Exhibit 99.2
SemGroup Corporation
Unaudited Pro Forma Condensed Financial Statements
On January 9, 2019, a wholly owned subsidiary of SemGroup Corporation, SemCanada II, L.P., an Oklahoma limited partnership (“SemGroup”), and an affiliate of Kohlberg Kravis Roberts & Co. L.P. and wholly owned subsidiary of KKR Global Infrastructure Investors III L.P., KKR Alberta Midstream Inc., an Alberta corporation (“KKR”), entered into definitive documents to create a new joint venture company that will own and operate midstream oil and gas infrastructure in Western Canada, SemCAMS Midstream ULC, an Alberta unlimited liability corporation (“SemCAMS Midstream”). SemGroup owns 51% and KKR owns 49% of SemCAMS Midstream, subsequent to close of the transaction described below.
SemGroup and KKR made the following contributions to SemCAMS Midstream: (i) SemGroup contributed 100% of the issued and outstanding equity interests in its wholly owned subsidiary, SemCAMS ULC, an Alberta unlimited liability company, (the “SemGroup Contribution”) in exchange for (A) 51% of the common shares of SemCAMS Midstream, (B) a cash amount of C$645.6 million (US$489.6 million), subject to adjustments for working capital of SemCAMS ULC, capital contributions to SemCAMS ULC by SemGroup, and other customary adjustments, (C) a potential payment of C$14.7 million (US$11.1 million) contingent on positive final investment decision of a specific project by SemCAMS Midstream, and (D) earnout consideration in the form of a special share in SemCAMS Midstream entitled to dividend payments up to a maximum(pre-tax) aggregate amount of C$50.0 million (US$37.9 million) if either or both of two specific projects proceed and EBITDA thresholds pertaining to those projects are achieved; and (ii) KKR contributed cash in the amount of C$785.6 million (US$595.7 million), subject to adjustments for working capital of SemCAMS ULC, capital contributions to SemCAMS ULC by SemGroup and a payment of C$14.7 million (US$11.1 million) contingent on the pursuit of a specific project (unrelated to the two projects referred to above) by SemCAMS Midstream, and other customary adjustments (the “KKR Contribution” and, together with the SemGroup Contribution, the “Contribution”) in exchange for (A) 49% of the common shares of SemCAMS Midstream and (B) 300,000 preferred shares in SemCAMS Midstream (representing C$300 million (US$227.5 million) of KKR cash contribution) which will pay quarterly dividends at an annual rate of 8.75%. SemCAMS Midstream may elect, for any of the first ten quarters following issuance of the preferred shares, to pay the dividendsin-kind in the form of additional preferred shares. SemCAMS Midstream will have the right to convert the preferred shares into common shares in the event of an initial public offering of its common shares, at a conversion price equal to 92.5% of the IPO offering price. In connection with the issuance of the preferred shares, KKR received a C$6.0 million (US$4.5 million) transaction fee from SemCAMS Midstream.
The accompanying unaudited pro forma condensed financial statements of SemGroup Corporation have been prepared in accordance with Article 11 of RegulationS-X. The accompanying unaudited pro forma condensed balance sheet at December 31, 2018, reflects the sale of a 49% common SemCAMS Midstream equity interest and 300 thousand SemCAMS Midstream’s 8.75% cumulative perpetual preferred shares, as if it had occurred on that date. The accompanying unaudited pro forma condensed statements of operations for the year ended December 31, 2018, reflect the disposal as if it had occurred on January 1, 2018. The terms “we”, “our”, “us”, and similar language used in these unaudited pro forma condensed financial statements refer to SemGroup Corporation and its subsidiaries.
These unaudited pro forma condensed financial statements have been derived from our historical financial statements, which are included in our annual report on Form10-K for the year ended December 31, 2018. These unaudited pro forma condensed financial statements should be read in conjunction with our historical financial statements and related notes thereto.
These unaudited pro forma condensed financial statements are provided for illustrative purposes only and do not purport to represent what our actual results of operations would have been if the disposal had occurred on the dates assumed, nor are they necessarily indicative of our future operating results. However, the pro forma adjustments shown in these unaudited pro forma condensed financial statements reflect estimates and assumptions that we believe to be reasonable.
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SEMGROUP CORPORATION
Unaudited Pro Forma Condensed Balance Sheet
December 31, 2018
(in thousands)
SemGroup Historical | Pro Forma Adjustments | SemGroup Pro Forma | ||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 86,655 | $ | — | $ | 86,655 | ||||||
Accounts receivable, net | 562,214 | — | 562,214 | |||||||||
Receivable from affiliates | 295 | — | 295 | |||||||||
Inventories | 49,397 | — | 49,397 | |||||||||
Other current assets | 17,264 | — | 17,264 | |||||||||
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Total current assets | 715,825 | — | 715,825 | |||||||||
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Property, plant and equipment, net | 3,457,326 | — | 3,457,326 | |||||||||
Equity method investments | 274,009 | — | 274,009 | |||||||||
Goodwill | 257,302 | — | 257,302 | |||||||||
Other intangible assets, net | 365,038 | — | 365,038 | |||||||||
Other noncurrent assets | 140,807 | — | 140,807 | |||||||||
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Total assets | $ | 5,210,307 | $ | — | $ | 5,210,307 | ||||||
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LIABILITIES, PREFERRED STOCK AND OWNERS’ EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 494,792 | $ | — | $ | 494,792 | ||||||
Payable to affiliates | 3,715 | — | 3,715 | |||||||||
Accrued liabilities | 115,095 | — | 115,095 | |||||||||
Deferred revenue | 11,060 | — | 11,060 | |||||||||
Other current liabilities | 6,495 | — | 6,495 | |||||||||
Current portion of long-term debt | 6,000 | — | 6,000 | |||||||||
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Total current liabilities | 637,157 | — | 637,157 | |||||||||
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Long-term debt, net | 2,278,834 | (467,000 | )(a) | 1,811,834 | ||||||||
Deferred income taxes | 55,789 | (10,000 | )(a) | 45,789 | ||||||||
Other noncurrent liabilities | 38,548 | — | 38,548 | |||||||||
Commitments and contingencies | ||||||||||||
Redeemable preferred stock, $0.01 par value | 359,658 | — | 359,658 | |||||||||
SemGroup owners’ equity: | ||||||||||||
Common stock, $0.01 par value | 786 | — | 786 | |||||||||
Additionalpaid-in capital | 1,615,969 | — | 1,615,969 | |||||||||
Treasury stock, at cost | (705 | ) | — | (705 | ) | |||||||
Accumulated deficit | (73,971 | ) | — | (73,971 | ) | |||||||
Accumulated other comprehensive loss | (51,247 | ) | — | (51,247 | ) | |||||||
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Total SemGroup owners’ equity | 1,490,832 | — | 1,490,832 | |||||||||
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Noncontrolling interests in consolidated subsidiaries | 349,489 | 477,000 | (a) | 826,489 | ||||||||
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Total owners’ equity | 1,840,321 | 477,000 | 2,317,321 | |||||||||
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Total liabilities, preferred stock and owners’ equity | $ | 5,210,307 | $ | — | $ | 5,210,307 | ||||||
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SEMGROUP CORPORATION
Unaudited Pro Forma Condensed Statement of Operations
Year Ended December 31, 2018
(in thousands, except per share amounts)
SemGroup Historical | Pro Forma Adjustments | SemGroup Pro Forma | ||||||||||
Revenues: | ||||||||||||
Product | $ | 1,907,436 | $ | — | $ | 1,907,436 | ||||||
Service | 518,764 | — | 518,764 | |||||||||
Lease | 17,549 | — | 17,549 | |||||||||
Other | 59,513 | — | 59,513 | |||||||||
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Total revenues | 2,503,262 | — | 2,503,262 | |||||||||
Expenses: | ||||||||||||
Costs of products sold, exclusive of depreciation and amortization shown below | 1,823,095 | — | 1,823,095 | |||||||||
Operating | 284,769 | — | 284,769 | |||||||||
General and administrative | 91,568 | — | 91,568 | |||||||||
Depreciation and amortization | 209,254 | — | 209,254 | |||||||||
Gain on disposal of long-lived assets, net | (3,563 | ) | — | (3,563 | ) | |||||||
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Total expenses | 2,405,123 | — | 2,405,123 | |||||||||
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Earnings from equity method investments | 57,672 | — | 57,672 | |||||||||
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Operating income | 155,811 | — | 155,811 | |||||||||
Other expenses (income), net: | ||||||||||||
Interest expense | 149,714 | (28,020 | )(b) | 121,694 | ||||||||
Loss on early extinguishment of debt | — | — | — | |||||||||
Foreign currency transaction gain | 9,501 | — | 9,501 | |||||||||
Other income, net | (2,380 | ) | — | (2,380 | ) | |||||||
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Total other expense (income), net | 156,835 | (28,020 | ) | 128,815 | ||||||||
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Income (loss) from continuing operations before income taxes | (1,024 | ) | 28,020 | 26,996 | ||||||||
Income tax expense | 23,304 | 6,683 | (c) | 29,987 | ||||||||
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Net income (loss) | (24,328 | ) | 21,337 | (2,991 | ) | |||||||
Less: net income attributable to noncontrolling interests | 2,421 | 26,869 | (d) | 29,290 | ||||||||
Less: cumulative preferred stock dividends | 23,790 | — | 23,790 | |||||||||
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Net loss attributable to common shareholders | $ | (50,539 | ) | $ | (5,532 | ) | $ | (56,071 | ) | |||
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Net loss per common share: | ||||||||||||
Basic | $ | (0.65 | ) | $ | (0.72 | ) | ||||||
Diluted | $ | (0.65 | ) | $ | (0.72 | ) | ||||||
Weighted average common shares outstanding: | ||||||||||||
Basic | 78,313 | 78,313 | ||||||||||
Diluted | 78,313 | 78,313 |
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SEMGROUP CORPORATION
Notes to Unaudited Pro Forma Condensed Financial Statements
1. | Basis of presentation |
The historical consolidated financial information of SemGroup Corporation has been adjusted in the accompanying unaudited pro forma condensed financial information to give effect to pro forma events that are (i) directly attributable to the disposition of a 49% equity interest and 300 thousand of SemCAMS Midstream’s 8.75% cumulative perpetual preferred shares, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed statement of operations, are expected to have a continuing impact on the results of operations.
2. | Pro forma adjustments |
(a) Adjustments to reflect estimated proceeds of $484 million on the sale of a 49% equity interest and 300 thousand of SemCAMS Midstream 8.75% cumulative perpetual preferred shares, net of estimated transaction costs of $7 million. Use of net proceeds assumes $10 million of cash income tax payments and a $467 million reduction of outstanding debt.
(b) Adjustments to recognize lower interest expense due to the repayment of $467 million of outstanding debt. Interest savings was calculated based on a 6.0% interest rate.
(c) Adjustment to recognize additional income tax expense based on SemGroup Corporation’s historical blended statutory rate of 23.85% for the year ended December 31, 2018.
(d) Adjustment to reflect 49% of SemCAMS Midstream historical earnings as attributable to noncontrolling interest and to reflect preferred dividends on 300 thousand shares of SemCAMS Midstream’s 8.75% cumulative perpetual preferred shares. Preferred shares have a $1,000 notional value.
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