SemGroup Earnings Double, Overcomes Unrealized Losses in 2Q

SemGroup’s latest earnings underscore the company’s strategy of using storage to address supply issues.

During the second quarter, SemGroup reported a 101 percent increase in earnings before interest, taxes, depreciation and before the non-cash impact of unrealized gains or losses, or EDITBDA, the company reported in a letter to investors.

SemGroup generated $157 million in EBITDA, compared to $78 million during the second quarter 2005.

During the second quarter, the Tulsa-based energy company generated $127 million net income, which was a 10 percent drop in profits from a year ago when the company reported profits of $142 million.

Included in net income were unrealized losses of $80 million and unrealized gains of $52 million for the three months ended June 30 this year in 2005, respectively.

The unrealized gains and losses are typically generated by SemGroup selling forward its purchased inventory and represents the change in market value of those forward positions, said Brent Cooper, SemGroup treasurer.

“These are non-cash amounts which are not expected ever to be realized,” Cooper said.

For the first six months, SemGroup reported EDITDA of $282 million, compared to $134 million reported a year earlier.

“The primary reason for the increase in EDITDA was as a result of continued favorable market conditions whereby certain products were in significant and relatively steep contango which rewards SemGroup company for our storage capabilities,” said Alex Stallings, SemGroup chief accounting officer. “Additionally, 2006 captures the results of two significant acquisitions we made in 2005 — SemMaterials, the asphalt division acquired from Koch on May 31, 2005, and SemCams, the four Canadian natural gas processing plants we acquired on March 16, 2005.”

SemGroup made two acquisitions for the second quarter.

In June, SemGroup purchased about a 20 percent interest in Canadian-based Niska Gas Storage. The company owns more than 165 billion cubic feet of existing and storage assets in Alberta, Canada; Oklahoma and Louisiana.

In July, SemCrude finalized the purchase of assets from Big Tex Crude Oil Co. The crude gathering assets are in Texas and New Mexico. ?

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