SemGroup's (SEMG) CEO Carlin Conner on Q2 2016 Results - Earnings Call Transcript

| About: SemGroup Corporation (SEMG)

SemGroup Corporation (NYSE:SEMG)

Q2 2016 Earnings Conference Call

August 05, 2016, 11:00 ET

Executives

Alisa Perkins - VP and Treasurer

Carlin Conner - CEO

Bob Fitzgerald - SVP & CFO

Analysts

Darren Horowitz - Raymond James

Elvira Scotto - RBC Capital Markets

Craig Shere - Tuohy Brothers

Charles Marshall - Capital One

Shneur Gershuni - UBS

Operator

Welcome to the SemGroup Corporation and Rose Rock Midstream Second Quarter 2016 Earnings Conference Call. [Operator Instructions]. As a reminder this call is being recorded. I would now like to turn the conference 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. Before we begin our prepared remarks, I would like to bring your attention to slides two through four of the earnings presentation for certain disclaimers and other cautionary statement, 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, adjusted EBITDA, cash available for dividends and distributable cash flow. Reconciliations to the most directly comparable GAAP financial measure are included in the presentation and can also be found on our website. Hosting the call is Carlin Conner our CEO and Bob Fitzgerald our CFO.

With that let me turn the call over to Carlin.

Carlin Conner

Thank you Alisa and good morning everyone. We're pleased to be here today to provide you with our second quarter update. Yesterday afternoon we announced the second quarter earnings for SemGroup Corporation and Rose Rock Midstream. Before we discuss these results I would like to touch on two major steps we took in the second quarter to enhance execution on our strategic growth plan. First, we announced SemGroup's agreement to acquire the outstanding common units of Rose Rock Midstream. The transaction is progressing as planned and we expect it to close later in the year. This merger is designed to simplify SemGroup's corporate capital structure and deliver several important benefits to shareholders, including an enhanced credit profile, strong dividend growth and coverage beyond 2016.

In addition, a lower cost of capital will aid us in our efforts to achieve our growth targets. Secondly, we completed our first SemGroup equity offering, to further strengthen our balance sheet. The offering was well received and resulted in the issuance of 8.6 million shares of SemGroup common stock, generating over $228 million of net cash proceeds. Our strong balance sheet and the proactive measures we have taken to raise funds positions us to pursue sizable organic growth, around our existing footprints, beyond this year, while being extremely diligent and opportunistic on the M&A front.

We're pleased to announce that we have received our key construction permits for Maurepas Pipeline. Although the delivery of these permits took longer than anticipated, achieving this significant milestone greatly reduces further schedule risks. We're working with our customer and our contractors to finalize the construction schedule now that we have the key permits in hand. Although that full review and schedule update is not finalized, we do believe that the commissioning of the pipeline will now fall into the early part of 2017. This $500 million project, backed by multi- decade take or pay commitments from an investment grade counterparty will provide SemGroup with significant growth of secure cash flow, while also positioning us on the Gulf coast.

Additional commercialization of excess capacity continues to be ongoing and we remain very optimistic that an extension of the crude pipeline to other refineries will be executed. So clearly, much is in the works as we pushed through the current headwinds affecting our industry. Our decision to prepare and manage for a lower for longer environment underscores the long term value proposition we have created for our shareholders. We pledge to keep on this path of effective, diligent and opportunistic execution, during a sustained down cycle.

With that let's turn to our second quarter results. First, looking at slide five, the performance of both companies reflected anticipated and forecasted declines in several operating areas. On a consolidated basis, SemGroup reported nearly $68 million of adjusted EBITDA, down 15% compared with the first quarter. Rose Rock recorded approximately $45 million in adjusted EBITDA, down 8% over the prior quarter.

Bob will provide more details on our quarterly results, by segment, in just a few moments. Also on slide five, you will notice that we're reaffirming SemGroup adjusted EBITDA guidance of $270 million to $320 million. However as indicated on our first quarter earnings call, we continue to anticipate being below midpoint of our guidance. This is due in part to the sale of our remaining common units of NGL which has removed approximately $15 million of anticipated distributions from our adjusted EBITDA forecast. SemGroup's announced second quarter dividend of $0.45 per share reflects a 7% increase over the second quarter 2015.

We expect to maintain our current dividend until the closing of the Rose Rock merger transaction. Rose Rock previously announced its second quarter distribution of $0.66 per unit, a 1.5% increase over the same period last year. We expect to maintain our current Rose Rock distribution until the closing of the merger.

Moving to slide six. Despite the low commodity price environment, we're still confident in and committed to our key growth projects. For 2016, we expect total capital expenditures of $455 million for SemGroup, with $400 million committed to growth CapEx and the remaining $55 million for maintenance capital. As we have mentioned before, our maintenance capital is higher this year, primarily due to our SemLogistics tank refurbishment program.

We anticipate future maintenance spending to return to historical levels of $30 million to $40 million per year. And lastly, as previously discussed, we're considering potential sale of our Mexican asphalt business. We're still having discussions with potential interested parties and do not have any further details to share with you at this point. Now I would like to turn the call over to Bob, who will discuss our financial results in more detail.

Bob Fitzgerald

Thanks Carlin. For the second quarter, SemGroup reported net income of $8 million. This compares with a net loss in the first quarter 2016 of $15.3 million, included in this quarter's net income is a $9.1 million gain in the sale of NGL units and a $1.7 million impairment, related to a section of our Kansas crude oil pipeline. For Rose Rock, second quarter 2016 net income totaled $9.9 million compared with $26.5 million in the first quarter 2016.

On slide eight turning to second quarter adjusted EBITDA results, SemGroup posted consolidated results of $67.6 million, down from the prior quarter, due primarily to the loss of NGL distributions, lower crude transportation volumes and an unplanned outage at one of our SemCAMS facilities. Affective this quarter, we're combining our SemStream statement, into our corporate and other statement, due to the divestment of our NGL common units in April.

he combined corporate and other segment, for the first quarter, has been recast to include $4.9 million of cash distributions received from our NGL equity position, held at that time. The crude transportation segment is down quarter over quarter. I will provide more detail when I discuss Rose Rock midstream in a few moments.

Looking at SemGas, adjusted EBITDA was flat with the prior quarter, as lower volumes were offset by higher price realization, as well as a few other miscellaneous items. SemCAMS adjusted EBITDA was down $1 million, on a quarter over quarter basis due primarily to lower volumes related to an unplanned shutdown, at our K-3 plant during June. The four week outage negatively impacted earnings, by approximately $2 million which was somewhat offset by higher overhead recoveries.

SemMaterials Mexico adjusted EBITDA was flat with the prior quarter, as higher volumes were offset by lower margins per ton and slightly higher operating expense. Our Rose Rock midstream crude oil business reported first quarter adjusted EBITDA of $45 million, down 8% over the prior quarter, due largely to lower transportation volumes. The crude transportation segment reported lower earnings, driven by a 12% decrease in White Cliffs pipeline volumes. As discussed on last quarter's call, the first quarter benefited from a temporary shift of producer barrels, from rail to pipeline.

We expect White Cliffs pipeline volumes to decline in the third quarter, as barrels are moved off the system to meet minimum volume commitments on a competitor pipeline. Glass Mountain pipeline volumes were down 11% quarter over quarter, as a result of general market conditions and a temporary shutdown of a pipeline segment feeding into glass mountain. The feeder pipe is down for repairs and not expected to return to service until later in the quarter.

Next on slide 9, moving to our leverage and liquidity position, SemGroup ended the quarter with total debt of $300 million. SemGroup's compliance net debt to adjusted EBITDA leverage ratio is 0.4 times. We exited the quarter with total liquidity of over $720 million which includes the cash proceeds from our recent equity offering. We intend to use our liquidity to fund our growth projects, including Maurepas pipeline. For Rose Rock we ended the quarter with total debt of $791 million. Rose Rock's compliance net debt to adjusted EBITDA leverage ratio is 4.2 times, we finished the quarter with total liquidity of $514 million. I'll now turn the call back over to Carlin for some final comments.

Carlin Conner

Thanks Bob. And as I said in my opening remarks, we continue to push through these expected headwinds thanks largely to the underlying strength of our business model. Looking ahead, we're well positioned with a strong balance sheet, to pursue high return growth projects and strategic acquisitions. We continue to focus on becoming a more diversified midstream company, with our sights set on a more balanced portfolio, that will create long term value for our shareholders.

Organizationally, we made some changes this summer to bring our U.S. teams under one roof to promote efficiencies and our one Sem culture. As anticipated this move is driving more collaboration between our business units and a more efficient operating approach. Earlier this year, we announced that SemGroup Vice President and Rose Rock Midstream Chief Operating Officer Pete Schwiering was retiring. Pete's official last day is, in fact, today. Pete has more than four decades of industry experience and has made immense contributions to SemGroup since joining in 2000.

We wish Pete and his wife all the best in their retirement. As we say goodbye to Pete, it is with great excitement that also effective today, we're welcoming David Minielly to the role of Vice President of Rose Rock. Dave has 25 years of industry experience and is a familiar face who has already made significant contributions to SemGroup. Dave joined the company 2007, as operating manager of White Cliffs pipeline and commenced oversight of operations for our entire crude business in 2010.

I am extremely confident in Dave's ability to lead SemGroup's crude business unit and the talented teams we have supporting that unit. With that, I would like to thank you for your time this morning and I'll turn the call over for questions. Operator?

Question-and-Answer Session

Operator

[Operator Instructions]. And our first question comes from Darren Horowitz with Raymond James. Please go ahead.

Darren Horowitz

Carlin, I want to go back to some comments that you made just from a qualitative perspective, around having more free cash flow to produce or to pursue some sizable growth opportunities. If we think about your midpoint and guidance this year, calling $295 million at Sem and we adjust that for the angel [ph] unit sale, so you call that out about $280 million in round numbers, then as that evolves into next year, you build to maybe $350 million, with the contribution for Maurepas and then of course from that you net out, your annual dividend and interest expense in maintenance CapEx, on a normalized basis.

It should lead Sem with about $100 million, plus or minus of free cash flow, so I am thinking, as you guys consider opportunities for deploying that, how does that look for you? Is it more commercial downstream opportunities at Maurepas? Is it more, maybe on the back end, of what is happening in the Duverney Conasey production and possibly even some dealing with take away capacity? If you could give us an idea that would be helpful.

Carlin Conner

I think you read it right. All of the above. We're really excited about our position in Canada. We believe that opportunities are there and we continue to pursue those opportunities having very good discussions with counter parties in Canada. In addition to that, with the further the commercialization of our Maurepas capacity is a priority and we feel very strongly about our opportunities on that side as well.

Darren Horowitz

Okay. And then just a quick follow-up on White Cliffs. I know you had talked before about the potential for repurposing a portion of those pipes. Maybe you could take a 12 inch pipe and clean product line or even think about segregating crude movements. Has there been any update there or am I still thinking about a conceptually the right way?

Carlin Conner

We still need both pipelines. We're still having lines that far exceed the capacity of one pipeline and we still also believe in the long term production environment in the basin and the need for an enough takeaway to monetize the oil that is being produced. Short term hiccups with the competitors coming online -- we will always evaluate our assets and try to come up with the best business plan for those assets but at this time I would say we're focused on being a very good service provider to Anadarko and Nobel and our other shippers.

Operator

Our next question comes from Elvira Scotto with RBC Capital Markets. Please go ahead.

Elvira Scotto

I just wanted to follow up on a few of the comments that you made. Can you provide a little more detail around Maurepas. It looks like the 2016 CapEx for Maurepas has been changed so when we think about timing of the project coming up in early 2017, are we thinking about January? Or sometime in the first quarter? And then maybe talk about some of the next steps in terms of the construction timeline.

Carlin Conner

I think as we look at the schedule we're having discussions with our customer and our contractors and reviewing the schedule and trying to determine what the in-service date may be now that we have the permits in hand. As you can imagine lots of complexity to this project by getting the permits we have definitely crossed one milestone and we're very happy to have crossed it. We feel much better about the ultimate in-service date. Obviously the construction schedule will also dictate a bit on the capital. At this point in time we have kind of held in what we forecasted and as the schedule is firmed up. there may be some adjustments to the capital spend through back half of '16 into early '17.

Elvira Scotto

So just one clarification, how delayed where the permits? And when we think about timing of construction is it a one for one if the permits were delayed a month the completion would be a month later?

Carlin Conner

Normally if you have a very simple pipeline project that would probably be the case. This project is a little more complex. There are three pipelines. One of the pipelines is a heated pipeline, insulated pipeline so when we think about construction schedule, there are many alternatives to pursue as far as how to install these pipes and we have looked at accelerated schedules what we call accelerated construction schedules and we have also reviewed that and we have decided that those schedules are probably not feasible at this time so it very difficult to track the delay in the permits for one for one I would say that first and foremost I wouldn’t try to do that.

As far as the anticipated delivery of the permits we were several months behind where we felt what was the out of range of the schedule for the permits, normal course of business dealing with the core of engineers I think most of the companies that have dealt with the core of engineers in recent years have hit the same frustration levels but we're very happy to have it behind us now and now we're in the field.

Elvira Scotto

And then just switching gears. When you talk about the potential for some sizable growth projects, can you provide any kind of book ends around the CapEx there? Are we thinking about projects that are similar in size like a Maurepas, a few hundred million? Or smaller type projects? And then how close are you to potentially announcing something?

Elvira Scotto

I think it would be premature to try to book in the investment opportunity we have. Some of our organic investments that we discussed earlier -- I would say that a sizable project like Maurepas, $0.1 billion in one contract signing. Those projects are fairly rare especially for a company our size but we feel very good about the opportunity set around our existing footprint not only in Canada but around our crude footprint in Maurepas. More to come. I think where we sit today we're really excited about the opportunities and we look forward to being able to talk more about as things warm up.

Elvira Scotto

And then the last question for me, can you provide some maybe additional detail around producing discussions in the Mississippi lime it looks like Chesapeake made positive comments about the play yesterday in terms of being low cost and competitive within their portfolio. Any updated thoughts there?

Bob Fitzgerald

As you noted recently Chesapeake has been pretty bullish about what is going on in the Mississippi lime area that during the quarter we did see that they temporarily moved a rig into the play and started doing additional drilling so we're very confident in our ability to maintain our production levels in that -- our volumes coming through the system and around that 280 Northern Oklahoma going into the rest of the year discussions with mid-states continue to be very good as well. So everything -- is business as usual as we previously had guided with them. So right now for our gas businesses it's getting pretty steady for the last quarter.

Operator

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

Craig Shere

As a follow up to Elvira's question around Maurepas, in terms of the timing uncertainty that we could see it bleed into second quarter '17 though it's not uncertain at this time, is that a fair statement?

Carlin Conner

I think as I said earlier we're evaluating the schedule. We do not want to get out ahead of ourselves until we have firmed up discussions with the contractors and customer.

Craig Shere

Okay. Well perhaps you might feel more comfortable talking about potential timing for some of these bolt-on projects that you mentioned in your prepared remarks. Doing as they have to finish Maurepas before you confirm something up to connect it to other refineries?

Craig Shere

No. I think obviously the in-service date of any extension of Maurepas depends on Maurepas being in service but having a commercial contract negotiated with the potential customer we definitely can't do that in the meantime. We feel as I have said all along once Maurepas received is permits and we started construction we felt that the pace of play dealing with other customers would pick up and that definitely has been the case.

Craig Shere

Okay. Would you be prepared to handicap potential announcements before the end of the year?

Carlin Conner

I don't think so. I think it is important to appreciate that we feel very strongly about the commercialization of the excess capacity so we feel good about executing -- I would not want to put a timing on that.

Craig Shere

And glad to hear that SemCAMS is still looking good. That volumetric flip in the quarter apparently on an unplanned outage was a question mark. I had a question that even though the volumes fell over 20% sequentially, the EBITDA fell under 10%. Can you talk about that stickiness of the EBITDA and prospects even without additional growth opportunities for this coming back quickly in the next quarter or two?

Bob Fitzgerald

Craig, as we mentioned on our prior comments, the outage created about a $2 million loss due to the reduced volumes however because of the contracts out there similar with to cost of service where we get recoveries of our operating expenses that provides some level of stickiness if you will to the EBITDA that you suggest because we are getting cost recoveries but clearly what our focus has been on was to get that plant, the K3 Plant back up and running as soon as possible and it is back up in operations as of the end of June.

Craig Shere

Okay. And the volume declined sequentially is pretty much all relating to that month outage on K3?

Carlin Conner

Yes, largely you can see that there is also an increase at our KA plant. We were able to move the some of the volume over from K-3 to KA but we could lose volumes so now we will see the volumes migrate back to what you have seen back in the last -- say the first quarter this year.

Craig Shere

And I understand you are not in a position to comment about the asphalt Mexican business sale effort, but any updates around the Mexican Energy development opportunities?

Carlin Conner

We still are having good conversations with key players. The pace of developments have been what they have been. We have not seen much activity on the [indiscernible] pipeline side but we believe that we will open up. We feel really good about our approach. The business development team that is in place it's 100% occupied with energy reform activities so we believe we will be able to talk about something in the future not quite sure when.

Craig Shere

Okay. But you are optimism is not shaken at all by the impact of the macro forces for the last quarter or two?

Carlin Conner

I think it has slowed some things down but the reality is that the reform of the infrastructure and the need for reinvestment in the infrastructure is still very much there. I believe international investment will be required to fix that.

Craig Shere

Okay. And last question for me -- it looked like Cushing storage contracting was pretty flat quarter over quarter or from the first quarter. So any kind of guidance about how the market is looking for contracting and how you would see filling up future years to more capacity in coming quarters?

Bob Fitzgerald

Just to be clear Cushing, the storage facility there is fully contracted going through early 2017. So today there is really nothing to re-contract. Everything we have is under lease other than what we're using for ourselves and we're not looking to lease that out. The demand there -- continues to be as we said in the past -- there certainly interest, certainly as the Contango market earlier this year had checked a lot of interest. Contango seems to me narrowing a bit for the back half of the year but the demand there is still fairly strong for us. So we're continuing to work on future contracting. We will wait and see how that plays out for next year's availability.

Craig Shere

And I think coming into the year was some of the increase contacting you did longer term and you all took maybe a couple pennies of reduced pricing to get some greater security on 10 of the contracts. Are you still looking at trying to get longer multi-year contracts at this point? And do you feel like the pricing that you already agreed to more recently is in line with what we should be expecting? Or to get longer 3 to 5 year context, do you feel you need to price that differently?

Carlin Conner

Our strategy is still to trade a little bit of price for tenure. We believe that that’s the way the play the Cushing market. I believe it has been successful as you see -- as we termed up the facility and we continue to extend out the contracts. We will continue to do that. I do not anticipate a dramatic change in the per barrel cost or the per barrel price that’s out there, so I think the model is still valid, but we definitely are looking for tenure.

Operator

Our next question comes from [indiscernible] with Seaport Global. Please go ahead.

Unidentified Analyst

Most of my questions had been hit, I would had a couple clarifications on the balance sheet and how things will roll out post the merger. So I think you clarified that there is no change in controlled trigged from the transaction. Any changes to how you are revolver would work post transaction and what will be the covenant metrics on the revolver?

Carlin Conner

So after the merger -- I think what you’re asking for is after the merger what would our balance sheet and what will our cap structure in target fee going forward?

Unidentified Analyst

Yes that's it.

Carlin Conner

And we talked a little bit about that when we had our call regarding the merger announcement. At that time and we're still maintaining that we're looking at a leverage ratio in a combined ratio post-merger. Target will be 4.5 times or better and we feel pretty comfortable running at those levels, when we have all the assets together. We're also continuing to focus on a coverage post-merger of 1.5 times.

Operator

Our next question comes from Charles Marshall with Capital One. Please go ahead.

Charles Marshall

I guess switching gears over to Rose Rock and supply and logistics segment, I mean we saw really for the first time in quite a while sequential volumes declined maybe not all that surprising but we also saw a nice uptick in margins sequentially can you just talk about that market right now both that from a volume perspective and from a margin perspective. Are those margins mostly due to the blending and segregating activities, you're doing at Cushing. Any color you can provide around that business in that segment.

Carlin Conner

Sure Charles. Two points. One is your comments about the volumes. You are looking sequentially off the first quarter which I would suggest the first quarter was unusually high. We would expect our volumes going forward to be in that 190,000 to 200,000 barrels a day range for our supply and logistics segment. We think giving where we're at and the activity levels that we have done that feels about right.

On the margins you correctly noted that our margin in the second quarter was pretty strong. We benefited from a penny positive contango realization in the quarter. Our blending continues to maintain a pretty consistent margin. We expect blending going forward to be about the same that we have seen in the first half. We think that general marketing and contango margins could narrow in the second half so that’s what we have included in our forecast.

Charles Marshall

And then over to transportation really the field service and the trucking business. We have seen obviously some volumes come down sequentially. What sort of trend line going forward in the back half of '16 should we continue to see sort of the 85-ish type range in trucking volumes or could that come down even further and see more volumes on the pipeline?

Carlin Conner

No. On the contrary, we expect the field services trucking volumes from the second half to probably increased a little bit off the 86 that we printed for the second quarter. We were repositioning some of the capacity. We have some of the trucks that we have during the quarter. We have some new focus and some key areas that we expect to bring on some volume sales, so we're probably a little more bullish than what you suggested on a decline.

Charles Marshall

And then last one for me -- I guess bigger picture here we have seen a lot of mid-streamers swap some assets or ownerships and assets and it has been a sort of a high grade of infrastructure, changing hands. I guess with respect to Maurepas I know we beat the drum on that one pretty hard already, you know looking out and some other growth opportunities that you are evaluating, I mean could that be in the game plan here? Maybe with a strategic JV of that pipe and then looking at bringing on a partner to maybe grow and optimize that pipe even further than what you're contemplating? Am I thinking about that right?

Carlin Conner

We have already said Maurepas has been a fantastic development for us. It is a huge asset, it's going to deliver a lot of value. We will always try to figure out a way to optimize and try to deliver as much value to our shareholders that we can to our asset so we're open to that. We clearly have discussions with other parties that are in the space, in that area. But right now we feel like we have a controlling piece of the equation and we will continue to commercialize and if we need to do something strategically, we will definitely take a look at that. What I will tell you is probably off the table is selling it for cash. We believe trading it for another asset that extends our strategic reach makes some sense, but we do not need to sell it for cash.

Charles Marshall

And then I will just one last one in here. In the UK SemLogistics, we saw EBITDA sort of trail off maybe where we saw it this time a year ago, was that mostly due to lower contango markets or higher expenses ? Can you just describe what happened in 2Q and what we should expect going forward at the balance of the year?

Bob Fitzgerald

Charles, just for clarity everything we have, all the tankage that we have an our SemLogistics facility in Wales that’s available to be lease -- it's fully leased out right now and we expect that to continue into '17. You saw little dip in the second quarter versus the first quarter. A lot of that was driven by just throughput productivity which had declined which isn't unusual.

Typically we will ship products from gasoline to jet and we will move it depending on what time of year it is. We just did not see as much throughput changes in the second quarter as we did in the first quarter and also we could see a little higher maintenance costs, maintenance expense roll through the quarter. So I wouldn’t get too concerned about that slight small dip that you saw in the second quarter.

Operator

And our next question is a follow-up from Craig Shere with Tuohy Brothers. Go ahead.

Craig Shere

In the prepared remarks you all commented how your balance sheet is looking a lot healthier at SemGroup post the equity offering and that your positioned to take advantage of incremental organic both opportunities and even M&A. Are you still focused more as far as bolt-on or incremental opportunities for acquisition, are you still focused on opportunities in the Gulf of Mexico area? Or is pretty much anything that will a accretively add to any of your business lines?

Carlin Conner

We have a little more probably disciplined to say anything is available. We're focusing on our key areas that we have talked about for quite some time. Priority for us is organic growth around our footprint and we have again some more interesting opportunities in Canada as well as in the U.S. around our existing footprint so we definitely want to make sure we're in position to execute on those opportunities going forward. As far as the M&A front, it is still a tough market. Bid, ask are till tough to try to manage but we continuing to pay attention to what's available on the asset side as well as the corporate side and there is some focus to try to figure out a way to balance our portfolio which means bringing in more down [indiscernible] businesses so that is where we're headed.

Operator

Our next question comes from Shneur Gershuni with UBS. Please go ahead.

Shneur Gershuni

You may have heard this before [indiscernible] multiple calls so I'm sort of bouncing around a little bit here but with respect to how you are thinking about CapEx, I understand that you sort of said there are similar opportunities for example until [indiscernible], how should we be thinking about kind of the numbers? Because you know when we look at the export it's pretty big and pretty steep increase in EBITDA and so forth -- you started to conclude that it probably comes from some growth CapEx. Are we at talking about one big project on the scale of Maurepas. Are we talking about multiple projects with the $50 million to $100 million zip code type project, I was wondering if you can sort of give us a flavor as to how to be thinking about the cadence of those CapEx opportunities?

Carlin Conner

I would not put it in the bucket of one big project. I think it's multiple opportunities that we have some clarity on which is not ready to be discussed in more detail. So I think you just spread that out little bit.

Shneur Gershuni

Okay. And when we think about the equity rates that you did earlier this year, our position at the time you didn’t really need equity unless you were planning to embark on a project, when we think about the equity that you’ve raised -- should we think about as fully funded at CapEx or what you’re thinking about and you try to fund it 100% equity, or can we assume that it's foreshadowing something larger than that number because you would assume that there would be some debt associated with that as well?

Bob Fitzgerald

Yes. I think as we have said the equity raised for us gets us -- definitely gets us through 2017 and a little bit beyond. We feel good about going out and hitting the markets and when we hit the markets we do not want to wait any longer and we feel like it has put us in a position where we're set. We can execute on these projects and not have to worry about any market conditions that could affect raising capital.

Shneur Gershuni

Okay. Finally I was wondering if you could sort of clarify [indiscernible] if you can extend a little bit on the selling Maurepas for cash and extending strategic sense. I was wondering if you can just extend on that a little bit?

Carlin Conner

I was answering a question about would we use Maurepas as a strategic trading piece or for something else and my answer basically was -- we would never sell it for cash, never say never but that’s not something I think that we would need to do. We're very proud of that project. It is a project that I think is well thought of throughout the industry and with think that it could definitely draw some pretty incredible demand with respect to selling it.

But ops strategy was to get to the Gulf Coast, add to our portfolio with some refinery facing businesses and that’s what we did. Basically what I was answering was that if indeed there was a strategic reason to trade some of Maurepas and possibly extend our strategic reach than that would be something we would consider but we would be very, very particular about that kind of trade and the valuation associated with that trade would have to be very compelling.

At this point in time we're not worried about that so much we're making our own way, commercializing the extra capacity ourselves. We do not need anybody else but we're business people we are going to listen to what people have to say and if it helps us execute then we will take it under consideration.

Shneur Gershuni

Just to paraphrase you a little bit, so basically you would consider something where one plus one is far greater than two either they are bringing something to the table and you end up with some sort of promoted type of position or you get something that is net additive to SemGroup otherwise you don't feel any necessary need to do something like this?

Carlin Conner

Yes. It has to drive more value, it has to drive more value than we have on a stand-alone basis.

Shneur Gershuni

Right. And you don't need it from a finance perspective?

Carlin Conner

We do not need it from a financial perspective.

Carlin Conner

Okay. Thank you all very much for joining us today. We appreciate your continued interest and support. Thank you again

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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