SemGroup Shareholder Meeting Set for December 4^th to Vote on Proposed Merger with Energy Transfer

TULSA, Okla., Nov. 07, 2019 (GLOBE NEWSWIRE) -- SemGroup^® Corporation (NYSE:SEMG) today reported third quarter 2019 net loss of $5.5 million, compared to second quarter net loss of $12.9 million and third quarter 2018 net income of $8.5 million.  The third quarter 2019 net loss improved over the prior quarter primarily driven by a one-time loss on disposal recognized in the second quarter of 2019.

Third quarter 2019 Adjusted EBITDA (adjusted earnings before interest, taxes, depreciation and amortization) was $94.3 million, compared to $105.5 million in the second quarter of 2019 and $96.5 million in the third quarter 2018. Adjusted EBITDA is a non-GAAP measure and is reconciled to net income below.

"Our Canadian and U.S. Gas businesses delivered improved quarter over quarter segment profit, offsetting the lower results in our U.S. Liquids segment, which was primarily impacted by lower crude marketing margins," said SemGroup President and Chief Executive Officer Carlin Conner. "We have been actively executing on key projects and have recently completed construction of the White Cliffs NGL line conversion and the Patterson Creek expansion. The Moore Road pipeline in Houston and Smoke Lake Plant in Canada are on track to come online at the end of this year."

"In addition, SemGroup's proposed merger with Energy Transfer is progressing swiftly and a shareholder vote is set for December 4th," said Conner. "We look forward to executing this transaction, which we expect to close shortly after the shareholder vote in early December."

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.

	Three Months Ended										Nine Months Ended
	September 30						June 30				September 30
Segment Profit:	2019			2018			2019				2019			2018
U.S. Liquids	$	67,508		$	75,500		$	85,189			$	242,208		$	223,949
U.S. Gas	13,661			19,754			11,040				36,866			49,468
Canada	34,931			20,543			29,669				87,293			64,104
Corporate/Other	(1,527		)	(913		)	(219		)		(1,983		)	9,878
Total Segment Profit	$	114,573		$	114,884		$	125,679			$	364,384		$	347,399

Performance by Segment - Third Quarter 2019 vs. Second Quarter 2019

U.S. Liquids

• Lower third quarter White Cliffs volumes and Cushing throughput due to one White Cliffs crude line out of service for NGL conversion, as well as take-or-pay contract expirations
• Lower crude marketing margins in the third quarter primarily due to inventory timing, expect partial recovery in the fourth quarter of 2019

U.S. Gas

• Higher STACK gas volumes and margin per mcf

Canada

• Volume growth at the Patterson Creek and Wapiti gas plants

	2019							2018
Select Operating Statistics	1Q		2Q		3Q			1Q		2Q		3Q		4Q
U.S. Liquids (1)
White Cliffs Pipeline Volumes (mbpd)	147		106		93			107		135		112		144
Cushing Terminal Utilization %	100	%	90	%	90	%		98	%	97	%	94	%	98	%
Houston Terminal Utilization %	98	%	98	%	98	%		97	%	97	%	96	%	96	%
U.S. Gas (2)
Total Oklahoma Average Processing Volumes (mmcf/d)	290		301		311			293		353		380		355
Canada (3)
Total Average Processing Volumes (mmcf/d)	460		590		638			441		382		434		430

⁽¹⁾ Second and third quarter 2019, White Cliffs Pipeline volumes decline primarily due to one crude line taken out of service for NGL conversion in early May 2019 and lower Cushing terminal utilization due to tanks out of service for routine inspections and repairs
⁽²⁾ U.S. Gas volumes exclude Sherman, Texas due to sale of asset
⁽³⁾ Canada volumes include total average processed volumes - K3/Wapiti, KA/West Fox Creek and Patterson Creek facilities

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

	2019													2018
Segment Profit:	1Q			2Q			3Q			YTD				1Q			2Q			3Q			4Q			FY2018
U.S. Liquids	$	89,511		$	85,189		$	67,508		$	242,208			$	68,056		$	80,393		$	75,500		$	85,474		$	309,423
U.S. Gas	12,165			11,040			13,661			36,866				14,277			15,437			19,754			17,602			67,070
Canada	22,693			29,669			34,931			87,293				22,113			21,448			20,543			17,226			81,330
Corporate and other (1)	(237		)	(219		)	(1,527		)	(1,983		)		10,963			(172		)	(913		)	(152		)	9,726
Total Segment Profit	124,132			125,679			114,573			364,384				115,409			117,106			114,884			120,150			467,549
Less:
General and administrative expense	29,547			25,520			29,662			84,729				26,477			22,886			21,904			20,301			91,568
Other income	(979		)	(1,347		)	(1,075		)	(3,401		)		(950		)	(533		)	(400		)	(497		)	(2,380		)
Plus:
M&A related costs	4,635			1,676			4,790			11,101				1,156			648			290			1,058			3,152
Employee severance and relocation	159			73			731			963				137			211			43			758			1,149
Non-cash equity compensation	2,632			2,232			2,808			7,672				2,196			3,398			2,738			3,190			11,522
Consolidated Adjusted EBITDA	$	102,990		$	105,487		$	94,315		$	302,792			$	93,371		$	99,010		$	96,451		$	105,352		$	394,184

(1) 1Q 2018 reflects earnings from divested businesses

Recent Developments
SemGroup has scheduled a special meeting of stockholders in connection with the proposed merger with Energy Transfer LP (NYSE: ET) on December 4, 2019, at 9 a.m. local time on the fifth floor of Two Warren Place, 6120 S. Yale Avenue, Tulsa, Oklahoma 74136. At the special meeting, stockholders will consider and vote on a proposal to approve the previously announced merger agreement whereby SemGroup will be acquired by Energy Transfer in a unit and cash transaction. SemGroup’s stockholders of record at the close of business on October 25, 2019 will be entitled to receive notice of and to vote at the special meeting.

On November 4, 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 November 21, 2019 to all common shareholders of record on November 14, 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 $6.8 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 November 21, 2019 and the record date is November 14, 2019.

About SemGroup
SemGroup^® Corporation (NYSE: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, maintenance capital expenditures and CAFD attributable to noncontrolling interests, 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.

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, the expected merger of SemGroup with and into Merger Sub LLC, a wholly owned subsidiary of Energy Transfer (“Merger Sub”) pursuant to the Agreement and Plan of Merger between us and Energy Transfer LP and Merger Sub, dated September 15, 2019 (the “merger”) 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 consummate the merger on the expected time frame or at all, including due to the inability to obtain all approvals necessary or the failure of other closing conditions; 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 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 or other business combination activities may not result in the corresponding anticipated benefits; 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@semgroup.com

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

Condensed Consolidated Balance Sheets
(in thousands, unaudited)

	September 30, 2019			December 31, 2018
ASSETS
Current assets	$	877,580		$	715,825
Property, plant and equipment, net	3,927,645			3,457,326
Goodwill and other intangible assets	783,085			622,340
Equity method investments	283,638			274,009
Other noncurrent assets, net	151,017			140,807
Right of use assets, net	89,665			—
Total assets	$	6,112,630		$	5,210,307
LIABILITIES, PREFERRED STOCK AND OWNERS' EQUITY
Current liabilities:
Current portion of long-term debt	$	15,912		$	6,000
Other current liabilities	633,417			631,157
Total current liabilities	649,329			637,157
Long-term debt, excluding current portion	2,477,326			2,278,834
Other noncurrent liabilities	274,612			94,337
Total liabilities	3,401,267			3,010,328
Preferred stock	379,285			359,658
Subsidiary preferred stock	258,376			—
Total owners' equity	2,073,702			1,840,321
Total liabilities, preferred stock and owners' equity	$	6,112,630		$	5,210,307

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

	Three Months Ended										Nine Months Ended
	September 30,						June 30,				September 30,
	2019			2018			2019				2019			2018
Revenues	$	562,410		$	633,996		$	674,940			$	1,804,582		$	1,891,399
Expenses:
Costs of products sold, exclusive of depreciation and amortization shown below	377,174			468,871			493,580				1,274,126			1,377,092
Operating	73,619			64,835			77,997				214,823			224,871
General and administrative	29,662			21,904			25,520				84,729			71,267
Depreciation and amortization	61,489			53,598			64,011				184,536			155,889
Loss (gain) on disposal or impairment, net	(373		)	(383		)	8,936				7,119			(2,125		)
Total expenses	541,571			608,825			670,044				1,765,333			1,826,994
Earnings from equity method investments	9,065			14,528			12,695				35,711			41,493
Operating income	29,904			39,699			17,591				74,960			105,898
Other expenses, net	39,389			33,935			36,574				111,348			116,425
Income (loss) before income taxes	(9,485		)	5,764			(18,983		)		(36,388		)	(10,527		)
Income tax expense (benefit)	(4,019		)	(2,697		)	(6,085		)		(14,710		)	16,773
Net income (loss)	(5,466		)	8,461			(12,898		)		(21,678		)	(27,300		)
Less: net income attributable to noncontrolling interest	7,042			—			12,689				23,256			—
Net loss attributable to SemGroup	(12,508		)	8,461			(25,587		)		(44,934		)	(27,300		)
Less: cumulative preferred stock dividends	6,773			6,317			6,657				19,971			17,360
Less: cumulative subsidiary preferred stock dividends	2,604			—			2,577				6,288			—
Less: accretion of subsidiary preferred stock to redemption value	255			—			237				14,241			—
Net loss attributable to common shareholders	$	(22,140	)	$	2,144		$	(35,058	)		$	(85,434	)	$	(44,660	)
Net income (loss)	$	(5,466	)	$	8,461		$	(12,898	)		$	(21,678	)	$	(27,300	)
Other comprehensive income (loss), net of income tax	(6,317		)	3,352			27,387				6,837			27,703
Comprehensive income (loss)	(11,783		)	11,813			14,489				(14,841		)	403
Less: net income attributable to noncontrolling interest	7,042			—			12,689				23,256			—
Less: other comprehensive income (loss) attributable to noncontrolling interests	(4,605		)	—			8,018				8,993			—
Comprehensive income (loss) attributable to SemGroup	$	(14,220	)	$	11,813		$	(6,218	)		$	(47,090	)	$	403
Net income (loss) per common share:
Basic	$	(0.28	)	$	0.03		$	(0.45	)		$	(1.09	)	$	(0.57	)
Diluted	$	(0.28	)	$	0.03		$	(0.45	)		$	(1.09	)	$	(0.57	)
Weighted average shares (thousands):
Basic	78,677			78,353			78,668				78,613			78,290
Diluted	78,677			78,977			78,668				78,613			78,290

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

	Three Months Ended										Nine Months Ended
	September 30,						June 30,				September 30,
	2019			2018			2019				2019			2018
Net income (loss)	$	(5,466	)	$	8,461		$	(12,898	)		$	(21,678	)	$	(27,300	)
Add: Interest expense	39,663			35,318			38,910				115,225			113,683
Add: Income tax expense (benefit)	(4,019		)	(2,697		)	(6,085		)		(14,710		)	16,773
Add: Depreciation and amortization expense	61,489			53,598			64,011				184,536			155,889
EBITDA	91,667			94,680			83,938				263,373			259,045
Selected Non-Cash Items and Other Items Impacting Comparability	2,648			1,771			21,549				39,419			29,787
Adjusted EBITDA	$	94,315		$	96,451		$	105,487			$	302,792		$	288,832

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

	Three Months Ended										Nine Months Ended
	September 30,						June 30,				September 30,
	2019			2018			2019				2019			2018
Loss (gain) on disposal or impairment, net	$	(373	)	$	(383	)	$	8,936			$	7,119		$	(2,125	)
Foreign currency transaction loss (gain)	801			(983		)	(989		)		(476		)	4,625
Adjustments to reflect equity earnings on an EBITDA basis	4,633			4,926			4,718				14,061			14,695
M&A transaction related costs	4,790			290			1,676				11,101			2,094
Employee severance and relocation expense	731			43			73				963			391
Unrealized loss (gain) on derivative activities	(10,742		)	(4,860		)	4,903				(1,021		)	1,775
Non-cash equity compensation	2,808			2,738			2,232				7,672			8,332
Selected Non-Cash Items and Other Items Impacting Comparability	$	2,648		$	1,771		$	21,549			$	39,419		$	29,787

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

	Three Months Ended										Nine Months Ended
	September 30,						June 30,				September 30,
	2019			2018			2019				2019			2018
Operating income	$	29,904		$	39,699		$	17,591			$	74,960		$	105,898
Plus:
Adjustments to reflect equity earnings on an EBITDA basis	4,633			4,926			4,718				14,061			14,695
Unrealized loss (gain) on derivatives	(10,742		)	(4,860		)	4,903				(1,021		)	1,775
General and administrative expense	29,662			21,904			25,520				84,729			71,267
Depreciation and amortization	61,489			53,598			64,011				184,536			155,889
Loss (gain) on disposal or impairment, net	(373		)	(383		)	8,936				7,119			(2,125		)
Total Segment Profit	$	114,573		$	114,884		$	125,679			$	364,384		$	347,399

Cash Available for Dividends:
(in thousands, unaudited)

	Three Months Ended										Nine Months Ended
	September 30,						June 30,				September 30,
	2019			2018			2019				2019			2018
Adjusted EBITDA	$	94,315		$	96,451		$	105,487			$	302,792		$	288,832
Less: Cash interest expense	37,817			36,377			36,458				109,901			103,777
Less: Maintenance capital	7,603			8,635			8,073				26,276			27,914
Less: Cash paid for income taxes	6,570			600			796				8,276			15,300
Less: CAFD attributable to CAMS Midstream noncontrolling interest	10,549			—			9,840				23,233			—
Less: Distributions to Maurepas Class B shareholders	6,595			—			6,595				19,803			—
Selected items impacting comparability
Add back: Cash income taxes related to SemCAMS Midstream formation	8,700			—			—				8,700			—
Add back: Mexico disposal cash taxes	—			—			—				—			10,955
Cash available for dividends	$	33,881		$	50,839		$	43,725			$	124,003		$	152,796
Dividends declared	$	37,177		$	37,022		$	37,161			$	111,399		$	111,048
Dividend coverage ratio	0.9		x	1.4		x	1.2		x		1.1		x	1.4		x