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The Market Cheers SemGroup's Latest Results



August 15, 2011 – Comments (2) | RELATED TICKERS: SEMG

Here's an update on a company that I have written about in the past, SemGroup, for anyone who is interested.

A couple of months ago SemGroup disappointed some shareholders (including myself) by announcing that it was going to conduct an IPO to spin-off some of its assets into a new MLP rather than converting the entire company into one like many had suspected it would.

There's still a lot to like about SEMG, it's a post-bankruptcy play, it recently refinanced its credit facility...lowering its interest expense, the market will likely value the assets that it spins off at a higher valuation than it is currently being credit for them, etc... However, after learning that one of the major catalists that I was hoping for will not materialize, I decided to sell small my stake in the SEMG at a slight loss. Fortunately, this was prior to the implosion in the markets over the past several weeks.

This morning the company reported its latest quarterly results and Mr. Market cheered, causing SEMG to jump 10%. Its Q2 2011 EBITDA rose 57% Y-O-Y. The company also reaffirmed its guidance for the rest of the year.

SemGroup Reports Second Quarter 2011 Results

As I mentioned above, SemGroup's recently announced plans to spin off some of its assets into a new LP called "Rose Rock Resources." No specific timing for the transaction has yet been announced, but SEMG expects Rose Rock to begin trading within the next two to six months. I suppose a lot will depend upon whether the markets calm down. The volatility that we have been experiencing lately has caused a number of IPOs to be delayed. I definitely plan on taking a close look at Rose Rock once the details of the IPO are announced. If it's attractive, I may consider investing in it.

SemGroup to spin off some assets into new, publicly traded company


2 Comments – Post Your Own

#1) On August 15, 2011 at 12:04 PM, TMFDeej (97.73) wrote:

BTW, here's an interesting bit of news.  While this may or may not actually mean anything, it has to be viewed as at least a slight negative that insiders have sold a massive number of shares in SEMG lately:

SemGroup Corp : Over the past six months, insiders have bought 31,600 shares and have sold -580,720 shares, for a net of -549,120 shares.

Insiders are Trading Shares in These Energy Companies


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#2) On August 16, 2011 at 9:01 AM, kenjotto (< 20) wrote:

Maybe they're freeing up cash to get in on the Rose Rock IPO.  Maybe all of the good assets are going into the MLP and they're putting their money in along with them!

 I'm sticking with SEMG for a little while.  I like that it's a post-bankruptcy deal.  I like that they're exposed to both Nat Gas and Oil, as well as Canadian and Northern/Western US plays.  While I was also disappointed that they didn't fully convert to an MLP or spin it off to shareholders, the Ops Manager in me can see the need to get that cash in house to do something with given their newly court-ordered lease on life.  I'll forgive them this time, and use it as a test for their capital allocation skills.  

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