Rose Rock Midstream, L.P. Reports First Quarter 2014 Results

Rose Rock Midstream, L.P. Reports First Quarter 2014 Results        First Quarter Adjusted EBITDA Increased 32% Over Previous Quarter  TULSA, Okla., May 8, 2014 (GLOBE NEWSWIRE) -- Rose Rock Midstream^®, L.P. (NYSE:RRMS) today announced its financial results for the three months ended March 31, 2014.  Rose Rock Midstream reported first quarter 2014 Adjusted EBITDA of $27.8 million, compared to $21.0 million for the fourth quarter 2013 and $16.4 million for the first quarter 2013, an increase of approximately 32% and 70%, respectively.  "Rose Rock posted an exceptional first quarter, largely reflecting growth from our acquisitions during 2013," said Carlin Conner, chief executive officer of Rose Rock Midstream's general partner. "I am very pleased with our progress thus far and look forward to working with the team as we continue to focus on organic growth projects and growth-oriented acquisitions."  Adjusted gross margin was $37.0 million for the first quarter 2014, up 4% from the fourth quarter 2013 of $35.6 million and 66% above first quarter 2013 Adjusted gross margin of $22.3 million. Adjusted gross margin and Adjusted EBITDA, which are non-GAAP measures, are reconciled to their most directly comparable GAAP measures below.  First quarter 2014 net income totaled $16.2 million, compared to $7.5 million for the fourth quarter 2013 and $12.0 million for the first quarter 2013.  Rose Rock Midstream's distributable cash flow for the three months ended March 31, 2014 was $24.9 million. On April 24, 2014, Rose Rock Midstream increased the partnership's quarterly cash distribution to $0.495 per unit from $0.465 per unit, effective for the first quarter 2014, resulting in an annualized distribution of $1.98 per unit. This is a 6.5% increase over the fourth quarter 2013 and marks the ninth consecutive increase in the quarterly cash distribution to RRMS limited partner unitholders. The distribution will be paid on May 15, 2014 to all unitholders of record on May 5, 2014. Distributable cash flow, which is a non-GAAP measure, is reconciled to its most directly comparable GAAP measure below.  First Quarter 2014 Highlights  Compared to the Fourth Quarter 2013    *$1.4 million increase in Adjusted gross margin primarily related to higher     pipeline and trucking volumes   *$2.1 million decrease in operating and G&A expenses   *$3.2 million increase in cash distributions attributable to our two-thirds     interest in White Cliffs Pipeline  2014 Guidance  Rose Rock Midstream reaffirms 2014 Adjusted EBITDA of $92 million to $97 million, an increase of approximately 40% over 2013 results of $68.5 million. The partnership is on target 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, May 9, 2014, 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 27070053. 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 2014 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; 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)                                                                                                                 March 31, December 31,                                                    2014      2013 ASSETS                                                        Current assets                                      $ 349,640 $ 321,587 Property, plant and equipment, net                  308,270   311,616 Equity method investment                            234,742   224,095 Other noncurrent assets, net                        38,737    39,949 Total assets                                        $ 931,389 $ 897,247                                                              LIABILITIES AND EQUITY                                        Current liabilities                                 $ 326,835 $ 293,031 Long-term debt                                      244,578   245,088 Total liabilities                                   571,413   538,119                                                              Total Rose Rock Midstream, L.P. partners' capital   280,450   280,571 Noncontrolling interests in consolidated subsidiary 79,526    78,557 Total equity                                        359,976   359,128 Total liabilities and equity                        $ 931,389 $ 897,247                                                                Condensed Consolidated Statements of Income (in thousands, except per unit data, unaudited)                                                                                                             Three Months Ended                                            March 31,             December 31,                                            2014       2013       2013 Revenues, including revenues from                                affiliates: Product                                     $266,290 $158,728 $228,434 Service                                     24,633     12,504     23,607 Total revenues                              290,923    171,232    252,041 Expenses, including expenses from                                affiliates: Costs of products sold, exclusive of        254,537    148,451    217,252 depreciation and amortization Operating                                   14,878     5,418      15,322 General and administrative                  3,623      3,561      5,326 Depreciation and amortization               10,534     3,507      11,838 Total expenses                              283,572    160,937    249,738 Earnings from equity method investment      11,080     3,453      7,140 Operating income                            18,431     13,748     9,443 Other expenses:                                                  Interest expense                            2,272      1,754      1,979 Other expense (income)                      —          —          (2) Total other expenses, net                   2,272      1,754      1,977 Net income                                  16,159     11,994     7,466 Less: net income attributable to            3,676      —          1,256 noncontrolling interests Net income attributable to Rose Rock        $12,483  $11,994  $6,210 Midstream, L.P. Net income allocated to general partner     $738     $281     $368 Net income allocated to common unitholders  $8,114   $6,767   $4,379 Net income allocated to subordinated        $3,750   $4,773   $2,023 unitholders Net income (loss) allocated to Class A      $(119)   $173     $(560) unitholders Earnings (loss) per limited partner unit:                        Common unit (basic)                         $0.45    $0.59    $0.26 Common unit (diluted)                       $0.45    $0.59    $0.26 Subordinated unit (basic and diluted)       $0.45    $0.57    $0.24 Class A unit (basic and diluted)            $(0.05)  $0.16    $(0.38) Basic weighted average number of limited                         partner units outstanding: Common units                                18,149     11,465     16,890 Subordinated units                          8,390      8,390      8,390 Class A units                               2,500      1,097      1,454 Diluted weighted average number of limited                       partner units outstanding: Common units                                18,198     11,491     16,934 Subordinated units                          8,390      8,390      8,390 Class A units                               2,500      1,097      1,454                                                                                                                                  Non-GAAP Reconciliations                                                                                                         (in thousands, unaudited)                     Three Months Ended                                              March 31,           December 31,                                              2014      2013      2013 Reconciliation of operating income to                            Adjusted gross margin: Operating income                              $18,431 $13,748 $9,443 Add:                                                             Operating expense                             14,878    5,418     15,322 General and administrative                    3,623     3,561     5,326 Depreciation and amortization                 10,534    3,507     11,838 Less:                                                            Earnings from equity method investment        11,080   3,453     7,140 Non-cash unrealized gain (loss) on            (606)     468       (785) derivatives, net Adjusted gross margin                         $36,992 $22,313 $35,574                                                                 Reconciliation of net income to Adjusted                         EBITDA: Net income                                    $16,159 $11,994 $7,466 Add:                                                             Interest expense                              2,272     1,754     1,979 Depreciation and amortization                 10,534    3,507     11,838 Cash distributions from equity method         13,585    2,892     5,861 investment Non-cash equity compensation                  260       143       228 Gain on disposal of long-lived assets, net    (34)      —         (31) Less:                                                            Earnings from equity method investment        11,080    3,453     7,140 White Cliffs cash distributions attributable  4,528     —         — to noncontrolling interests Impact from derivative instruments:                              Total gain (loss) on derivatives, net         (807)     (544)   837 Total realized (gain) loss (cash flow) on     201       1,012     (1,622) derivatives, net Non-cash unrealized gain (loss) on            (606)     468       (785) derivatives, net Adjusted EBITDA                               $27,774 $16,369 $20,986                                                                 Reconciliation of net cash provided by                           operating activities to Adjusted EBITDA: Net cash provided by operating activities     $18,388 $9,915  $50,360 Less:                                                            Changes in operating assets and liabilities,  (9,397)   (4,898)   30,466 net White Cliffs cash distributions attributable  4,528     —         — to noncontrolling interests Add:                                                             Interest expense, excluding amortization of   2,012     1,556     1,799 debt issuance costs Distributions in excess of equity in earnings 2,505     —         (707) of affiliates Adjusted EBITDA                               $27,774 $16,369 $20,986                                                                                                                                Non-GAAP Reconciliations (Continued)                                                                                           (in thousands, unaudited)                 Three Months Ended                                          March 31,               December 31,                                          2014         2013      2013 Reconciliation of net income to                                 distributable cash flow: Net income                                $ 16,159     $ 11,994  $ 7,466 Add:                                                            Interest expense                          2,272        1,754     1,979 Depreciation and amortization             10,534       3,507     11,838 EBITDA                                    28,965       17,255    21,283 Add:                                                            Gain on disposal of long-lived assets,    (34)         —         (31) net Cash distributions from equity method     13,585       2,892     5,861 investment Non-cash equity compensation              260          143       228 Less:                                                           Earnings from equity method investment    11,080       3,453     7,140 White Cliffs cash distributions           4,528        —         — attributable to noncontrolling interests Non-cash unrealized gain (loss) on        (606)        468       (785) derivatives, net Adjusted EBITDA                           $ 27,774     $ 16,369 $ 20,986 Less:                                                           Cash interest expense                     1,989        1,556     1,865 Maintenance capital expenditures          907          2,071     1,174 Distributable cash flow                   $ 24,878     $ 12,742  $ 17,947                                                                Distribution declared                     $ 13,903 ^(1) $ 8,941   $ 12,841                                                                Distribution coverage ratio               1.79x        1.43x     1.40x  (1) The distribution declared April 24, 2014 represents $0.495 per unit, or $1.98 per unit on an annualized basis. This is a 6.5% 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 interests 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  
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