539 67,805 SemCAMS 22,113 21,448 43,561 16,865 19,038 16,704 23,668 76,274 Corporate and other 10,963 (172) 10,791 8,367 8,296 8,421 8,153 33,237 Total Segment Profit 115,409 117,106 232,515 78,846 83,153 110,882 133,642 406,523 Less: General and administrative expense 26,477 22,886 49,363 21,712 26,819 38,389 26,859 113,779 Other income (950) (533) (1,483) (218) (508) (3,390) (516) (4,632) Pension curtailment gain (loss) — — — — — 3,097 (89) 3,008 Plus: M&A related costs 1,156 648 1,804 — 5,453 14,886 1,649 21,988 Employee severance and relocation 137 211 348 558 312 104 720 1,694 Non-cash equity compensation 2,196 3,398 5,594 2,757 2,803 2,957 1,736 10,253 Consolidated Adjusted EBITDA $ 93,371 $ 99,010 $ 192,381 $ 60,667 $ 65,410 $ 90,733 $ 111,493 $ 328,303 Segment Profit and Adjusted EBITDA
- 36. 36 Reconciliation of OperatingIncome to Total Segment Profit (in thousands, unaudited) 2018 2017 Q1 Q2 YTD Q1 Q2 Q3 Q4 FY2017 Operating income (loss) $ 34,853 $ 31,346 $ 66,199 $ 23,389 $ 25,202 $ (27,778) $ 73,247 $ 94,060 Plus: Adjustments to reflect equity earnings on an EBITDA basis 4,883 4,886 9,769 6,709 6,692 6,678 6,811 26,890 Unrealized loss (gain) on derivatives 2,226 4,409 6,635 27 (928) 1,833 (892) 40 General and administrative expense 26,477 22,886 49,363 21,712 26,819 38,389 26,859 113,779 Depreciation and amortization 50,536 51,755 102,291 24,599 25,602 50,135 58,085 158,421 Loss (gain) on disposal or impairment, net (3,566) 1,824 (1,742) 2,410 (234) 41,625 (30,468) 13,333 Total Segment Profit $ 115,409 $ 117,106 $ 232,515 $ 78,846 $ 83,153 $ 110,882 $ 133,642 $ 406,523
- 37. 37 Non-GAAP Adjusted EBITDACalculation (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
- 38. 38 Cash Available forDividends (in thousands, unaudited) 2018 2017 Q1 Q2 YTD Q1 Q2 Q3 Q4 FY2017 Adjusted EBITDA $ 93,371 $ 99,010 $ 192,381 $ 60,667 $ 65,410 $ 90,733 $ 111,493 $ 328,303 Less: Cash interest expense 32,530 34,870 67,400 17,976 18,396 29,621 35,203 101,196 Less: Maintenance capital 7,729 11,550 19,279 8,272 11,850 12,693 9,597 42,412 Less: Cash paid for income taxes 1,800 12,900 14,700 1,155 1,721 196 4,088 7,160 Selected items impacting comparability: Add back: Mexico disposal cash taxes — 10,955 10,955 — — — — — Cash available for dividends $ 51,312 $ 50,645 $ 101,957 $ 33,264 $ 33,443 $ 48,223 $ 62,605 $ 177,535 Dividends declared $ 37,004 $ 37,022 $ 74,026 $ 29,584 $ 35,171 $ 35,184 $ 36,961 $ 136,900 Dividend coverage ratio 1.4x 1.4x 1.4x 1.1x 1.0x 1.4x 1.7x 1.3x
- 39. 39 Reconciliation of AdjustedEBITDA to Consolidated Leverage EBITDA (in millions, unaudited) Adjusted EBITDA 2Q18 $ 99.0 1Q18 93.4 4Q17 111.5 3Q17 90.7 LTM Adjusted EBITDA 394.6 Adjustments 54.6 LTM Consolidated Leverage EBITDA $ 449.2 Acquisition / divestitures adjustment(1) (15.3) Material projects adjustment(2) 56.0 Tax adjustment 13.2 Miscellaneous adjustment 0.7 Total Adjustments(3) $ 54.6 1) Includes proforma LTM results for HFOTCO acquisition and Glass Mountain Pipeline, SemMexico and SemLogistics divestitures 2) Pro-rata portion of projected future annual EBITDA from material projects 3) Consistent with adjustments permitted under SemGroup's senior secured credit facility