SemGroup Reports Financial Results for Fourth Quarter and Full-Year 2018

• Strong 4Q and Full-Year Results Reflect Higher Transportation Volumes and Terminalling Revenues
  
• Expect 2019 Consolidated Adjusted EBITDA of Between $420 Million and $465 Million
• Raised $1.6 Billion Through Strategic Transactions Since 2017 to Support Balance Sheet Goals

TULSA, Okla., Feb. 27, 2019 (GLOBE NEWSWIRE) -- SemGroup^® Corporation SEMG today reported fourth quarter 2018 net income of $3.0 million, compared to net income of $8.4 million in third quarter 2018 and net income of $2.6 million in fourth quarter 2017.

Fourth quarter 2018 Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) was $105.4 million, compared to $96.4 million in third quarter 2018 and $111.5 million in fourth quarter 2017, which included $8.1 million in earnings from assets that SemGroup later sold. Fourth quarter 2018 Adjusted EBITDA includes a $5.2 million non-cash lower of cost or net realizable value inventory charge that is expected to be recovered in the first quarter of 2019. The fourth quarter increase over the prior quarter was driven by higher crude transportation and terminalling revenues. Adjusted EBITDA is a non-GAAP measure and is reconciled to net income below.

For full-year 2018, SemGroup reported net loss of $24.3 million, compared to net loss of $17.2 million in 2017. Year-over-year Adjusted EBITDA increased 19 percent to $394.2 million in 2018 from $328.3 million in 2017.

"Our strong fourth quarter results reflect ongoing growth at our Houston terminal and improved crude marketing margins," said SemGroup President and Chief Executive Officer Carlin Conner. "We continue to execute our strategy to strengthen our financial position and expand our physical footprint around our Gulf Coast and Canadian platforms. Last month we completed construction on the Wapiti gas plant in Alberta on budget and ahead of schedule and this week we closed on the SemCAMS joint venture and acquisition of Meritage. Since embarking on our capital raise plan we have raised approximately $1.6 billion through asset sales and strategic transactions like SemCAMS Midstream."

Recent Developments
On February 25, SemCAMS Midstream closed on its acquisition of Meritage Midstream's Canadian infrastructure assets in the prolific Montney resource play. SemCAMS Midstream is a newly-created joint venture owned by SemGroup and KKR. SemCAMS Midstream owns approximately 1.1 bcf/d of natural gas processing capacity, including capacity from Meritage's Patterson Creek Plant and the new Wapiti Plant. Capacity will increase to approximately 1.3 bcf/d later this year with the expected completion of the Smoke Lake Plant and Patterson Creek Plant expansion.

On February 20, SemGroup announced that its Board of Directors had declared a quarterly cash dividend to common shareholders. A dividend in the amount of $0.4725 per share, or $1.89 per share annualized, will be paid on March 14, 2019 to all common shareholders of record on March 4, 2019. The Board of Directors also declared a dividend to holders of its 7% Series A Cumulative Perpetual Convertible Preferred Stock. The company elected, pursuant to the terms of the convertible preferred shares, to have the aggregate amount of $6.4 million that would have been payable in cash as a dividend added to the liquidation preference of such shares as a payment in kind. The payment date for the payment in kind on the shares of convertible preferred stock is March 1, 2019 and the record date was February 22, 2019.

New Financial Reporting Segments
Given the significant change in SemGroup's asset portfolio over the past 18 months, the company elected to reorganize its business structure and reporting relationships to enhance execution and capture operating efficiencies. SemGroup will now report results for three operating segments: U.S. Liquids, U.S. Gas and Canada. U.S. Liquids includes the results previously reported as Crude Transportation, Crude Facilities, Supply & Logistics and Houston Fuel Oil Terminal Company. U.S. Gas contains the results of the company's historical SemGas segment. Canada includes the operations of the company's historical SemCAMS segment and will also include the recently acquired Meritage operations in future quarters. SemGroup's prior Mexico and U.K. operating segments are included within Corporate and Other, as these businesses were disposed of in 2018.

Segment Profit Results
SemGroup management believes segment profit is a valuable measure of the operating and financial performance of the company's operating segments. Segment profit is defined as 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. Reconciliations can be found in the tables of this release.

Performance by Segment - Fourth Quarter vs. Third Quarter 2018

U.S. Liquids

• Stronger marketing margins, partially offset by a non-cash $5.2 million lower of cost or net realizable value inventory charge
• White Cliffs volumes increased as shippers moved more barrels to build shipper history prior to one of the pipes coming out of service for NGL conversion
• Our Houston terminal benefited from a full quarter of certain new crude storage tanks

U.S. Gas

• Decreased due to lower volumes and NGL prices

Canada

• Decreased results due to timing of operating expense recover

(1) U.S. Gas volumes include total processed volumes - Oklahoma and Texas plants
(2) Canada volumes include total processed volumes - K3, KA and West Fox Creek facilities

Segment Profit and Adjusted EBITDA:
(in thousands, unaudited)

2019 Adjusted EBITDA and Dividend Guidance
SemGroup expects full-year 2019 Adjusted EBITDA to range between $420 million and $465 million.

The company is forecasting 2019 net capital expenditures of $307 million, including $45 million related to maintenance projects.

SemGroup is focused on its balance sheet strategy and reinvesting in high-return growth projects and therefore expects to keep the dividend flat at $0.4725 per share, or $1.89 per share annualized, during 2019.

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. SemGroup does not expect that such amounts would be significant to Adjusted EBITDA as they are largely non-cash items; however, such items maybe significant to net income.

Earnings Conference Call
SemGroup will host a conference call for investors at 11 a.m. Eastern, Thursday, February 28, 2019. 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.semgroup.com. A replay of the webcast will be available following the call. The fourth quarter and full year 2018 slide deck will be posted under presentations.

About SemGroup
SemGroup^® Corporation SEMG moves energy across North America through a network of pipelines, processing plants, refinery-connected storage facilities and deep-water marine terminals with import and export capabilities. SemGroup serves as a versatile connection between upstream oil and gas producers and downstream refiners and end users. Key areas of operation and growth include western Canada, the Mid-Continent and the Gulf Coast. SemGroup is committed to safe, environmentally sound operations. Headquartered in Tulsa, Okla., the company has additional offices in Calgary, Alberta; Denver, Colo.; and Houston, Texas.

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.semgroup.com, our Twitter account and LinkedIn account.

Non-GAAP Financial Measures
SemGroup's non-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 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, 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 consequences of any divestitures of non-strategic operating assets or divestitures of interests in some of our operating assets through partnerships and/or joint ventures; the failure to realize the anticipated benefits of our acquisition of Meritage Midstream ULC and its midstream infrastructure assets through our joint venture SemCAMS Midstream ULC; 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 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.

Contacts:
Investor Relations:
Kevin Greenwell
918-524-8081
investor.relations@semgroupcorp.com

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

Condensed Consolidated Balance Sheets
(in thousands, unaudited)

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

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

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

Prior Segmentation and Adjusted EBITDA:
(in thousands, unaudited)

Reconciliation of Operating Income to Total Segment Profit:
(in thousands, unaudited)

Cash Available for Dividends:
(in thousands, unaudited)

(1)  Distributions to noncontrolling interest represents Alinda's 49% interest in Maurepas Pipeline and will also include KKR's 49% interest in SemCAMS Midstream joint venture
(2)  To date preferred stock dividends have been paid-in-kind