Rose Rock Midstream, L.P. Reports Fourth Quarter and Full Year 2013 Results

Rose Rock Midstream, L.P. Reports Fourth Quarter and Full Year 2013 Results   Adjusted EBITDA Increased 73% Year-Over-Year; 2014 Adjusted EBITDA Guidance                               $92 to $97 Million  TULSA, Okla., Feb. 27, 2014 (GLOBE NEWSWIRE) -- Rose Rock Midstream^®, L.P. (NYSE:RRMS) today announced its financial results for the three months and year ended December 31, 2013.  Rose Rock Midstream reported fourth quarter 2013 Adjusted EBITDA of $21.0 million, up 34% from the third quarter 2013 of $15.7 million, and more than double the fourth quarter 2012 of $9.9 million. Adjusted EBITDA for the year ended December 31, 2013, totaled $68.5 million, up 73% from $39.5 million for the year ended December 31, 2012. Rose Rock's results improved over the previous quarter of 2013 due to a $3.5 million increase in marketing as a result of higher volumes along with a 15% increase in White Cliffs Pipeline volumes.  "Rose Rock Midstream had a strong finish to the year, exceeding our previous guidance range and delivering excellent results driven by growth," said Norm Szydlowski, chief executive officer of Rose Rock Midstream's general partner. "We are confident that our solid financial results, 15% increase in cash distributions year-over-year and our continued focus on organic growth projects and growth-oriented acquisitions are all steps in the right direction. Looking to 2014, Rose Rock is ready to meet the increased demand for midstream services with a strong balance sheet and plenty of room to grow."  Adjusted gross margin was $35.6 million for the fourth quarter 2013, up 50% from the third quarter 2013 of $23.8 million and 85% above fourth quarter 2012 Adjusted gross margin of $19.2 million. Adjusted gross margin and Adjusted EBITDA, which are non-GAAP measures, are reconciled to their most directly comparable GAAP measures below.  Fourth quarter 2013 net income totaled $7.5 million, compared to $9.4 million for the third quarter 2013 and $4.6 million for the fourth quarter 2012. Net income decreased from the prior quarter due to increased depreciation primarily related to a revision of the estimated useful life of certain pipeline segments.  Rose Rock Midstream's distributable cash flow for the three months ended December 31, 2013 was $17.9 million. On January 23, 2014, Rose Rock Midstream increased the partnership's quarterly cash distribution to $0.465 per unit from $0.45 per unit, effective for the fourth quarter 2013, resulting in an annualized distribution of $1.86 per unit. This is a 3.3% increase over the third quarter 2013 and marks the eighth consecutive increase in the quarterly cash distribution to RRMS limited partner unitholders. The distribution was paid on February 14, 2014 to all unitholders of record on February 4, 2014. Distributable cash flow, which is a non-GAAP measure, is reconciled to its most directly comparable GAAP measure below.  Full Year 2013 Highlights    *White Cliffs Pipeline Interest Acquisitions     ― January 2013- Rose Rock acquired a one-third interest in SemCrude     Pipeline, L.L.C., which owns a 51% interest in White Cliffs Pipeline, from     SemGroup     ― December 2013- Rose Rock acquired an additional one-third interest in     SemCrude Pipeline, L.L.C.   *Completed Two Acquisitions     ― September 2013- Barcas Field Services acquisition     ― November 2013- Tampa Pipeline acquisition   *Rose Rock spent approximately $103 million on growth projects and     acquisitions in 2013  2014 Adjusted EBITDA and Capex Guidance  Rose Rock Midstream anticipates 2014 Adjusted EBITDA of $92 million to $97 million, an increase of approximately 40% over 2013 results of $68.5 million. The partnership also expects to deploy $75 million in capital investments in 2014, with 84% allocated to growth projects and a target distribution growth rate in 2014 of 15% year-over-year.  Earnings Conference Call  Rose Rock Midstream will host a joint conference call with SemGroup^® Corporation (NYSE:SEMG) for investors tomorrow, February 28, 2013, at 11 a.m. ET. 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 31052519. 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 fourth 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. 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, 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; the amount of collateral required to be posted from time to time in our transactions; 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 and capital 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; weather and other natural phenomena; 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.  Condensed Consolidated Balance Sheets (in thousands, unaudited)                                                                                                                      December 31, December 31,                                                      2013         2012 ASSETS                                                            Current assets                                       $321,587   $250,617 Property, plant and equipment, net                   311,616      291,530 Equity method investment                             224,095      — Other noncurrent assets, net                         39,949       2,579 Total assets                                         $897,247   $544,726                                                                  LIABILITIES AND EQUITY                                            Current liabilities                                  $293,031   $231,843 Long-term debt                                       245,088      4,562 Total liabilities                                    538,119      236,405                                                                  Total Rose Rock Midstream, L.P. partners' capital    280,571      308,321 Noncontrolling interests in consolidated             78,557       — subsidiaries Total equity                                         359,128      308,321 Total liabilities and equity                         $897,247   $544,726    Condensed Consolidated Statements of Income (in thousands, except per unit amounts, unaudited)                                                                                      Three Months Ended               Year Ended                       December 31,          September  December 31,                                              30,                       2013       2012       2013       2013       2012 Revenues, including revenues from                                                   affiliates: Product                $228,434 $140,344 $166,050 $702,028 $576,158 Service                23,607     11,386     15,781     64,498     44,318 Other                  —          —          —          —          (59) Total revenues         252,041    151,730    181,831    766,526    620,417 Expenses, including expenses from                                                   affiliates: Costs of products sold, exclusive of     217,252    134,119    157,550    663,759    546,966 depreciation and amortization Operating              15,322     6,156      9,248      35,795     23,302 General and            5,326      3,253      3,146      15,287     12,083 administrative Depreciation and       11,838     3,099      4,130      23,165     12,131 amortization Total expenses         249,738    146,627    174,074    738,006    594,482 Earnings from equity   7,140      —          3,527      17,571     — method investment Operating income       9,443      5,103      11,284     46,091     25,935 Other expenses:                                                 Interest expense       1,979      505        1,873      8,100      1,912 Other expense (income) (2)        (3)        —          (14)       69 Total other expenses,  1,977      502        1,873      8,086      1,981 net Net income             7,466      4,601      9,411      38,005     23,954 Less: net income attributable to        1,256      —          —          1,256      — noncontrolling interests Net income attributable to Rose   $6,210   $4,601   $9,411   $36,749  $23,954 Rock Midstream, L.P. Net income allocated   $368     $92      $315     $1,218   $479 to general partner Net income allocated   $4,379   $2,254.5 $6,116   $22,701  $11,737.5 to common unitholders Net income allocated to subordinated        $2,023   $2,254.5 $3,083   $13,321  $11,737.5 unitholders Net loss allocated to  $(560)   $—       $(103)    $(491)    $— Class A unitholders Earnings (loss) per                                             limited partner unit: Common unit (basic)    $0.26    $0.27    $0.45    $1.66    $1.40 Common unit (diluted)  $0.26    $0.27    $0.45    $1.66    $1.40 Subordinated unit      $0.24    $0.27    $0.37    $1.59    $1.40 (basic and diluted) Class A unit (basic    $(0.38)   $—       $(0.08)   $(0.39)   $— and diluted) Basic weighted average number of limited                                               partner units outstanding: Common units           16,890     8,390      13,442     13,672     8,390 Subordinated units     8,390      8,390      8,390      8,390      8,390 Class A units          1,454      —          1,250      1,264      — Diluted weighted average number of                                               limited partner units outstanding: Common units           16,934     8,411      13,479     13,708     8,406 Subordinated units     8,390      8,390      8,390      8,390      8,390 Class A units          1,454      —          1,250      1,264      —    Non-GAAP Reconciliations  (in thousands,         Three Months Ended               Year Ended unaudited)                       December 31,          September  December 31,                                              30,                       2013       2012       2013       2013        2012 Reconciliation of operating income to                                              Adjusted gross margin: Operating income       $9,443   $5,103   $11,284  $46,091   $25,935 Add:                                                             Operating expense      15,322     6,156      9,248      35,795      23,302 General and            5,326      3,253      3,146      15,287      12,083 administrative Depreciation and       11,838     3,099      4,130      23,165      12,131 amortization Less:                                                            Earnings from equity   7,140      —          3,527      17,571      — method investment Unrealized gain (loss) (785)      (1,628)    464        974         (1,196) on derivatives, net Adjusted gross margin  $35,574  $19,239  $23,817  $101,793  $74,647                                                                 Reconciliation of net income to Adjusted                                               EBITDA: Net income             $7,466   $4,601   $9,411   $38,005   $23,954 Add:                                                             Interest expense       1,979      505        1,873      8,100       1,912 Depreciation and       11,838     3,099      4,130      23,165      12,131 amortization Distributions from equity method          5,861      —          4,078      16,999      — investment Non-cash equity        228        90         223        806         308 compensation Gain on disposal of    (31)       (57)       —          (31)        (1) long-lived assets, net Less:                                                            Earnings from equity   7,140      —          3,527      17,571      — method investment Impact from derivative                                           instruments: Total gain (loss) on   837        491        (1,653)    (1,593)     149 derivatives, net Total realized (gain) loss (cash flow) on    (1,622)    (2,119)    2,117      2,567       (1,345) derivatives, net Non-cash unrealized gain (loss) on         (785)      (1,628)    464        974         (1,196) derivatives, net Adjusted EBITDA        $20,986  $9,866   $15,724  $68,499   $39,500                                                                 Reconciliation of net cash provided by (used in) operating                                                    activities to Adjusted EBITDA: Net cash provided by (used in) operating    $50,360  $(428)    $(1,194)  $72,475   $35,097 activities Less:                                                            Changes in operating assets and             30,466     (9,887)    (14,726)   11,265      (2,850) liabilities, net Add:                                                             Interest expense, excluding amortization 1,799      407        1,641      7,289       1,553 of debt issuance costs Distributions in excess of equity in    (707)      —          551        —           — earnings of affiliates Adjusted EBITDA        $20,986  $9,866   $15,724  $68,499   $39,500                                                                 Reconciliation of net income to                                                        distributable cash flow: Net income             $7,466   $4,601   $9,411   $38,005   $23,954 Add:                                                             Interest expense       1,979      505        1,873      8,100       1,912 Depreciation and       11,838     3,099      4,130      23,165      12,131 amortization EBITDA                 21,283     8,205      15,414     69,270      37,997 Add:                                                             Gain on disposal of    (31)       (57)       —          (31)        (1) long-lived assets, net Distribution from equity method          5,861      —          4,078      16,999      — investment Non-cash equity        228        90         223        806         308 compensation Less:                                                            Earnings from equity   7,140      —          3,527      17,571      — method investment Unrealized gain (loss) (785)      (1,628)    464        974         (1,196) on derivatives, net Adjusted EBITDA        $20,986  $9,866   $15,724  $68,499   $39,500 Less:                                                            Cash interest expense  1,865      406        1,641      7,355       1,551 Maintenance capital    1,174      1,633      1,057      4,813       4,239 expenditures Distributable cash     $17,947  $7,827   $13,026  $56,331   $33,710 flow                                                                 Distribution declared  $12,841  $8,331   $11,624  $42,586   $27,979                        ^(1)                                                                 Distribution coverage  1.40 x     0.94 x     1.12 x     1.32 x      1.20 x ratio                                                                 (1) The distribution declared January 23, 2014 represents $0.465 per unit, or $1.86 per unit on an annualized basis. This is a 3.3% increase over the prior quarter.    2014 RRMS Adjusted EBITDA Guidance Reconciliation                                                                  (millions, unaudited)                                                     Low          High Net income                                           $64        $67 Add: Interest expense                                13           15 Add: Depreciation and amortization                   22           22 EBITDA                                               $99        $104 Non-Cash Adjustments and Other Adjustments           (7)         (7) Adjusted EBITDA                                      $92        $97                                                                                                                                   Non-Cash and Other Adjustments                                    Earnings from equity method investment               $(44)       $(48) Distributions from equity method investment^(1)      36           40 Non-cash equity compensation                         1            1 Non-Cash and Other Adjustments                       $(7)        $(7)                                                                  (1) Distributions from equity method investment includes only the cash distributions from White Cliffs attributable to Rose Rock and excludes the distributions attributable to noncontrolling interest from Adjusted EBITDA.  CONTACT: Investor Relations:          Alisa Perkins          918-524-8081          roserockir@rrmidstream.com                   Media:          Kiley Roberson          918-524-8594          kroberson@rrmidstream.com  Rose Rock Midstream logo