Increased Quarterly Distribution by 2.4%
Reaffirmed Adjusted EBITDA and Capex Guidance for
2015
Rose Rock Midstream®, L.P. (NYSE:RRMS) today announced its
financial results for the three months ended March 31, 2015.
Rose Rock Midstream's adjusted earnings before interest, taxes,
depreciation and amortization (Adjusted EBITDA) was $42.1 million,
compared to $45.1 million for the fourth quarter 2014 and $28.9
million for the first quarter 2014, a decrease of 7% from the
previous quarter but up 46% year-over-year.
"We are pleased with the partnership's performance and
consistent returns. During the quarter, we continued to execute on
our growth strategy with the drop down of the remaining crude
assets from our parent company," said Carlin Conner, chief
executive officer of Rose Rock Midstream's general partner. "We
also increased volumes on White Cliffs Pipeline as expected and are
on track to expand that system to 215,000 barrels per day by third
quarter 2015. Rose Rock Midstream is in a strong position to
continue delivering growth in earnings, cash distributions and
value for our investors."
First Quarter 2015 Adjusted EBITDA
Highlights
Compared to the Fourth Quarter 2014
- The decrease was primarily related to a reduction in marketing
margins, as marketing margins returned to a more normalized
position following an extraordinary fourth quarter, partially
offset by increased cash distributions from equity investments
Adjusted gross margin was $41.0 million for the first quarter
2015, down 15% from the fourth quarter 2014 of $48.2 million but 6%
above first quarter 2014 Adjusted gross margin of $38.6 million.
Adjusted gross margin and Adjusted EBITDA, which are non-GAAP
measures, are reconciled to their most directly comparable GAAP
measures below.
First quarter 2015 net income attributable to Rose Rock totaled
$14.6 million, compared to $15.1 million for the fourth quarter
2014 and $12.6 million for the first quarter 2014.
Rose Rock Midstream's distributable cash flow for the three
months ended March 31, 2015 was $33.7 million. On April 23, 2015,
Rose Rock Midstream increased the partnership's quarterly cash
distribution to $0.635 per unit from $0.62 per unit, effective for
the first quarter 2015, resulting in an annualized distribution of
$2.54 per unit. This is a 2.4% increase over the fourth quarter
2014 and a 28.3% increase over the first quarter 2014 quarterly
distribution of $0.495 per unit. The distribution will be paid on
May 15, 2015 to all unitholders of record on May 5, 2015.
Distributable cash flow, which is a non-GAAP measure, is reconciled
to its most directly comparable GAAP measure below. 2015
Guidance Rose Rock reaffirms 2015 consolidated Adjusted
EBITDA guidance of between $180 and $200 million, an increase of
more than 48% over 2014 results of $127.9 million. The company is
on track to deploy approximately $190 million in capital
investments in 2015, with more than 90% allocated to growth
projects, and is targeting a distribution growth rate for 2015 of
15% to 20% on a year-over-year basis. Earnings Conference
Call
Rose Rock Midstream will host a joint conference call with
SemGroup® Corporation (NYSE:SEMG) for investors tomorrow, May 8,
2015, at 11 a.m. ET. The call can be accessed live over the
telephone by dialing 1.888.317.6003, or for international callers,
1.412.317.6061. The pass code for the call is 6235605. 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 2015
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. Headquartered in Tulsa, OK,
Rose Rock Midstream provides crude oil gathering, transportation,
storage and marketing services with the majority of its assets
strategically located in or connected to the Cushing, Oklahoma
crude oil marketing hub.
Rose Rock 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 ir.rrmidstream.com, our Twitter
account and LinkedIn account.
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, cash distributions, management's plans and
objectives for future operations, capital investments, 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 the
instruments governing our indebtedness and to maintain certain
financial ratios required by our credit facility; our ability to
access credit and capital markets; our ability to renew or replace
expiring storage, transportation and related 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; weather and other
natural phenomena; cyber attacks involving our information systems
and related infrastructure; 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;
and 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.
Condensed Consolidated
Balance Sheets |
(in thousands, unaudited) |
|
|
|
|
March 31, |
December 31, |
|
2015 |
2014(1) |
ASSETS |
|
|
Current assets |
$ 275,265 |
$ 274,769 |
Property, plant and equipment, net |
405,283 |
396,066 |
Equity method investment |
425,655 |
269,635 |
Other noncurrent assets, net |
64,963 |
65,793 |
Total assets |
$ 1,171,166 |
$ 1,006,263 |
|
|
|
LIABILITIES AND PARTNERS' CAPITAL |
|
|
Current liabilities |
$ 227,607 |
$ 265,682 |
Long-term debt |
661,072 |
432,092 |
Total liabilities |
888,679 |
697,774 |
|
|
|
Partners' capital |
282,487 |
308,489 |
Total liabilities and partners' capital |
$ 1,171,166 |
$ 1,006,263 |
|
|
|
(1) Prior period financial information has
been recast to reflect the effects of the dropdown of the
Wattenberg Oil Trunkline |
|
Condensed Consolidated
Statements of Income |
(in thousands, except per unit
data, unaudited) |
|
|
Three Months Ended |
|
March 31, |
December 31, |
|
2015 |
2014(1) |
2014(1) |
Revenues, including revenues from
affiliates: |
|
|
|
Product |
$ 106,567 |
$ 266,290 |
$ 305,583 |
Service |
28,126 |
26,224 |
30,988 |
Total revenues |
134,693 |
292,514 |
336,571 |
Expenses, including expenses from
affiliates: |
|
|
|
Costs of products sold, exclusive of
depreciation and amortization |
96,237 |
254,537 |
287,434 |
Operating |
20,951 |
15,215 |
25,696 |
General and administrative |
5,620 |
3,747 |
5,033 |
Depreciation and amortization |
10,143 |
11,482 |
12,882 |
Total expenses |
132,951 |
284,981 |
331,045 |
Earnings from equity method investments |
20,864 |
11,080 |
17,718 |
Operating income |
22,606 |
18,613 |
23,244 |
Other expenses: |
|
|
|
Interest expense |
8,006 |
2,387 |
8,152 |
Other expense (income), net |
— |
— |
1 |
Total other expenses, net |
8,006 |
2,387 |
8,153 |
Net income |
14,600 |
16,226 |
15,091 |
Less: net income attributable to
noncontrolling interests |
— |
3,676 |
— |
Net income attributable to Rose Rock
Midstream, L.P. |
$ 14,600 |
$ 12,550 |
$ 15,091 |
Net income allocated to general
partner |
$ 4,742 |
$ 805 |
$ 4,077 |
Net income allocated to common
unitholders |
$ 9,858 |
$ 8,114 |
$ 6,925 |
Net income allocated to subordinated
unitholders |
$ — |
$ 3,750 |
$ 2,826 |
Net income (loss) allocated to Class A
unitholders |
$ — |
$ (119) |
$ 1,263 |
Net income (loss) per limited partner
unit: |
|
|
|
Common unit (basic) |
$ 0.28 |
$ 0.45 |
$ 0.34 |
Common unit (diluted) |
$ 0.28 |
$ 0.45 |
$ 0.34 |
Subordinated unit (basic and
diluted) |
$ — |
$ 0.45 |
$ 0.34 |
Class A unit (basic and diluted) |
$ — |
$ (0.05) |
$ 0.34 |
Basic weighted average number of
limited partner units outstanding: |
|
|
|
Common units |
34,804 |
18,149 |
20,576 |
Subordinated units |
— |
8,390 |
8,390 |
Class A units |
— |
2,500 |
3,750 |
Diluted weighted average number of
limited partner units outstanding: |
|
|
|
Common units |
34,847 |
18,198 |
20,647 |
Subordinated units |
— |
8,390 |
8,390 |
Class A units |
— |
2,500 |
3,750 |
|
|
|
|
(1) Prior period financial information has
been recast to reflect the effects of the dropdown of the
Wattenberg Oil Trunkline |
|
Non-GAAP
Reconciliations |
|
(in thousands, unaudited) |
Three Months Ended |
|
March 31, |
December 31, |
|
2015 |
2014(1) |
2014(1) |
Reconciliation of operating income to
Adjusted gross margin: |
|
|
|
Operating income |
$ 22,606 |
$ 18,613 |
$ 23,244 |
Add: |
|
|
|
Operating expense |
20,951 |
15,215 |
25,696 |
General and administrative expense |
5,620 |
3,747 |
5,033 |
Depreciation and amortization
expense |
10,143 |
11,482 |
12,882 |
Less: |
|
|
|
Earnings from equity method
investments |
20,864 |
11,080 |
17,718 |
Non-cash unrealized gain (loss) on
derivatives, net |
(2,531) |
(606) |
965 |
Adjusted gross margin |
$ 40,987 |
$ 38,583 |
$ 48,172 |
|
|
|
|
Reconciliation of net income to
Adjusted EBITDA: |
|
|
|
Net income |
$ 14,600 |
$ 16,226 |
$ 15,091 |
Add: |
|
|
|
Interest expense |
8,006 |
2,387 |
8,152 |
Depreciation and amortization
expense |
10,143 |
11,482 |
12,882 |
Cash distributions from equity method
investments |
26,065 |
13,585 |
21,687 |
Inventory valuation adjustment |
1,187 |
— |
5,667 |
Non-cash equity compensation |
298 |
260 |
238 |
Loss (gain) on disposal of long-lived
assets, net |
152 |
(34) |
89 |
Less: |
|
|
|
Earnings from equity method
investments |
20,864 |
11,080 |
17,718 |
White Cliffs cash distributions
attributable to noncontrolling interests |
— |
4,528 |
— |
Impact from derivative instruments: |
|
|
|
Total gain (loss) on derivatives,
net |
(644) |
(807) |
16,053 |
Total realized loss (gain) (cash flow) on
derivatives, net |
(1,887) |
201 |
(15,088) |
Non-cash unrealized gain (loss) on
derivatives, net |
(2,531) |
(606) |
965 |
Adjusted EBITDA |
$ 42,118 |
$ 28,904 |
$ 45,123 |
|
|
|
|
Reconciliation of net cash provided
by (used in) operating activities to Adjusted EBITDA: |
|
|
|
Net cash provided by (used in) operating
activities |
$ (7,070) |
$ 18,187 |
$ 64,823 |
Less: |
|
|
|
Changes in operating assets and
liabilities, net |
(36,508) |
(10,613) |
31,295 |
White Cliffs cash distributions
attributable to noncontrolling interests |
— |
4,528 |
— |
Add: |
|
|
|
Interest expense, excluding amortization
of debt issuance costs |
7,479 |
2,127 |
7,626 |
Distributions from equity method
investments in excess of equity in earnings |
5,201 |
2,505 |
3,969 |
Adjusted EBITDA |
$ 42,118 |
$ 28,904 |
$ 45,123 |
|
|
|
|
(1) Prior period financial information has
been recast to reflect the effects of the dropdown of the
Wattenberg Oil Trunkline |
|
Non-GAAP Reconciliations
(Continued) |
|
(in thousands, unaudited) |
Three Months Ended |
|
March 31, |
December 31, |
|
2015 |
2014(2) |
2014(2) |
Reconciliation of net income to
distributable cash flow: |
|
|
|
Net income |
$ 14,600 |
$ 16,226 |
$ 15,091 |
Add: |
|
|
|
Interest expense |
8,006 |
2,387 |
8,152 |
Depreciation and amortization
expense |
10,143 |
11,482 |
12,882 |
EBITDA |
32,749 |
30,095 |
36,125 |
Add: |
|
|
|
Loss (gain) on disposal of long-lived
assets, net |
152 |
(34) |
89 |
Cash distributions from equity method
investments |
26,065 |
13,585 |
21,687 |
Inventory valuation adjustment |
1,187 |
— |
5,667 |
Non-cash equity compensation |
298 |
260 |
238 |
Less: |
|
|
|
Earnings from equity method
investments |
20,864 |
11,080 |
17,718 |
White Cliffs cash distributions
attributable to noncontrolling interests |
— |
4,528 |
— |
Non-cash unrealized gain (loss) on
derivatives, net |
(2,531) |
(606) |
965 |
Adjusted EBITDA |
$ 42,118 |
$ 28,904 |
$ 45,123 |
Less: |
|
|
|
Cash interest expense |
7,454 |
2,104 |
7,601 |
Maintenance capital expenditures |
927 |
907 |
2,268 |
Distributable cash flow |
$ 33,737 |
$ 25,893 |
$ 35,254 |
|
|
|
|
Distribution declared |
$ 28,379 (1) |
$ 13,903 |
$ 24,269 |
|
|
|
|
Distribution coverage ratio |
1.19x |
1.86x |
1.45x |
|
|
|
|
(1) The distribution declared April 23, 2015
represents $0.635 per unit, or $2.54 per unit on an annualized
basis. This is a 2.4% increase over the prior quarter. |
(2) Prior period financial information has
been recast to reflect the effects of the dropdown of the
Wattenberg Oil Trunkline |
|
2015 Adjusted EBITDA
Guidance Reconciliation |
|
(millions, unaudited) |
|
Mid-point |
Net income |
$ 90.5 |
Add: Interest expense |
37.0 |
Add: Depreciation and amortization |
45.0 |
EBITDA |
$ 172.5 |
Non-Cash and Other Adjustments |
17.5 |
Adjusted EBITDA |
$ 190.0 |
|
|
Less: |
|
Cash interest expense |
34.5 |
Maintenance capital expenditures |
16.0 |
Distributable cash flow |
$ 139.5 |
|
|
Non-Cash and Other
Adjustments |
|
Earnings from equity method investment |
$ (92.0) |
Distributions from equity method
investment |
108.0 |
Non-cash equity compensation |
1.5 |
Non-Cash and Other Adjustments |
$ 17.5 |
CONTACT: Investor Relations:
Alisa Perkins
918-524-8081
roserockir@rrmidstream.com
Media:
Kiley Roberson
918-524-8594
kroberson@rrmidstream.com
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