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SemGroup (SEMG) Q2 Earnings Beat on Higher Crude Volumes

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SemGroup Corporation (SEMG - Free Report) reported second-quarter 2018 adjusted profit of 12 cents per share, well ahead of the Zacks Consensus Estimate of 1 cent. The outperformance stemmed from strength in the company’s Crude Transportation, Crude Facilities and SemCAMS segments.   

However, the company’s bottom line deteriorated from the year-ago quarter adjusted income of 15 cents per share due to weak results from the SemGas division though overall adjusted EBITDA improved 51.4% from the prior period to $99 million.

Total revenues recorded in the quarter came in at $595.8 million, surpassing the Zacks Consensus Estimate of $575 million. Further, the top line was also around 26% higher than the prior-year sales of $473.1 million.

Semgroup Corporation Price, Consensus and EPS Surprise


Semgroup Corporation Price, Consensus and EPS Surprise | Semgroup Corporation Quote

Segmental Information

Crude Transportation: This segment recorded a profit of $37.9 million, reflecting an increase of 30.4% from the year-ago quarter. Consolidated pipeline volumes increased 3.3% to 188 thousand barrels per day (Mbbl/d). In particular, White Cliffs pipeline volumes of 135 Mbbl/d were notably higher than the year-ago figure of 107 Mbbl/d.

Crude Facilities: Profit generated from this segment amounted to $9.7 million, essentially unchanged from a year ago on flat storage and throughput volumes.

Crude Supply and Logistics: The segment’s loss in the quarter under review narrowed to $2 million, from $2.2 million incurred in the corresponding quarter of the last year. The improvement came on the back of positive basis differentials.

HFOTCO: This unit (acquired last year) generated a profit of around $34.8 million in the second quarter.

SemGas: During the second quarter, the SemGas segment earned $15.4 million, down 20.8%. The decrease could be attributed to lower processing volumes, which fell 32.5% to 367 million cubic feet per day.

SemCAMS: Profit generated from this unit increased 12.7% year over year to stand at $21.4 million in the quarter under review. The uptick reflects improvement in cost recoveries and favourable timing issues.

Capital Expenditure & Balance Sheet

During the three months ended Jun 30, 2018, SemGroup’s capital investments and expenditures totaled $94 million.

As of Jun 30, 2018, the company had cash and cash equivalents of $55.3 million and long-term debt of around $2.5 billion. The debt-to-capitalization ratio of the company was 61.5%, down from 63.2% six months ago. SemGroup was able to improve the leverage primarily on the back of asset sales.

2018 Guidance

SemGroup reaffirmed its full-year 2018 capital expenditure guidance of $350 million. The better-than-expected second-quarter earnings also allowed the company to reiterate its adjusted EBITDA band of $385-$415 million.

Zacks Rank & Stock Picks

SemGroup currently retains a Zacks Rank #3 (Hold).

Meanwhile, one can look at a better-ranked energy player like McDermott International, Inc. (MDR - Free Report) , Northern Oil and Gas, Inc. (NOG - Free Report) and W&T Offshore, Inc. (WTI - Free Report) . McDermott sports a Zacks Rank #1 (Strong Buy), while Northern Oil and Gas and W&T Offshore are Zacks Rank #2 (Buy) stocks.

(You can see the complete list of today’s Zacks #1 Rank stocks here.)

McDermott International is a fully vertically integrated company providing engineering and construction solutions to the energy firms. In the last 60 days, the Zacks Consensus Estimate for current year earnings has risen 4%.

Northern Oil and Gas is a non-operator explorer and producer with primary focus on the Williston Basin in North Dakota and Montana. In the last 60 days, the Zacks Consensus Estimate for current year earnings has risen 24%.

W&T Offshore is a leading oil and natural gas explorer with operations primarily focused on resources located off the coast of Gulf of Mexico. In the last 60 days, the Zacks Consensus Estimate for current year earnings has risen 23%.

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