May 17, 2011 [NewsOK] - SemGroup Corp.’s long-term prospects are getting stronger as it adds crude oil storage and pipeline capacity while also pursuing a new $650 million credit facility, the Tulsa company’s top two officers said Monday.
First-quarter net income totaled $32,000, or basically 0 cents per share, compared with a $9.1 million profit for the same time last year.
SemGroup CEO Norm Szydlowski shook off a weaker report from the company’s SemStream propane and overseas segment and reaffirmed earlier earnings guidances of between $120 million and $140 million for all of 2011.
“Long-term we’re still feeling really good,” he said in an exclusive interview with the Tulsa World after Monday morning’s conference call with analysts. Chief Financial Officer Bob Fitzgerald, who also participated in the interview, touted SemGroup’s move to refinance its capital structure.
Company officials had a meeting with bankers and investors in New York last week to detail the proposed $650 million credit facility. The revolving credit facility would total $350 million, with the remainder split among two term loan facilities.
SemGroup hopes to complete the refinancing before the end of this quarter.
“It’s pretty exciting,” Fitzgerald said. “We expect to get a pretty substantial reduction in overall interest rates.”
SemGroup also is finishing up 350,000 barrels’ worth of new-build storage capacity at the Cushing crude oil hub, Szydlowski said.
Another 1.95 million barrels in Cushing storage will be added in 2012. Contracts already are signed to fill the tanks for customers, officials said.
SemGroup still plans to budget $80 million for capital expenditures this year, according to reports.
The first-quarter profit, although meager compared to the same time last year, actually shows another relatively positive step forward for the formerly bankrupt SemGroup LP.
The company suffered a combined $132 million net loss in 2010, the first full year since SemGroup’s December 2009 emergence from Chapter 11 bankruptcy protection.
“The way I size it up, really, is that we still have got a lot of work to do in getting the company running optimally,” Szydlowski said.
“We’re continuing on the road to recovery.”
Another big decision will be whether to remain as a corporation — which SemGroup adopted upon its Chapter 11 reorganization — or return to the master limited partnership structure.
The obvious benefit of the latter is taxation: MLPs do not pay corporate income taxes, although unit holders take that burden in the form of cash distributions.
SemGroup hopes to decide on a possible return as an MLP by the end of June.
