Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Rose Rock Midstream (NYSE:RRMS)

Q2 2013 Earnings Conference Call

August 9, 2013 11:00 AM ET

Executives

Alisa Perkins – Investor Relations

Norman J. Szydlowski – President and Chief Executive Officer

Robert N. Fitzgerald – Senior Vice President and Chief Financial Officer

Analysts

Brian Zarahn – Barclays Capital

Curt Launer – Deutsche Bank

Craig Shere – Tuohy Brothers

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Will Frohnhoefer – BTIG

Operator

Good morning, ladies and gentlemen, and welcome to the SemGroup Corporation and Rose Rock Midstream’s Second Quarter 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the call over to Alisa Perkins. Please go ahead.

Alisa Perkins

Thank you for joining us today. The presentation for today’s call is available under the Investor Relations section of our website at semgroupcorp.com or rrmidstream.com.

Before we begin our prepared remarks, I would like to bring your attention to Slides 2 and 3 for certain disclaimers and other cautionary statements, as remarks within our presentation may contain forward-looking statements. Also included in the presentation are various non-GAAP financial measures, such as adjusted gross margin, EBITDA and adjusted EBITDA. Reconciliations to the most directly comparable GAAP financial measures are included in the presentation and can also be found on our website.

With that, I’d like to turn the call over to Norm Szydlowski, our Chief Executive Officer.

Norman Szydlowski

Thanks, Alisa. In addition to Alisa, I’m also joined by Bob Fitzgerald, our Chief Financial Officer. Before we review our second quarter earnings, I’d like to take a few minutes to discuss yesterday’s announcement that I will retire as CEO of SemGroup and Rose Rock once the successor came in.

Let me begin by saying, I’m extremely proud how I am of what we’ve accomplished at SemGroup. I greatly enjoyed working closely with the Board, the management team and all of our extremely talented employees together. We put the Company on a solid financial footing following the restructuring of SemGroup LP. We guided SemGroup to its successful listing on the New York Stock Exchange in 2010. We launched the IPO of our MLP Rose Rock Midstream, a year later. And since then, we’ve grown our businesses and strengthen our position in the Midstream industry.

Today, we have a deep into proven business leaders and both companies are well positioned for continued success. As such, I believe now is the right time to identify new leadership who will continue to grow SemGroup and Rose Rock. The Board has initiated a comprehensive search process with a leading executive recruiting firm to identify my successor, considering both internal and external candidates. During this process, I will continue to serve in my current capacities until a successor is in place, so we have an orderly transition.

I look forward to working closely with the Board while the search process is underway to identify the right person to continue the success that the management team has accomplished. We are fortunate to have a dedicated and experienced management team that I know while make this transition all the more seamless. I’m pleased with the Company’s momentum with the Company’s strength and I’m confident that we will continue to build on our track record of growth success and equity holder value creation.

With that, let’s now take a look at some of our recent developments and updates. At SemGroup, we closed our previously announced acquisition of Chesapeake gas gathering and processing assets in the Mississippi Lime play. The newly acquired plans and gathering systems are supported by a joint venture between Chesapeake Energy and Sinopec, which include a 540,000 net acre dedication in the Mississippi Lime Play and a 20 year 100% fee-based gas gathering and processing agreement. This acquisition positions us as one of the largest processors in the Mississippi Lime and we’re very excited about the future growth in this highly attractive celebrity oil and gas play. We used the proceeds from our June bond issuance to fund the acquisition from Chesapeake. Bob will have more comments on the capital structure later.

In Canada, we continue to see increasing demand for gas gathering and processing as producers developed the Montney and Duvernay Shale plays, we’re expanding our ownership in one of our gathering systems that will enable us to capture additional growth in the Wapiti area which reaches out into Northwestern Alberta in to the Montney Shale development region.

We’re also looking to expand our system into Duvernay Shale both of these growth opportunities which total approximately $38 million will be supported by producer commitments. But due to confidentiality restrictions, we’re limited in the details we can provide.

On August 6, we increased our ownership of NGL Energy Partners GP interest from 6.4% to 11.8%. At Rose Rock, we signed a definitive agreement to acquire Barcas Field Services for $47 million. Barcas owns and operates a crude oil trucking fleet at 114 trucks with operations in key production areas, throughout eight states, it provides additional growth areas in which we currently operate such as the Bakken, the DJ Basin and the Mississippi Lime, but it also provides entering into new areas for us, such as the Eagle Ford, (inaudible), Southern Louisiana and New Mexico.

This acquisition is backed by a long-term take-or-pay customer transportation agreement. Well we won’t be providing specifics today this purchase expands our presence in highly attractive areas with strong producer activity giving us more opportunity to bring volume into our existing crude oil systems like this soon to be completed Glass Mountain Pipeline. This transaction is expected to close by the end of the third quarter of this year 2013.

Our other projects remain on schedule. The Healy de-bottlenecking project came online in mid June and has increased the White Cliffs Pipeline capacity to 76,000 barrels per day. The Wattenberg Oil Trunkline construction is complete, and the line is now being hydro-tested. It will be fully operational in October. Construction continues along the Glass Mountain Pipeline route, the project will finish by year end. The White Cliffs Pipeline expansion is on track to complete by the end of the second quarter of 2014.

Moving to second quarter results, and I’m pleased to say that both companies continued to benefit from the growing demand for midstream services, owing to the favorable North American Mid-Continent Production environment. SemGroup adjusted EBITDA for the second quarter was $43.6 million, up 23% from the first quarter. Our Rose Rock’s adjusted EBITDA was $15.4 million, down slightly from the first quarter due to lower marketing margins.

Our guidance for SemGroup’s full-year earnings remains between $165 million to $175 million of adjusted EBITDA, which does not include any contribution from the Mississippi Lime gas gathering and processing acquisition. For those Rose Rock, we’re maintaining our full-year guidance of between $56 million to $60 million of adjusted EBITDA, excluding the impact of the Barcas acquisition, and we anticipate being at the higher end of this range given its continued strong performance.

The SemGroup Board of Directors declared a quarterly cash dividend to common shareholders of $0.20 per share, resulting in an annualized distribution of $0.80 per share. This represents a 5.3% increase from the initial quarterly dividend of $0.19 The Company is targeting a 10% increase in dividends paid in 2013, and anticipates a double-digit annual dividend growth rate for the next three years.

If you look at Slide 6 and 7 of our earnings presentation, you will see that we continue to find attractive growth projects in both crude oil and natural gas and have more than doubled our planned capital spending for 2013 to $850 million. This amount includes the Mississippi Lime gas gathering and processing acquisition.

Now Bob will review our financial performance.

Robert N. Fitzgerald

Thanks, Norm. Beginning on Slide 8 of our earnings presentation; as noted in our press release yesterday, we reported net income of $3.6 million for the second quarter, significantly below our prior quarter net income due to the absence of $54 million non-cash income tax benefit realized in the first quarter of 2013.

Adjusted EBITDA was $43.6 million for the second quarter, up 23% on a quarter-over-quarter basis and up 44% when compared to last year’s second quarter results. Our adjusted EBITDA for the first half of this year was $79 million, an increase of 35% over the prior year. Although, the Crude segment was down slightly, due to a decrease in our marketing margins, it was more than offset by higher performance in our SemCAMS, SemGas, and SemMaterials Mexico businesses.

Turning specifically to our segment results, the increase in quarterly adjusted EBITDA was due largely from gas segment. SemGas was up $3.8 million nearly doubling its first quarter results, driven by higher processing volumes in the Mississippi Lime Play and non-recurring plant fuel adjustment.

Our Canadian Gas business, SemCAMS was up 65% over the first quarter due to the combination of higher cost recoveries related to the turnaround at our KA Plant and an additional $1.6 million related to higher capital fees and from new well connects and low G&A costs. SemMexico reported a significant increase of over $3 million in adjusted EBITDA due to increased sales of higher margins specialty products.

Moving on to the performance of our other business units, our Crude segment was down $1.3 million due to lower marketing margins, compared to the unusually strong first quarter. However, for the first half of 2013, our marketing margin is on track with our expectations and we believe those averages will continue for the remainder of the year.

White Cliffs Pipeline net EBITDA was up slightly on flat volumes. Volumes originating at our Platteville, terminal dropped by 2,300 barrels per day due to operational issues suffered by our key producers. The volume reduction of Platteville was offset by a corresponding increase in volumes at our Healy Kansas injection point. Lastly, SemLogistics continue to operate near break-even due to the ongoing degradation in crude and refined products in Europe.

Next moving to our capitalization and liquidity position on Slide 10; we ended the quarter with total consolidated debt of $471 million, an increase of $290 million from the first quarter reflecting the $300 million bond issuance in June. The bonds have a coupon rate of 7.5% and mature in June 2021.

SemGroup’s debt-to-capitalization ratio is 30% and a net debt-to-adjusted EBITDA leverage ratio of 1.1 times. We ended the quarter with total liquidity of $976 million. Since the quarter closed, we used just over $300 million of our liquidity to fund the Chesapeake Mississippi Lime asset acquisition.

Moving next to Rose Rock’s results on Slide 11; we reported adjusted EBITDA of $15.4 million, down slightly from the first quarter due to a $2.2 million decline in marketing margins that I previously mentioned. This was somewhat offset by receiving a full quarter of cash distributions from White Cliffs Pipeline compared to the two months received during the prior quarter.

Turning to Rose Rock’s distribution for LP unit, we previously announced our sixth consecutive quarterly increase in the distribution for limited partner unit to $0.44 per unit or $1.76 per unit on an annualized basis. The second quarter distribution represents a 2.3% increase over the prior quarter’s distribution and a 15% increase over the second quarter of 2012. Our 2013 guidance for distribution growth is 15% on a year-over-year basis.

As outlined and detailed in the appendix of our earnings presentation, Rose Rock’s distributable cash flow for the quarter was $12.6 million. Our distribution of $9 million declared on July 25 represents the coverage ratio of 1.4 times for the quarter.

Rose Rock spent $31 million in capital during the first half of the year and we are on target to spend over $100 million for 2013. Included in our latest guidance is the $47 million Barcas Field Services acquisition that we announced last week.

Rose Rock’s capitalization and liquidity position is presented on Slide 14. As previously announced, Rose Rock increased its revolving credit facility to $385 million during the first quarter in conjunction with the White Cliffs Pipeline acquisition.

Borrowings for the acquisition and ongoing organic growth projects resulted in total debt of $167 million and a net debt-to-adjusted EBITDA leverage ratio of 3.2 times as of June 30. We are targeting a leverage ratio of 3.5 to 4.0 times. Rose Rock ended the quarter with $185 million of total liquidity.

I’ll now turn the call back over to Norm for some final comments.

Norman J. Szydlowski

Thanks Bob. Our strategic plan continues on target with the 2013 goals we’ve given in the last quarter conference calls. We closed on our first acquisition of SemGroup and recently announced the proposed acquisition of Rose Rock. We continue to grow organically throughout our North American footprint.

We’ve increased the SemGroup dividend and the Rose Rock distribution. Excellent safety and environmental performance are always on top of our list and we remain focused on our long-term objective of transitioning SemGroup to a GP Holdco.

Thank you, and before we turn the call over to Allie for questions, I would like to remind everyone that the purpose of today’s call is to discuss our second quarter results. Thank you in advance for limiting your questions to this topic and we’ll now open the call for questions. Allie?

Question-and-Answer Session

Operator

(Operator Instructions) Our first question comes from Brian Zarahn of Barclays. Please go ahead.

Brian Zarahn – Barclays Capital

Good morning.

Norman J. Szydlowski

Good morning, Brian.

Brian Zarahn – Barclays Capital

As we get closer to the inservice dates for Wattenberg and Glass Mountain, can you give us maybe an update and your expectations of dropdowns?

Norman J. Szydlowski

As far as dropdowns Brian, we’re still looking at those carefully. I think the Wattenberg Oil Trunkline is probably likely to go in earlier. We still have the potential of the rest also of the White Cliffs Pipeline. So as we thought about for sometime now, moving crude oil projects and dropping them down and the Rose Rock is where we’re headed it’s still in our mind a decision to be made, whether we would do Wattenberg Oil Trunkline first or more of the White Cliffs Pipeline, first. And it’s still not unlikely although not yet determined that we can do a drop-down yet in the fourth quarter this year, and if not soon thereafter.

Brian Zarahn – Barclays Capital

Turning to your trucking acquisition can you give us your thoughts on, what type of contribution you’re expecting from this asset?

Norman J. Szydlowski

It’s a little early Brian to say that, we haven’t closed on it as of yet. So we’ll give you those details here shortly when we do get that close but at this point we’re not including in any of the guidance, any contribution from that for yet this year.

Brian Zarahn – Barclays Capital

And then perhaps if you could give some color on the contract does it cover all the truck, all the fleet or and then maybe is generally what is the life of the contract?

Robert N. Fitzgerald

Hey, Brian. This is Bob, the contract has approximately a year and a half remaining once we close and it is primarily contracted most of the trucks that we contracted in terms of the volume commitments that we have for moving is fee based of course as we talked earlier.

Brian Zarahn – Barclays Capital

Okay. And I guess finally from me on for Rose Rock EBITDA guidance your second quarter run rate is around $62 million, which will be a little bit above your range and you will have the White Cliffs de-bottlenecking project as what is some of the puts and takes for still maintaining guidance was like going to be maybe a little bit above…

Robert N. Fitzgerald

The key thing Brian as we look there was our colleagues at Anadarko and Noble and of course as we listen to their earnings calls and have talked with them. The challenges that they’ve had recent vintage both the over pressurization of gas with the legacy verticals for Anadarko, whether struggles late in the first quarter for Noble have got some disconnections from there and they are as they’ve said very bullish on getting back on track. And we’ll be ready if they do and we’re just watching that carefully.

I don’t think it is a matter of – yes it’s just a matter of how quickly they can get things back up to their initial plan. So that’s really the key consideration. The rest of the business as we see is performing very, very well and we have every reason to believe it will continue.

Brian Zarahn – Barclays Capital

Terrific. Norm, I just want to add. You did a terrific and have done a terrific job with SemGroup and Rose Rock and wish you the best of luck.

Norman J. Szydlowski

Thanks so much Brian. You’re very kind.

Operator

Our next question comes from Craig Shere of Tuohy Brothers. Please go ahead.

Craig Shere – Tuohy Brothers

Nice. Can you…

Operator

I’m sorry. (Operator Instructions) Our next question comes from Curt Launer of Deutsche Bank. Please go ahead.

Curt Launer – Deutsche Bank

Good morning and thank you. I want to add my congratulations Norm to you and the whole management team and wish you all the best in the next steps of whatever you’re going to do. Couple of questions, first on the NGL partners increase in interest from 6% or so to 11%. Can you tell us how that was accomplished and then I’ve got another one?

Norman J. Szydlowski

Yes of course and thanks for your good wishes, much appreciated Curt. The GP activity presented itself when one of the current owners. Private equity owners decided to sell and we had an opportunity to acquire that additional amount as a result of that and we are very pleased of course as you know with the performance of NGL and the business and particularly of what we see as a great upside potential as the business continues with the General Partner. So we’ve retained to take advantage of an opportunity and that’s how it came about.

Curt Launer – Deutsche Bank

Have you disclosed the price you paid for that or is that part of the CapEx budget that I’m going to ask the question about next?

Robert N. Fitzgerald

Hey, Curt, this is Bob. It is part of our capital budget, its part of what we’re reporting under the other growth projects and because it’s the private transaction though we will be not disclosing that amount.

Curt Launer – Deutsche Bank

Okay, thank you. So to move more fully to the CapEx budget, I think I missed it and made a mistake in the first analysis. You’re now saying $850 million will be spent in 2013 and $300 million to $400 million will be spent in 2014. Did I ask you to run us through the expectations relative to capital in the Mississippi Lime deal, because if I recall from the original discussions that deal had near-term CapEx, but also longer-term CapEx into 16 for the second plan?

Robert N. Fitzgerald

Hey, Curt, this is Bob. As we’ve outlined on Slide 4 of the deck, we’ve broken out the CapEx according to different components, beginning with the purchase price, of course we had the $300 million purchase price. We then aligned what the plant capital will be over the next two years 2013 through 2014 and we expect to spend $75 million during that timeframe on the plant.

You might recall, that we had announced that we would totally – we will spend a total of $125 million for the plant and that’s related to the additional capital to be spent on the second plant in 2015 and 2016. So that will be the difference there. And then if you look at gathering, we put out $95 million through the end of 2014 to build out the gathering system including compression and metering, so that will be total gathering investment that we are currently estimating.

Curt Launer – Deutsche Bank

Okay so last question and relative to the slide that shows a 9 to 10 times EBITDA on all of this related to the Mississippi Lime area is that meant to be a what is the right word fully distributed kind of multiple half of the full expenses in EBITDA you’re expecting that out year?

Robert N. Fitzgerald

Yeah I think the way to look at that Curt is and my apologies I think I confused talking about that on the call last time on and what we expected, here is the way to look at that, that has got a lot of upfront investment as you have pointed out, the second plant which comes online the first quarter of 2016 according to the current plan if you look at all that and look at the second plant also up and running.

Look at the economics the multiple at that 9 to 10 range for the whole activity, the whole investment. Now I think it’s important to point out to that is the base economic there is some upside, The upside is if we turn at third party volumes, there are no third party volumes in those numbers, so far and I think it’s quite likely we will do that, we don’t how much but that’s good upside and there is going to be upside from interconnecting all these plants as we talked about in the past that our existing gathering and processing network.

And we haven’t included any of the upside of looking at this whole as one very large gathering and processing system. And lastly there is of course this adds to the overall drop down inventory for SemGroup into Rose Rock and we’ll capture the values associated with that part as well.

Curt Launer – Deutsche Bank

Okay. Thank you very much.

Robert N. Fitzgerald

You’re welcome Curt.

Operator

Our next question comes from Craig Shere, Tuohy Brothers. Please go ahead.

Craig Shere – Tuohy Brothers

Good morning, guys and congratulations Norm.

Norman J. Szydlowski

Yes, thank you, Craig.

Craig Shere – Tuohy Brothers

Couple of quick questions; do we ever go over the cost and expected returns over time from the debottlenecking at White Cliffs?

Robert N. Fitzgerald

Hey, Craig, this is Bob. We talked a little bit about that before. The cost was actually fairly de minimis in total and that project is actually split between Rose Rock and Midstream. So the CapEx is going to be divided between those two. But in total it was just going to be a couple of million dollars. Going forward, we expect to have or actually now have the additional capacity available towards the 76,000 barrels and it’s subject to the volume throughput that Norm had talked about earlier.

Craig Shere – Tuohy Brothers

Understood and from an acquisition standpoint was the – given the fact you have a number of years drop down opportunities was the trucking opportunities, that you did at Rose Rock just kind of a one-off opportunistic thing or do you think that it will be more third-party deals that might soak up capital at Rose Rock and potentially stretch out a little bit the drop down timetable?

Norman J. Szydlowski

I think Craig will have more opportunities to do acquisitions not unlike that that’s a pretty good size for us at Rose Rock. And it was quite just speaking specifically to what we liked about Barcas is, it is a great addition to the rest of the system. So we like the opportunities that is offered and afforded us to improve things like the Glass Mountain Pipeline and other systems. So it was a great match up, not only just looking at the business for what it does in terms of potential cash flow to us. But also what it likely and what we are expecting it to bring to the rest of the gathering and processing for crude oil.

Craig Shere – Tuohy Brothers

Understood. I just between acquiring more or so want to see firm like what Chesapeake Mississippi Lime deal and some smaller deals as they’ve been growing over time at Rose Rock. The timetable or finishing dropdowns becoming a pure-play GP kind of gets pushed out a little bit. Does that make sense and is there a point at which you would like to be a pure-play or if you could just keep a virtuous cycle going, that’s fine with you?

Norman J. Szydlowski

Well, we do like virtue. But I think the reality as you positioned there Craig is, it depends on the size and the capacity of Rose Rock to pick on acquisitions. So the other moving part in the overall equation and trying to answer that when will you become a pure-play GP Holdco at SemGroup.

It’s also going to be affected by a growing size of Rose Rock, which also grows its capacity to do larger and larger acquisitions accretively on its own. So it’s a little washing and trying to pick that ultimate end date because it is dependent on the size and other opportunities that we’ll have along the journey so to speak to get there. But as we get bigger in Rose Rock, we’ll do more and more there and get closer and closer to SemGroup as the holding company.

Craig Shere – Tuohy Brothers

Understood. Thanks a lot.

Norman J. Szydlowski

You’re most welcome.

Operator

Our next question comes from Bradley Olsen of Tudor Pickering. Please go ahead.

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Good morning everyone.

Norman J. Szydlowski

Good morning, Brad.

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Norm, I was certainly sad to see you go, given the outstanding performance of SemGroup during your tenure, and best of luck to you in all your future endeavors.

Norman J. Szydlowski

Thank you. Thank you so much.

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Yeah, absolutely. As far as CapEx, the CapEx detail that you provided in your presentation, you’ve historically whether it would be organic or otherwise provided pretty detailed economics around most of your projects. Is there any reason that given the geographics or given the take-or-pay contract on the Barcas acquisition that you’re not providing economics or more geographic details around those assets today?

Robert N. Fitzgerald

Hey, Brad, this is Bob. I’ll take that question. No, I think it’s really kind of driven by the fact that we haven’t closed the transaction yet. So we’re preferred to do is to wait before give any additional information until we get through closing. And then we’ll going to provide a little more color in terms of the project and the expectations around the financial performance of the investment.

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Okay, great. And is that an asset that you think giving your existing kind of steel in the ground that you have in a lot of these active oil and liquids plays. Is that an asset that you think you’ll be able to grow once you closed on that deal and add assets to that footprint?

Norman J. Szydlowski

I think the way we look at that is to see the trucking as an entree into more steel in the ground. In other words, trucking opens up more and more opportunities for us to do more gathering systems to do activities in more areas that perhaps we are in today. So it much more our thesis Brad is an adjunct to the existing assets in a way to keep following.

There’s been a lot of discussion these days about trucking and is it there too many trucks in one area or another. But we see it very clearly as an opportunity to keep following the drill rig and to keep close to more and more steel in the ground opportunities for us.

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Okay, great. And as far as similar question around the Montney and Duvernay pipeline purchase, it sounded like that was an increased interest in an asset that maybe you already had some ownership in. Is the reason there is no multiple around that acquisition similar just that it hasn’t closed yet?

Norman J. Szydlowski

Well, that one it’s probably little bit more complicated. But you’re correcting that; part of that investment would be an increase in ownership of an existing part of the system, as well as the potential step out. But beyond that we are somewhat restricted by the agreements that we’re developing with the producers. So when we get through the final analysis in contracting, we’ll look and see what we can provide. We would endeavor to provide as much color on those as we can under the restriction that we might have with the producers.

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Okay, great. And moving to SemCrude, obviously being kind of cushing centric company the moves that we’ve seen in WTI have been significant and I guess on one hand it would seem that the WTI price rally that we’ve seen would be a positive for White Cliffs.

And my first question would be have you seen an increased interest in long-term contracting on White Cliffs as a result of WTI finding its footing again? And my second question would be you mentioned that your SemCrude marketing margins, you expected them to stay relatively stable. Now as far as when you kind of enter into back to back transactions in that business, is that not impacted by the move from Contango to degradation that we’ve seen and if not or why not?

Robert N. Fitzgerald

This is Bob again, Brad. To answer the latter part of that question first, with regard to the marketing margins, we generally are entering those contracts off of an index price. So the absolute price is necessarily driving it. What we do is lock it in as you say on a back-to-back basis.

And then what we’ve seen is the volatility in terms of our earnings will be generated through the change to the crude price curve, because all of our acquisitions, all of our purchases run through our costing inventory process which is on a weighted average basis. So we tend to follow the increase or decrease in price, which is what happened to us in the second quarter. We expect that to – we expect we will capture those margins fairly consistently through the rest of this year.

On the first part, the White Cliffs Pipeline, we continue to primarily focus on our two key shippers and you’re seeing some of their information out in their earnings presentations over the last couple of weeks. They continue to drew up the storm and have high expectation; so a lot of the demand that Platteville is going to continue to come from those key shippers.

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Okay, great. I understand if you can’t answer this. But my final question would be to Norm. And will you be playing a role in selecting your successor?

Norman J. Szydlowski

Yeah, the Board has asked me to participate and I feel very proud about being able to do that and I think it’s also a testimony to the whole organization and the strategy that we’ve been trying to execute on and a reinforcement that the Board is solidly behind the direction, very pleased with the progress and we will get a good replacement.

Bradley Olsen – Tudor, Pickering, Holt & Co. Securities, Inc.

Okay, great. Well, I think that’s good news for all stakeholders in SemGroup. So thanks for answering my questions.

Norman J. Szydlowski

You’re welcome Brad.

Operator

Our next question comes from Will Frohnhoefer of BTIG. Please go ahead.

Will Frohnhoefer – BTIG

Hi, guys. This is Will Frohnhoefer. How are you doing?

Norman J. Szydlowski

Hello, Will.

Will Frohnhoefer – BTIG

So I was distracted briefly as soon as I just ask first to make sure on that reduplicating. Do we go over the CapEx program for the Mississippi Lime gas gathering acquisition and I think the original number has been 425 and now we’re seeing the combined 2013 cost in CapEx, but 2014 CapEx presents about 470. Was that touched on already or…?

Robert N. Fitzgerald

Yes, Will, this is Bob. We did talk about that a little bit and referenced the additional disclosures that we put on Slide 4 of the earnings presentation…

Will Frohnhoefer – BTIG

Yeah.

Robert N. Fitzgerald

When we broke out some of those components; the point I’ll make for you here is just on the plant side. We’re still anticipating spending $125 million to complete the plant overall, but $75 million of that $125 million will be spent between now and the end of 2014.

Will Frohnhoefer – BTIG

Okay, I got that. Okay, I’m not going to waste any more time. I’ll go back and then check with the comments. So thank you for that. And then also the other point that I wanted to ask you about was the increase on the GP ownership of NGL. How is that funded and then kind of what’s the strategic thinking there?

Norman J. Szydlowski

Well, I can speak well to the strategic thinking. It was an opportunity that surface and we really like NGL, the businesses grow its performance and having an opportunity to increase our ownership in the GP. We felt very fortunate to have. It is of course that GP is a private entity.

So we’re not in a position to disclose the price point or the value of the GP or anything of that nature. But we did feel it was superb opportunity to increase an investment and something that was going to grow significantly over time. So Bob, you might want to take that, how do we funded question?

Robert N. Fitzgerald

Sure, we just funded in the cash flows, we have available at SemGroup. It is an investment held at SemGroup and we’ll also point out that we’ve included in our CapEx in terms of the details on Slide 7 under the other undesignated. So we do account for it in terms of our capital spend for this year.

Will Frohnhoefer – BTIG

Okay. And I was just wondering if it involve say for example a swap of combination for GP in similar but apparently it was a little bit more (inaudible) on that?

Norman J. Szydlowski

That was a trade up purchase.

Will Frohnhoefer – BTIG

Okay. That’s good. And then I think those are the key questions that I had. So I guess I’ll pass it back, but Norm it’s been a pleasure.

Norman J. Szydlowski

It’s also mine. Thank you very much.

Operator

And no further questions at this time. I would like to turn the conference back over to Norm Szydlowski for any closing remarks.

Norman J. Szydlowski

Thanks Allie. And thanks everyone for your very kind comments. I sincerely appreciate that it’s been my pleasure to work with all of you. And thanks again for participating today and for everyone, your interest in SemGroup and Rose Rock. We remain with a clear idea of how we’re going to use our assets and capabilities to maximize value for shareholders and we continue to make very good progress. Thank you again.

Operator

Ladies and gentlemen, this does conclude today’s conference. You may all disconnect and have a wonderful day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Rose Rock Midstream's CEO Discusses Q2 2013 Results - Earnings Call Transcript
This Transcript
All Transcripts