Rose Rock Midstream, L.P. Reports First Quarter 2013 Results
First Quarter Adjusted EBITDA Increased 66% Over Previous Quarter
Tulsa, OK - May 8, 2013 - Rose Rock Midstream, L.P. (NYSE: RRMS) today announced its financial results for the three months ended March 31, 2013.
“The year is off to a tremendous start and we are pleased to report a strong quarter which positions us to deliver on our full-year expectations,” said Norm Szydlowski, chief executive officer of Rose Rock Midstream's general partner. “Demand for our assets and services remains strong and we have good visibility for continued growth.”
Rose Rock Midstream reported first quarter 2013 Adjusted EBITDA of $16.4 million, up 66% from the fourth quarter 2012 of $9.9 million, and up 43% from the first quarter 2012 of $11.4 million.
First Quarter Highlights
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| • | As previously announced, on January 11, 2013, Rose Rock Midstream acquired a 33.3% interest in SemCrude Pipeline, L.L.C., which owns 51% of White Cliffs Pipeline, L.L.C.; |
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| • | Received $2.9 million in cash distributions from ownership in White Cliffs pipeline; and |
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| • | Crude marketing margins increased due to improved crude oil market conditions. |
Adjusted gross margin was $22.3 million for the first quarter 2013, up 16% from the fourth quarter 2012 of $19.2 million and 15% above first quarter 2012 Adjusted gross margin of $19.4 million. Adjusted gross margin and Adjusted EBITDA, which are non-GAAP measures, are reconciled to their most directly comparable GAAP measures below.
First quarter 2013 net income totaled $12.0 million, compared to $4.6 million for the fourth quarter 2012 and $7.8 million for the first quarter 2012.
Rose Rock Midstream's distributable cash flow for the three months ended March 31, 2013 was $12.7 million. On April 25, 2013, Rose Rock Midstream increased the partnership's quarterly cash distribution to $0.43 per unit from $0.4025 per unit, effective for the first quarter 2013, resulting in an annualized distribution of $1.72 per unit. This is a 7% increase over the fourth quarter 2012 and marks the fifth consecutive increase in the quarterly cash distribution to RRMS limited partner unitholders. The distribution will be paid on May 15, 2013 to all unitholders of record on May 6, 2013. Distributable cash flow, which is a non-GAAP measure, is reconciled to its most directly comparable GAAP measure below.
2013 Guidance
Rose Rock Midstream reaffirms 2013 Adjusted EBITDA guidance of $56 million to $60 million, an increase of approximately 47% over 2012 results of $39.5 million, primarily due to the acquisition of a partial interest in January 2013 in the White Cliffs Pipeline. The partnership is on target to deploy $60 million in capital expenditures in 2013 and to achieve a 2013 distribution growth rate of approximately15% year-over-year.
Earnings Conference Call
Rose Rock Midstream will host a joint conference call with SemGroup® Corporation (NYSE: SEMG) for investors tomorrow, May 9, 2013, at 11 a.m. EDT. The call can be accessed live over the telephone by dialing 877.359.3652, or for international callers, 720.545.0014. The pass code for the call is 34090290. Interested parties may also listen to a simultaneous webcast of the conference call by logging onto Rose Rock Midstream's Investor Relations website at ir.rrmidstream.com. A replay of the webcast will also be
available for a year following the call at ir.rrmidstream.com on the Calendar of Events-Past Events page. The first quarter 2013 earnings slide deck will be posted under Presentations.
About Rose Rock Midstream
Rose Rock Midstream, L.P. (NYSE: RRMS) is a growth-oriented Delaware limited partnership formed by SemGroup® Corporation (NYSE: SEMG) to own, operate, develop and acquire a diversified portfolio of midstream energy assets. Rose Rock Midstream provides crude oil gathering, transportation, storage and marketing services. Headquartered in Tulsa, OK, Rose Rock Midstream has operations in six states with the majority of its assets strategically located in or connected to the Cushing, Oklahoma crude oil marketing hub.
Non-GAAP Financial Measures
This Press Release and the accompanying schedules include the non-GAAP financial measures of Adjusted gross margin, Adjusted EBITDA and distributable cash flow, which may be used periodically by management when discussing our financial results with investors and analysts. The accompanying schedules of this Press Release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America (GAAP). Adjusted gross margin, Adjusted EBITDA and distributable cash flow are presented as management believes they provide additional information and metrics relative to the performance of our business.
Operating income (loss) is the GAAP measure most directly comparable to Adjusted gross margin, net income (loss) and cash provided by (used in) operating activities are the GAAP measures most directly comparable to Adjusted EBITDA, and net income (loss) is the GAAP measure most directly comparable to distributable cash flow. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measures. 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 Adjusted gross margin, Adjusted EBITDA or distributable cash flow in isolation or as substitutes for analysis of our results as reported under GAAP. Because Adjusted gross margin, Adjusted EBITDA and distributable cash flow may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Management compensates for the limitation of Adjusted gross margin, Adjusted EBITDA and distributable cash flow as analytical tools by reviewing the comparable GAAP measures, understanding the differences between Adjusted gross margin, Adjusted EBITDA and distributable cash flow, on the one hand, and operating income (loss), net income (loss) and net cash provided by (used in) operating activities, on the other hand, 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.
Forward-Looking Statements
Certain matters contained in this Press Release include “forward-looking statements.”
All statements, other than statements of historical fact, included in this Press Release including the prospects of our industry, our anticipated financial performance, including distributable cash flow, management's plans and objectives for future operations, 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, insufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to pay the minimum quarterly distribution; any sustained reduction in demand for crude oil in markets served by our midstream assets; our ability to obtain new sources of supply of crude oil; competition from other midstream energy companies; our ability to comply with the covenants contained in and maintain certain financial ratios required by our credit facility; our ability to access credit markets; our ability to renew or replace expiring storage contracts; the loss of or a material nonpayment or nonperformance by any of our key customers; the overall forward market for crude oil; the possibility that our hedging activities may result in losses or may have a negative impact on our financial results; hazards or operating risks incidental to the gathering, transporting or storing of crude oil; our failure to comply with new or existing environmental laws or regulations; the possibility that the construction or acquisition of new assets may not result in the corresponding anticipated revenue increases; 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:
Mary Catherine Ward
918-524-8081
roserockir@rrmidstream.com
Media:
Kiley Roberson
918-524-8594
kroberson@rrmidstream.com
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| Condensed Consolidated Balance Sheets | | |
| (in thousands, unaudited) | | |
| | March 31, 2013 | December 31, 2012 |
| ASSETS | | |
| Current assets | $ | 259,784 |
| $ | 250,617 |
|
| Property, plant and equipment, net | 295,384 |
| 291,530 |
|
| Equity method investment | 54,459 |
| — |
|
| Other noncurrent assets, net | 3,992 |
| 2,579 |
|
| Total assets | $ | 613,619 |
| $ | 544,726 |
|
| | | |
| LIABILITIES AND PARTNERS' CAPITAL | | |
| Current liabilities | $ | 234,266 |
| $ | 231,843 |
|
| Long-term debt | 152,556 |
| 4,562 |
|
| Total liabilities | 386,822 |
| 236,405 |
|
| | | |
| Total partners' capital | 226,797 |
| 308,321 |
|
| Total liabilities and partners' capital | $ | 613,619 |
| $ | 544,726 |
|
| | | |
|
| | | | | | | | | |
| Condensed Consolidated Statements of Income | |
| (in thousands, except per unit amounts, unaudited) | |
| | |
| | Three Months Ended |
| | March 31, | December 31, |
| | 2013 | 2012 | 2012 |
| Revenues, including revenues from affiliates: | | | |
| Product | $ | 158,728 |
| $ | 169,386 |
| $ | 140,344 |
|
| Service | 12,504 |
| 10,334 |
| 11,386 |
|
| Other | — |
| (5 | ) | — |
|
| Total revenues | 171,232 |
| 179,715 |
| 151,730 |
|
| | | | |
| Expenses, including expenses from affiliates: | | | |
| Costs of products sold, exclusive of depreciation and amortization | 148,451 |
| 160,508 |
| 134,119 |
|
| Operating | 5,418 |
| 5,227 |
| 6,156 |
|
| General and administrative | 3,561 |
| 2,703 |
| 3,253 |
|
| Depreciation and amortization | 3,507 |
| 2,967 |
| 3,099 |
|
| Total expenses | 160,937 |
| 171,405 |
| 146,627 |
|
| | | | |
| Earnings from equity method investment | 3,453 |
| — |
| — |
|
| | | | |
| Operating income | 13,748 |
| 8,310 |
| 5,103 |
|
| | | | |
| Other expenses (income): | | | |
| Interest expense | 1,754 |
| 480 |
| 505 |
|
| Other expense (income), net | — |
| 72 |
| (3 | ) |
| Total other expenses, net | $ | 1,754 |
| $ | 552 |
| $ | 502 |
|
| Net income | $ | 11,994 |
| $ | 7,758 |
| $ | 4,601 |
|
| | | | |
| Net income allocated to general partner | $ | 281 |
| $ | 155 |
| $ | 92 |
|
| Net income allocated to common unitholders | $ | 6,767 |
| $ | 3,801.5 |
| $ | 2,254.5 |
|
| Net income allocated to subordinated unitholders | $ | 4,773 |
| $ | 3,801.5 |
| $ | 2,254.5 |
|
| Net income allocated to Class A unitholders | $ | 173 |
| $ | — |
| $ | — |
|
| Earnings per limited partner unit: | | | |
| Common unit (basic and diluted) | $ | 0.59 |
| $ | 0.45 |
| $ | 0.27 |
|
| Subordinated unit (basic and diluted) | $ | 0.57 |
| $ | 0.45 |
| $ | 0.27 |
|
| Class A unit (basic and diluted) | $ | 0.16 |
| $ | — |
| $ | — |
|
| Basic weighted average number of limited partner units outstanding: | | | |
| Common units | 11,465 |
| 8,390 |
| 8,390 |
|
| Subordinated units | 8,390 |
| 8,390 |
| 8,390 |
|
| Class A units | 1,097 |
| — |
| — |
|
| Diluted weighted average number of limited partner units outstanding: | | | |
| Common units | 11,491 |
| 8,390 |
| 8,411 |
|
| Subordinated units | 8,390 |
| 8,390 |
| 8,390 |
|
| Class A units | 1,097 |
| — |
| — |
|
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| | | | | | | | | |
| Non-GAAP Reconciliations | | | |
| | | | |
| (in thousands, unaudited) | Three Months Ended |
| | March 31, | December 31, |
| | 2013 | 2012 | 2012 |
| Reconciliation of operating income to Adjusted gross margin: | | | |
| Operating income | $ | 13,748 |
| $ | 8,310 |
| $ | 5,103 |
|
| Add: | | | |
| Operating expense | 5,418 |
| 5,227 |
| 6,156 |
|
| General and administrative | 3,561 |
| 2,703 |
| 3,253 |
|
| Depreciation and amortization | 3,507 |
| 2,967 |
| 3,099 |
|
| Less: | | | |
| Earnings from equity method investment | 3,453 |
| — |
| — |
|
| Unrealized gain (loss) on derivatives, net | 468 |
| (146 | ) | (1,628 | ) |
| Adjusted gross margin | $ | 22,313 |
| $ | 19,353 |
| $ | 19,239 |
|
| | | | |
| Reconciliation of net income to Adjusted EBITDA: | | | |
| Net income | $ | 11,994 |
| $ | 7,758 |
| $ | 4,601 |
|
| Add: | | | |
| Interest expense | 1,754 |
| 480 |
| 505 |
|
| Depreciation and amortization | 3,507 |
| 2,967 |
| 3,099 |
|
| Cash distributions from equity method investment | 2,892 |
| — |
| — |
|
| Non-cash equity compensation | 143 |
| 61 |
| 90 |
|
| Gain on sale of assets | — |
| — |
| (57 | ) |
| Less: | | | |
| Earnings from equity method investment | 3,453 |
| — |
| — |
|
| Impact from derivative instruments: | | | |
| Total gain (loss) on derivatives, net | (544 | ) | (1,125 | ) | 491 |
|
| Total realized (gain) loss (cash flow) on derivatives, net | 1,012 |
| 979 |
| (2,119 | ) |
| Non-cash unrealized gain (loss) on derivatives, net | 468 |
| (146 | ) | (1,628 | ) |
| Adjusted EBITDA | $ | 16,369 |
| $ | 11,412 |
| $ | 9,866 |
|
| | | | |
| Reconciliation of net cash provided by (used in) operating activities to Adjusted EBITDA: | | | |
| Net cash provided by (used in) operating activities | $ | 9,915 |
| $ | (240 | ) | $ | (428 | ) |
| Less: | | | |
| Changes in assets and liabilities | (4,898 | ) | (11,257 | ) | (9,887 | ) |
| Add: | | | |
| Interest expense, excluding amortization of debt issuance costs | 1,556 |
| 395 |
| 407 |
|
| Adjusted EBITDA | $ | 16,369 |
| $ | 11,412 |
| $ | 9,866 |
|
| | | | |
|
| | | | | | | | | | | | |
| Non-GAAP Reconciliations (Continued) | | | | | | |
| | | | | | | |
| (in thousands, unaudited) | Three Months Ended | |
| | March 31, | | December 31, | |
| | 2013 | | 2012 | | 2012 | |
| Reconciliation of net income to distributable cash flow: | | | | | | |
| Net income | $ | 11,994 |
| | $ | 7,758 |
| | $ | 4,601 |
| |
| Add: | | | | | | |
| Interest expense | 1,754 |
| | 480 |
| | 505 |
| |
| Depreciation and amortization | 3,507 |
| | 2,967 |
| | 3,099 |
| |
| EBITDA | 17,255 |
| | 11,205 |
| | 8,205 |
| |
| Add: | | | | | | |
| Gain on sale of assets | — |
| | — |
| | (57 | ) | |
| Cash distribution from equity method investment | 2,892 |
| | — |
| | — |
| |
| Non-cash equity compensation | 143 |
| | 61 |
| | 90 |
| |
| Less: | | | | | | |
| Earnings from equity method investment | 3,453 |
| | — |
| | — |
| |
| Unrealized gain (loss) on derivatives, net | 468 |
| | (146 | ) | | (1,628 | ) | |
| Adjusted EBITDA | $ | 16,369 |
| | $ | 11,412 |
| | $ | 9,866 |
| |
| Less: | | | | | | |
| Cash interest expense | 1,556 |
| | 394 |
| | 406 |
| |
| Maintenance capital expenditures | 2,071 |
| | 476 |
| | 1,633 |
| |
| Distributable cash flow | $ | 12,742 |
| | $ | 10,542 |
| | $ | 7,827 |
| |
| | | | | | | |
| Distribution declared | $ | 8,941 |
| (1) | $ | 6,378 |
| | $ | 8,331 |
| |
| | | | | | | |
| Distribution coverage ratio | 1.43x |
| | 1.65x |
| | 0.94x |
| |
| | | | | | | |
| (1) The distribution declared April 25, 2013 represents $0.43 per unit, or $1.72 per unit on an annualized basis. This is a 6.8% increase over the prior quarter. |
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| | | | | | | |
| 2013 Adjusted EBITDA Guidance | | | |
| (in millions, unaudited) | | | |
| | Guidance |
| | Low | | High |
| Net income | $ | 26.7 |
| | $ | 32.2 |
|
| Add: Interest expense | 12.3 |
| | 11.3 |
|
| Add: Depreciation and amortization | 13.5 |
| | 13.0 |
|
| EBITDA | $ | 52.5 |
| | $ | 56.5 |
|
| Non-Cash Adjustments | 3.5 |
| | 3.5 |
|
| Adjusted EBITDA | $ | 56.0 |
| | $ | 60.0 |
|
| | | | |
| Non-Cash Adjustments | | | |
| Remove earnings from equity method investment | $ | (14.0 | ) | | $ | (16.0 | ) |
| Include cash distributions from equity method investment | 17.0 |
| | 19.0 |
|
| Non-cash equity compensation | 0.5 |
| | 0.5 |
|
| Non-Cash Adjustments | $ | 3.5 |
| | $ | 3.5 |
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