SEMGROUP CORP, 10-Q filed on 5/8/2015
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2015
Apr. 30, 2015
Common Class A [Member]
Apr. 30, 2015
Class B
Document Type
10-Q 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Mar. 31, 2015 
 
 
Document Fiscal Period Focus
Q1 
 
 
Document Fiscal Year Focus
2015 
 
 
Entity Registrant Name
SemGroup Corp 
 
 
Entity Central Index Key
0001489136 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Common Stock, Shares Outstanding
 
43,901,405 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Current assets:
 
 
Cash and cash equivalents
$ 315,525 
$ 40,598 
Restricted cash
6,396 
6,980 
Accounts receivable (net of allowance of $3,488 and $3,260, respectively)
290,353 
351,334 
Receivable from affiliates
15,156 
16,819 
Inventories
67,770 
43,532 
Other current assets
15,770 
20,017 
Total current assets
710,970 
479,280 
Property, plant and equipment (net of accumulated depreciation of $259,980 and $245,629, respectively)
1,303,781 
1,256,825 
Equity method investments
561,463 
577,920 
Goodwill
58,159 
58,326 
Other intangible assets (net of accumulated amortization of $22,859 and $20,545, respectively)
170,362 
173,065 
Other noncurrent assets, net
56,805 
44,386 
Total assets
2,861,540 
2,589,802 
Current liabilities:
 
 
Accounts payable
222,712 
257,177 
Payable to affiliates
16,188 
13,460 
Accrued liabilities
83,473 
92,694 
Payables to pre-petition creditors
3,130 
3,129 
Deferred revenue
20,602 
23,688 
Other current liabilities
3,236 
1,474 
Current portion of long-term debt
47 
40 
Total current liabilities
349,388 
391,662 
Long-term debt
1,027,072 
767,092 
Deferred income taxes
175,562 
161,956 
Other noncurrent liabilities
47,576 
49,655 
Commitments and contingencies (Note 9)
   
   
SemGroup owners’ equity:
 
 
Common stock, $0.01 par value (authorized - 100,000 shares; issued - 44,822 and 44,689 shares, respectively)
439 
436 
Additional paid-in capital
1,266,325 
1,245,877 
Treasury stock, at cost (922 and 862 shares, respectively)
(4,962)
(1,332)
Accumulated deficit
(66,866)
(68,332)
Accumulated other comprehensive loss
(36,201)
(27,141)
Total SemGroup Corporation owners’ equity
1,158,735 
1,149,508 
Noncontrolling interests in consolidated subsidiaries
103,207 
69,929 
Total owners’ equity
1,261,942 
1,219,437 
Total liabilities and owners’ equity
$ 2,861,540 
$ 2,589,802 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Statement of Financial Position [Abstract]
 
 
Allowance for doubtful accounts
$ 3,488 
$ 3,260 
Accumulated depreciation
259,980 
245,629 
Accumulated amortization
$ 22,859 
$ 20,545 
Common stock, $0.01 par value
$ 0.01 
$ 0.01 
Common stock shares authorized
100,000 
100,000 
Common stock shares issued
44,822 
44,689 
Treasury stock shares
922 
862 
Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Revenues:
 
 
Product
$ 220,131 
$ 427,030 
Service
61,877 
48,507 
Other
16,302 
23,346 
Total revenues
298,310 
498,883 
Expenses:
 
 
Costs of products sold, exclusive of depreciation and amortization shown below
192,072 
385,113 
Operating
53,090 
50,778 
General and administrative
32,310 
18,736 
Depreciation and amortization
23,734 
23,637 
Loss (gain) on disposal or impairment of long-lived assets, net
1,058 
(58)
Total expenses
302,264 
478,206 
Earnings from equity method investments
20,559 
14,962 
Gain on issuance of common units by equity method investee
8,127 
Operating income
16,605 
43,766 
Other expenses (income), net:
 
 
Interest expense
14,591 
9,227 
Foreign currency transaction gain
(519)
(683)
Other income, net
(7,985)
(1,047)
Total other expenses, net
6,087 
7,497 
Income from continuing operations before income taxes
10,518 
36,269 
Income tax expense
4,742 
16,526 
Income from continuing operations
5,776 
19,743 
Loss from discontinued operations, net of income taxes
(5)
Net income
5,776 
19,738 
Less: net income attributable to noncontrolling interests
4,310 
6,150 
Net income attributable to SemGroup
1,466 
13,588 
Other comprehensive loss, net of income taxes
(9,060)
(2,972)
Comprehensive income (loss)
(3,284)
16,766 
Less: comprehensive income attributable to noncontrolling interests
4,310 
6,150 
Comprehensive income (loss) attributable to SemGroup
$ (7,594)
$ 10,616 
Net income attributable to SemGroup per common share (Note 11):
 
 
Basic
$ 0.03 
$ 0.32 
Diluted
$ 0.03 
$ 0.29 
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Cash flows from operating activities:
 
 
Net income
$ 5,776 
$ 19,738 
Adjustments to reconcile net income to net cash provided by operating activities:
 
 
Net unrealized loss related to derivative instruments
2,645 
606 
Depreciation and amortization
23,734 
23,637 
Loss (gain) on disposal or impairment of long-lived assets, net
1,058 
(58)
Earnings from equity method investments
(20,559)
(14,962)
Gain on issuance of common units by equity method investee
(8,127)
Gain on sale of common units of equity method investee
(7,894)
Distributions from equity investments
25,879 
16,421 
Amortization of debt issuance costs
1,066 
785 
Deferred tax expense (benefit)
(682)
10,518 
Non-cash equity compensation
2,777 
2,330 
Excess tax benefit from equity-based awards
(1,650)
Gain on fair value of warrants
(980)
Provision for uncollectible accounts receivable, net of recoveries
383 
(129)
Currency gain
(519)
(683)
Inventory valuation adjustment
1,187 
Changes in operating assets and liabilities (Note 12)
(16,307)
(18,548)
Net cash provided by operating activities
18,544 
28,898 
Cash flows from investing activities:
 
 
Capital expenditures
(84,327)
(56,753)
Proceeds from sale of long-lived assets
117 
695 
Proceeds from the sale of Wattenberg Holding, LLC and Glass Mountain Holding, LLC to Rose Rock Midstream L.P.
 
Contributions to equity method investments
(15,182)
(24,251)
Proceeds from sale of common units of equity method investee
29,012 
Distributions in excess of equity in earnings of affiliates
5,201 
2,505 
Net cash used in investing activities
(65,179)
(77,804)
Cash flows from financing activities:
 
 
Debt issuance costs
(601)
(155)
Borrowings on credit facilities
422,000 
186,000 
Principal payments on credit facilities and other obligations
(162,012)
(128,509)
Rose Rock Midstream, L.P. equity issuance
89,119 
Distributions to noncontrolling interests
(8,953)
(6,398)
Repurchase of common stock for payment of statutory taxes due on equity-based compensation
(3,630)
(719)
Dividends paid
(14,846)
(9,382)
Proceeds from issuance of common stock under employee stock purchase plan
313 
88 
Excess tax benefit from equity-based awards
1,650 
Intercompany borrowings (advances), net
Net cash provided by financing activities
321,390 
42,575 
Effect of exchange rate changes on cash and cash equivalents
172 
1,938 
Change in cash and cash equivalents
274,927 
(4,393)
Cash and cash equivalents at beginning of period
40,598 
79,351 
Cash and cash equivalents at end of period
$ 315,525 
$ 74,958 
Overview
OVERVIEW
OVERVIEW
SemGroup Corporation is a Delaware corporation headquartered in Tulsa, Oklahoma. The terms "we," "our," "us," "SemGroup," "the Company" and similar language used in these notes to the unaudited condensed consolidated financial statements refer to SemGroup Corporation and its subsidiaries.
Basis of presentation
The accompanying condensed consolidated balance sheet at December 31, 2014, which is derived from audited financial statements, and the unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules and regulations of the Securities and Exchange Commission ("SEC"). These financial statements include all normal and recurring adjustments that, in the opinion of management, are necessary to present fairly the financial position of the Company and the results of its operations and its cash flows.
Our condensed consolidated financial statements include the accounts of our controlled subsidiaries. All significant transactions between our consolidated subsidiaries have been eliminated.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts and disclosures in the financial statements. Although management believes these estimates are reasonable, actual results could differ materially from these estimates. The results of operations for the three months ended March 31, 2015, are not necessarily indicative of the results to be expected for the full year ending December 31, 2015.
Pursuant to the rules and regulations of the SEC, the accompanying condensed consolidated financial statements do not include all of the information and notes normally included with financial statements prepared in accordance with accounting principles generally accepted in the United States. Certain reclassifications have been made to conform previously reported balances to the current presentation. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2014, which are included in our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC.
Our significant accounting policies are consistent with those described in our Annual Report on Form 10-K for the year ended December 31, 2014.
Recent accounting pronouncements
In February 2015 the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-02, “Consolidation (Topic 810): Amendments to the Consolidation Analysis,” which adds requirements that limited partnerships must meet to qualify as voting interest entities and modifies the evaluation of whether limited partnerships are variable interest entities or voting interest entities. It also eliminates the presumption that a general partner should consolidate a limited partnership. This guidance is effective for public companies for fiscal years beginning after December 15, 2015. We will adopt this guidance in the first quarter of 2016 and are currently reviewing the impact of adoption on our consolidated financial statements.
On April 7, 2015, the FASB issued Accounting Standards Update ASU 2015-03, “Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which is designed to simplify presentation of debt issuance costs. The standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard will be effective for U.S. public companies for annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The new guidance shall be applied on a retrospective basis for all periods presented. The Company will adopt this guidance in the first quarter of 2016. The impact is not expected to be material.
In April 2014, the FASB issued ASU 2014-08, "Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity," which raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. For public entities, this ASU is effective for fiscal years beginning on or after December 15, 2014, and interim periods within those years. The Company adopted this guidance in the first quarter of 2015. The impact was not material.
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers," which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP.
The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and have not yet determined the method by which we will adopt the standard.
Rose Rock Midstream, L.P.
ROSE ROCK MIDSTREAM, L.P.
ROSE ROCK MIDSTREAM, L.P.
We control the operations of our consolidated subsidiary, Rose Rock Midstream, L.P. (NYSE: RRMS) ("Rose Rock"), through our ownership of the general partner interest. As of March 31, 2015, we own the 2% general partner interest and a 55.2% limited partner interest.
On January 1, 2015, certain operational targets were achieved by White Cliffs Pipeline, L.L.C. ("White Cliffs") and all 3,750,000 Class A units held by the Company were converted to common units on a one-for-one basis. The conversion did not impact the total number of the Rose Rock's outstanding units representing limited partner interests.
On February 13, 2015, we contributed the Wattenberg Oil Trunkline ("WOT") and our 50% ownership interest in Glass Mountain Pipeline LLC ("Glass Mountain") to Rose Rock for (i) cash of approximately $251.2 million, (ii) the issuance of 1.75 million common units, and (iii) an increase of the capital account of the general partner and a related issuance of general partner interest, to allow the general partner to maintain its 2% general partner interest.
As the transaction was between entities under common control, Rose Rock recorded the acquired assets and liabilities based on SemGroup's historical cost. The purchase price in excess of historical cost was treated as an equity transaction with SemGroup, which reduced the partners' capital accounts of Rose Rock's general and limited partners on a pro-rata basis.
Additionally, the acquisition of WOT created a change in reporting entity which required Rose Rock's historical results to be recast as if WOT had been part of Rose Rock in prior periods. The historical summarized financial information of Rose Rock has been recast to reflect this change. The impact to prior periods was not significant. Prior period earnings of WOT have been allocated to the general partner. The acquisition of the equity method investment in Glass Mountain did not create a change in reporting entity. As such, prior periods have not been recast to include the historical results of Glass Mountain. There was no impact to SemGroup as these entities are all reported within the Crude segment.
On February 17, 2015, certain targets specified in Rose Rock’s partnership agreement were achieved and all 8,389,709 subordinated units held by the Company were converted to common units. The conversion did not impact the total number of Rose Rock’s outstanding units representing limited partner interests.
Cash distributions
We receive distributions from Rose Rock on our common units, our 2% general partner interest and incentive distribution rights. Rose Rock intends to pay a minimum quarterly distribution of $0.3625 per unit, to the extent it has sufficient available cash, as defined in Rose Rock’s partnership agreement.  
The following table shows the cash distributions paid or declared during 2015 and 2014 (in thousands, except for per unit amounts):
 
Distribution
Per Unit
 
Distributions Paid/To Be Paid
Quarter Ended
SemGroup
Noncontrolling
Interest
Common Units
Total
Distributions
General
Partner
Incentive
Distributions
Common
Units
Subordinated
Units
December 31, 2013
$
0.4650

 
$
257

$
244

$
2,041

$
3,901

$
6,398

$
12,841

March 31, 2014
$
0.4950


$
278

$
488

$
2,173

$
4,153

$
6,811

$
13,903

June 30, 2014
$
0.5350

 
$
334

$
888

$
3,646

$
4,488

$
7,362

$
16,718

September 30, 2014
$
0.5750

 
$
377

$
1,835

$
3,918

$
4,824

$
7,912

$
18,866

December 31, 2014
$
0.6200

 
$
485

$
3,487

$
6,551

$
5,202

$
8,544

$
24,269

March 31, 2015
$
0.6350

*
$
568

$
4,450

$
13,148

$

$
10,213

$
28,379


*Expected distributions related to the quarter ended March 31, 2015, which will be paid on May 15, 2015 to unitholders of record as of May 5, 2015.

Summarized financial information
Certain summarized balance sheet information of Rose Rock is shown below (in thousands):
 
(Unaudited)
 
 
 
March 31,
2015
 
December 31,
2014
Cash
$
13,323

 
$
3,625

Other current assets
261,942

 
271,144

Property, plant and equipment, net
405,283

 
396,066

Equity method investment
425,655

 
269,635

Goodwill
36,116

 
36,116

Other noncurrent assets, net
28,847

 
29,677

Total assets
$
1,171,166

 
$
1,006,263

 
 
 
 
Current liabilities
$
227,607

 
$
265,682

Long-term debt
661,072

 
432,092

Partners’ capital attributable to SemGroup
179,280

 
238,560

Partners’ capital attributable to noncontrolling interests
103,207

 
69,929

Total liabilities and partners' capital
$
1,171,166

 
$
1,006,263


Certain summarized income statement information of Rose Rock for the three months ended March 31, 2015 and 2014 is shown below (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
Revenue
$
134,693

 
$
292,514

Cost of products sold
$
96,237

 
$
254,537

Operating, general and administrative expenses
$
26,571

 
$
18,962

Depreciation and amortization expense
$
10,143

 
$
11,482

Earnings from equity method investment
$
20,864

 
$
11,080

Net income
$
14,600

 
$
16,226

Noncontrolling interests in consolidated subsidiary retained by SemGroup
$

 
$
3,676

Net income attributable to Rose Rock Midstream, L.P.
$
14,600

 
$
12,550

Equity Method Investments
EQUITY METHOD INVESTMENTS
EQUITY METHOD INVESTMENTS

Our equity method investments consist of the following (in thousands):
 
March 31, 2015
 
December 31, 2014
White Cliffs
$
279,753

 
$
269,635

NGL Energy Partners LP
135,808

 
162,246

Glass Mountain
145,902

 
146,039

Total equity method investments
$
561,463

 
$
577,920


    
Our earnings from equity method investments consist of the following (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
White Cliffs
$
19,090

 
$
11,080

NGL Energy Partners LP*
(305
)
 
3,591

Glass Mountain
1,774

 
291

Total earnings from equity method investments
$
20,559

 
$
14,962


* Excluding gain on issuance of common units of $8.1 million for the three months ended March 31, 2014.
Cash distributions received from equity method investments consist of the following (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
White Cliffs
$
24,154

 
$
13,585

NGL Energy Partners LP
5,015

 
5,341

Glass Mountain
1,911

 

Total cash distributions received from equity method investments
$
31,080

 
$
18,926


White Cliffs
Certain unaudited summarized income statement information of White Cliffs for the three months ended March 31, 2015 and 2014 is shown below (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
Revenue
$
54,614

 
$
33,274

Operating, general and administrative expenses
$
8,353

 
$
6,768

Depreciation and amortization expense
$
8,538

 
$
4,393

Net income
$
37,723

 
$
22,113


The equity in earnings of White Cliffs for the three months ended March 31, 2015 and 2014 is less than 51% of the net income of White Cliffs for the same periods. This is due to certain general and administrative expenses we incur in managing the operations of White Cliffs that the other owners are not obligated to share. Such expenses are recorded by White Cliffs and are allocated to our ownership interest. White Cliffs recorded $0.3 million and $0.4 million of such general and administrative expense for the three months ended March 31, 2015 and 2014, respectively.
The members of White Cliffs are required to contribute capital to White Cliffs to fund various projects. For the three months ended March 31, 2015, we contributed $14.9 million to these projects, including a $6.6 million contribution for an expansion project adding approximately 65,000 barrels per day of capacity. Remaining contributions related to the expansion project will be paid in 2015 and are expected to total $30.1 million. The project is expected to be completed in late 2015.
NGL Energy Partners LP
At March 31, 2015, we owned 5,652,568 common units representing limited partner interests in NGL Energy Partners LP (NYSE: NGL) ("NGL Energy"), which represents approximately 6.4% of the total 88,545,764 limited partner units of NGL Energy outstanding at December 31, 2014, and an 11.78% interest in the general partner of NGL Energy.
At March 31, 2015, the fair market value of our 5,652,568 common unit investment in NGL Energy was $148.3 million, based on a March 31, 2015 closing price of $26.23 per common unit. This does not reflect our 11.78% interest in the general partner of NGL Energy. The fair value of our limited partner investment in NGL Energy is categorized as a Level 1 measurement, as it is based on quoted market prices.
Our policy is to record our equity in earnings of NGL Energy on a one-quarter lag, as we do not expect information on the earnings of NGL Energy to always be available in time to consistently record the earnings in the quarter in which they are generated. Accordingly, the equity in earnings from NGL Energy, which is reflected in our condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2015 and 2014, relates to the earnings of NGL Energy for the three months ended December 31, 2014 and 2013, respectively.
In the first quarter of 2015, NGL announced several transactions in which they issued common units publicly and privately which diluted our limited partnership interest. As we record activity on a one-quarter lag, we expect to record a non-cash gain associated with these issuances in the second quarter of 2015.
In the first quarter of 2015, we sold 999,533 of our NGL Energy common units for $29.0 million, net of related costs of $0.4 million. We recorded a net gain of approximately $7.9 million in "other expense (income)" in our condensed consolidated statement of operations and comprehensive income for the three months ended March 31, 2015.
Subsequent to March 31, 2015, we sold an additional 1 million of our NGL Energy common units for $27.3 million, net of related costs of $0.1 million. We expect to record a net gain of approximately $6.6 million related to this sale.
Certain unaudited summarized income statement information of NGL Energy for the three months ended December 31, 2014 and 2013 is shown below (in thousands):
 
Three Months Ended December 31,
 
2014
 
2013
Revenue
$
4,552,146

 
$
2,743,445

Cost of sales
$
4,311,668

 
$
2,576,029

Operating, general and administrative expenses
$
172,064

 
$
90,753

Depreciation and amortization expense
$
50,335

 
$
35,494

Net income (loss)
$
(5,269
)
 
$
24,052

 
Glass Mountain
Certain unaudited summarized income statement information of Glass Mountain for the three months ended March 31, 2015 is shown below (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
Revenue
$
11,121

 
$
3,853

Cost of sales
$
1,982

 
$

Operating, general and administrative expenses
$
1,438

 
$
850

Depreciation and amortization expense
$
4,044

 
$
2,348

Net income
$
3,655

 
$
653

The equity in earnings of Glass Mountain for the three months ended March 31, 2015 reported in our condensed consolidated statement of operations and comprehensive income is less than 50% of the net income of Glass Mountain for the same period due to amortization of capitalized interest for the period.
Segments
SEGMENTS
SEGMENTS
Our businesses are organized based on the nature and location of the services they provide. Certain summarized information related to our reportable segments is shown in the tables below. None of the operating segments have been aggregated. Our investment in NGL Energy is included within the SemStream segment. Although "Corporate and Other" does not represent an operating segment, it is included in the tables below to reconcile segment information to that of the consolidated Company. Eliminations of transactions between segments are also included within "Corporate and Other" in the tables below.
The accounting policies of each segment are the same as the accounting policies of the consolidated Company. Transactions between segments are generally recorded based on prices negotiated between the segments. Certain general and administrative and interest expenses incurred at the corporate level are allocated to the segments, based on our allocation policies in effect at the time.

 
Three Months Ended March 31, 2015
 
Crude

SemStream

SemCAMS

SemGas

SemLogistics

SemMexico

Corporate
and Other

Consolidated
 
 
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External
$
141,668

 
$

 
$
29,724

 
$
60,276

 
$
5,152

 
$
61,490

 
$

 
$
298,310

Intersegment

 

 

 
5,981

 

 

 
(5,981
)
 

Total revenues
141,668

 

 
29,724

 
66,257

 
5,152

 
61,490

 
(5,981
)
 
298,310

Expenses:
 
 

 

 

 

 

 

 
 
Costs of products sold, exclusive of depreciation and amortization shown below
105,145

 

 
132

 
41,269

 

 
51,507

 
(5,981
)
 
192,072

Operating
21,162

 

 
18,331

 
8,046

 
2,614

 
2,937

 

 
53,090

General and administrative
5,622

 
3

 
3,376

 
2,063

 
1,677

 
1,942

 
17,627

 
32,310

Depreciation and amortization
10,143

 

 
3,066

 
7,138

 
2,040

 
1,053

 
294

 
23,734

Loss (gain) on disposal or impairment of long-lived assets, net
152

 

 

 
(1
)
 

 
(19
)
 
926

 
1,058

Total expenses
142,224

 
3


24,905


58,515


6,331


57,420


12,866


302,264

Earnings (losses) from equity method investments
20,864

 
(305
)
 

 

 

 

 

 
20,559

Operating income (loss)
20,308

 
(308
)

4,819


7,742


(1,179
)

4,070


(18,847
)

16,605

Other expenses (income), net
10,646

 
(9,216
)
 
3,069

 
2,851

 
1,116

 
69

 
(2,448
)
 
6,087

Income (loss) from continuing operations before income taxes
$
9,662

 
$
8,908

 
$
1,750

 
$
4,891

 
$
(2,295
)
 
$
4,001

 
$
(16,399
)

$
10,518

Total assets at March 31, 2015 (excluding intersegment receivables)
$
1,188,963

 
$
135,808

 
$
275,308

 
$
686,665

 
$
143,778

 
$
98,546

 
$
332,472

 
$
2,861,540



 
Three Months Ended March 31, 2014
 
Crude
 
SemStream
 
SemCAMS
 
SemGas
 
SemLogistics
 
SemMexico
 
Corporate
and Other
 
Consolidated
 
 
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
External
$
292,514

 
$

 
$
39,283

 
$
90,686

 
$
4,790

 
$
71,610

 
$

 
$
498,883

Intersegment

 

 

 
9,892

 

 

 
(9,892
)
 

Total revenues
292,514

 


39,283


100,578


4,790


71,610


(9,892
)
 
498,883

Expenses:
 
 
 
 

 

 

 

 

 

Costs of products sold, exclusive of depreciation and amortization shown below
254,537

 

 
67

 
78,582

 
350

 
61,469

 
(9,892
)
 
385,113

Operating
15,139

 

 
23,666

 
7,444

 
2,080

 
2,449

 

 
50,778

General and administrative
3,942

 
113

 
3,980

 
1,972

 
1,422

 
2,751

 
4,556

 
18,736

Depreciation and amortization
11,482

 

 
2,829

 
4,969

 
2,495

 
1,427

 
435

 
23,637

Loss (gain) on disposal of long-lived assets, net
(34
)
 

 

 
4

 

 
(28
)
 

 
(58
)
Total expenses
285,066

 
113


30,542


92,971


6,347


68,068


(4,901
)
 
478,206

Earnings from equity method investments
11,371

 
3,591

 

 

 

 

 

 
14,962

Gain on issuance of common units by equity method investee

 
8,127

 

 

 

 

 

 
8,127

Operating income (loss)
18,819


11,605


8,741


7,607


(1,557
)

3,542


(4,991
)

43,766

Other expenses (income), net
4,663

 
(1,264
)
 
4,155

 
1,689

 
251

 
(45
)
 
(1,952
)
 
7,497

Income (loss) from continuing operations before income taxes
$
14,156

 
$
12,869


$
4,586


$
5,918


$
(1,808
)

$
3,587


$
(3,039
)

$
36,269

 
 
 
 
Inventories
Inventories
INVENTORIES
Inventories consist of the following (in thousands):
 
March 31,
2015
 
December 31,
2014
Crude oil
$
55,680

 
$
26,722

Asphalt and other
12,090

 
16,810

Total inventories
$
67,770

 
$
43,532



During the three months ended March 31, 2015, our Crude segment recorded non-cash charges of $1.2 million to write-down crude oil inventory to the lower of cost or market.
Financial Instruments
FINANCIAL INSTRUMENTS
FINANCIAL INSTRUMENTS
Fair value of financial instruments
We record certain financial assets and liabilities at fair value at each balance sheet date. The tables below summarize the balances of commodity derivative assets and liabilities at March 31, 2015 and December 31, 2014 (in thousands):

 
March 31, 2015
 
December 31, 2014
Derivatives subject to netting arrangements:
Level 1
 
Netting*
 
Total
 
Level 1
 
Netting*
 
Total
Commodity derivatives:
 
 
 
 

 
 
 
 
 

Assets
$
1,763

 
$
(1,763
)
 
$

 
$
3,311

 
$
(1,637
)
 
$
1,674

Liabilities
$
2,733

 
$
(1,763
)
 
$
970

 
$
1,637

 
$
(1,637
)
 
$

*Relates primarily to exchange traded futures. Gain and loss positions on multiple contracts are settled net on a daily basis with the exchange.
"Level 1" measurements are based on inputs consisting of unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. These include commodity futures contracts that are traded on an exchange.
"Level 2" measurements are based on inputs consisting of market observable and corroborated prices for similar derivative contracts. Assets and liabilities classified as Level 2 include over the counter ("OTC") traded physical fixed priced purchases and sales forward contracts.
"Level 3" measurements are based on inputs from a pricing service and/or internal valuation models incorporating observable and unobservable market data. These include commodity derivatives, such as forwards and swaps for which there is not a highly liquid market and therefore are not included in Level 2 above.
Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the measurement requires judgment and may affect the valuation of assets and liabilities and their placement within the fair value levels. At March 31, 2015, all of our physical fixed price forward purchases and sales contracts were being accounted for as normal purchases and normal sales.
There were no financial assets or liabilities recorded at fair value which were classified as Level 2 or Level 3 during the three months ended March 31, 2015 and 2014. As such, no rollforward of Level 3 activity has been presented.
Commodity derivative contracts
Our consolidated results of operations and cash flows are impacted by changes in market prices for petroleum products. This exposure to commodity price risk is managed, in part, by entering into various commodity derivatives.
We seek to manage the price risk associated with our marketing operations by limiting our net open positions through (i) the concurrent purchase and sale of like quantities of petroleum products to create back-to-back transactions that are intended to lock in positive margins based on the timing, location or quality of the petroleum products purchased and delivered or (ii) derivative contracts. Our storage and transportation assets can also be used to mitigate location and time basis risk. All marketing activities are subject to our Comprehensive Risk Management Policy, which establishes limits in order to manage risk and mitigate financial exposure.
Our commodity derivatives can be comprised of swaps, futures contracts and forward contracts of crude oil and natural gas liquids. These are defined as follows:
Swaps – OTC transactions where a floating price, basis or index is exchanged for a fixed (or a different floating) price, basis or index at a preset schedule in the future, according to an agreed-upon formula.
Futures contracts – Exchange traded contracts to buy or sell a commodity. These contracts are standardized by the exchange in terms of quality, quantity, delivery period and location for each commodity.
Forward contracts – OTC contracts to buy or sell a commodity at an agreed upon future date. The buyer and seller agree on specific terms (price, quantity, delivery period and location) and conditions at the inception of the contract.
The following table sets forth the notional quantities for commodity derivative instruments entered into (in thousands of barrels):
 
Three Months Ended March 31,
 
2015
 
2014
Sales
5,731

 
815

Purchases
5,905

 
810


We have not designated any of our commodity derivative instruments as accounting hedges. We have recorded the fair value of our commodity derivative instruments on our condensed consolidated balance sheets in other current assets and other current liabilities in the following amounts (in thousands):
 
March 31, 2015
 
December 31, 2014
 
Assets
 
Liabilities
 
Assets
 
Liabilities
Commodity contracts
$

 
$
970

 
$
1,674

 
$


We have posted margin deposits as collateral with brokers who have the right of set off associated with these funds. Our margin deposit balances were $3.2 million and $0.8 million at March 31, 2015 and December 31, 2014, respectively. These margin account balances have not been offset against our net commodity derivative instrument (contract) positions. Had these margin deposits been netted against our net commodity derivative instrument (contract) positions as of March 31, 2015 and December 31, 2014, we would have had net asset positions of $2.2 million and $2.5 million, respectively.
Realized and unrealized gains (losses) from our commodity derivatives were recorded to product revenue in the following amounts (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
Commodity contracts
$
(66
)
 
$
(807
)

Concentrations of risk
During the three months ended March 31, 2015, two customers of our Crude segment accounted for more than 10% of our consolidated revenues at approximately 35%. We purchased approximately $71.2 million of product from two third-party suppliers of our Crude segment, which represented approximately 37% of our costs of products sold.
At March 31, 2015, two third-party customers of our Crude segment accounted for approximately 33% of our consolidated accounts receivable.
Income Taxes
INCOME TAXES
INCOME TAXES

The effective tax rate was comparable between periods at 45% and 46% for the three months ended March 31, 2015 and 2014, respectively. The rate for the three months ended March 31, 2014 is impacted by $3.1 million Canadian withholding tax paid on remittances to the U.S. Significant items that impacted the effective tax rate for each period, as compared to the U.S. federal statutory rate of 35%, include earnings in foreign jurisdictions taxed at lower rates and a non-controlling interest in Rose Rock for which taxes are not provided. Further, the foreign earnings are taxed in foreign jurisdictions as well as in the U.S., since they are disregarded entities for U.S. federal income tax purposes.

We have a valuation allowance on a small portion of our state net operating loss carryovers with shorter carryover periods and our foreign tax credit carryover. We have not released the valuation allowance on the foreign tax credits due to the foreign tax credit limitation and the relative subjectivity of forecasts of the relational magnitude of U.S. and foreign taxable income in future periods, as well as the shorter carryover period available for the credits. Deferred tax assets are reduced by a valuation allowance when a determination is made that it is more likely than not that some, or all, of the deferred tax assets will not be realized based on the weight of all available evidence. Evidence which is objectively verifiable carries a higher weight in the analysis. The ultimate realization of deferred tax assets is dependent upon the existence of sufficient taxable income of the appropriate character within the carryback and carryforward period available under the tax law. Sources of taxable income include future reversals of existing taxable temporary differences, future earnings and available tax planning strategies.

We have determined that no accruals related to uncertainty in tax positions are required. All income tax years of the Company ending after the emergence from bankruptcy remain open for examination in all jurisdictions. In foreign jurisdictions, all tax years within the relevant statute of limitations for periods prior to the emergence from bankruptcy remain open for examination. Currently, there are no examinations in progress for our federal jurisdiction. There is one examination in progress for our state jurisdictions. We do not anticipate that this audit will have a significant impact on the results of operations or financial position. No foreign jurisdictions are currently under audit.
Long-Term Debt
Long-Term Debt
LONG-TERM DEBT
Our long-term debt consisted of the following (in thousands):
 
March 31,
2015
 
December 31,
2014
SemGroup 7.50% senior unsecured notes
$
300,000

 
$
300,000

SemGroup corporate revolving credit facility
66,000

 
35,000

Rose Rock 5.625% senior unsecured notes
400,000

 
400,000

Rose Rock revolving credit facility
261,000

 
32,000

SemMexico revolving credit facility

 

Capital leases
119

 
132

Total long-term debt
$
1,027,119

 
$
767,132

less: current portion of long-term debt
47

 
40

Noncurrent portion of long-term debt
$
1,027,072

 
$
767,092


SemGroup senior unsecured notes
For the three months ended March 31, 2015 and 2014, we incurred $5.8 million and $5.8 million, respectively, of interest expense related to $300 million of 7.5% senior unsecured notes due 2021 (the "Notes") including the amortization of debt issuance costs.
SemGroup corporate revolving credit facility
At March 31, 2015, we had $66.0 million outstanding cash borrowings on our $500 million revolving credit facility which incurred interest at the alternate base rate ("ABR") of 4.25%.
At March 31, 2015, we had outstanding letters of credit under the facility of $3.8 million, for which the rate in effect was 2.0%.
We recorded interest expense related to the SemGroup revolving credit facility of $1.0 million and $1.8 million for the three months ended March 31, 2015 and 2014, respectively, including amortization of debt issuance costs.
Rose Rock senior unsecured notes
At March 31, 2015, Rose Rock had outstanding $400 million of 5.625% senior unsecured notes due 2022 (the "Rose Rock Notes"). For the three months ended March 31, 2015, we incurred $5.8 million of interest expense related to the Rose Rock Notes including amortization of debt issuance costs.
Rose Rock revolving credit facility
At March 31, 2015, Rose Rock had $261.0 million outstanding cash borrowings under the $585 million Rose Rock revolving credit facility, of which $36.0 million incurred interest at the ABR of 4.75% and $225.0 million incurred interest at the Eurodollar rate of 2.68%.
At March 31, 2015, Rose Rock had $17.3 million in outstanding letters of credit, and the rate in effect was 2.50%.
Rose Rock had $9.1 million of Secured Bilateral Letters of Credit outstanding at March 31, 2015. The interest rate in effect was 1.75%. Secured Bilateral Letters of Credit are external to the facility and do not reduce availability for borrowing on the revolving credit facility.
We recorded $2.3 million and $2.3 million of interest expense related to this facility during the three months ended March 31, 2015 and 2014, respectively, including letters of credit and amortization of debt issuance costs.
SemMexico revolving credit facility
At March 31, 2015, SemMexico had no outstanding borrowings on its 44 million Mexican pesos (U.S. $2.9 million at the March 31, 2015 exchange rate) revolving credit facility, which matures in May 2015. Borrowings are unsecured and bear interest at the bank prime rate in Mexico plus 1.50%.
At March 31, 2015, SemMexico had no outstanding borrowings on its 56 million Mexican pesos (U.S. $3.7 million at the March 31, 2015 exchange rate) revolving credit facility, which matures in July 2015. Borrowings are unsecured and bear interest at the bank prime rate in Mexico plus 1.50%.
At March 31, 2015, SemMexico had an outstanding letter of credit of 292.8 million Mexican pesos (U.S. $19.2 million at the March 31, 2015 exchange rate) and a $3.0 million U.S. dollar letter of credit. Fees on outstanding letters of credit range from a rate of 0.40% to 0.70%.
Capitalized interest
During the three months ended March 31, 2015 and 2014, we capitalized interest from our credit facilities of $0.3 million and $0.7 million, respectively.
Fair value
We estimate the fair value of the Notes to be $315 million and the fair value of the Rose Rock Notes to be $394 million at March 31, 2015, based on unadjusted, transacted market prices, which is categorized as a Level 1 measurement. We estimate that the fair value of our other long-term debt was not materially different than the recorded values at March 31, 2015. It is our belief that neither the market interest rates nor our credit profile have changed significantly enough to have had a material impact on the fair value of our other debt outstanding at March 31, 2015. This estimate is categorized as a Level 2 measurement.
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
Bankruptcy matters
On July 22, 2008 (the "Petition Date"), SemGroup, L.P. and certain subsidiaries filed petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Also on July 22, 2008, SemGroup, L.P.'s Canadian subsidiaries filed for creditor protection in Canada. Later during 2008, certain other U.S. subsidiaries filed petitions for reorganization. While in bankruptcy, SemGroup, L.P. filed a plan of reorganization with the court, which was confirmed on October 28, 2009 (the "Plan of Reorganization"). The Plan of Reorganization determined, among other things, how pre-Petition Date obligations would be settled, the equity structure of the reorganized company upon emergence and the financing arrangements upon emergence. SemGroup Corporation emerged from bankruptcy protection on November 30, 2009 (the "Emergence Date").
Claims reconciliation process
A large number of parties made claims against us for obligations alleged to have been incurred prior to our predecessor's bankruptcy filing. We have resolved or settled all of these outstanding claims and have made all required distributions. The Plan of Reorganization has therefore been fully administered.On November 7, 2014, SemGroup Corporation and the other reorganized debtors moved for a final decree from the bankruptcy court closing the debtors’ bankruptcy cases. The United States Bankruptcy Court for the District of Delaware granted the request and entered its Order Granting Motion of Remaining Debtors for Entry of Final Decree on December 18, 2014. Accordingly, the bankruptcy cases for SemCrude, L.P., Eaglwing, L.P., SemCanada II, L.P., SemCanada L.P., SemGas, L.P., SemGroup, L.P., SemMaterials, L.P., and SemStream, L.P. have been closed. As part of its decree, the Court retained jurisdiction over certain on-going adversary proceedings, but the debtors have estimated and paid the claims associated with these remaining adversaries, leaving the non-debtor parties to the adversaries to resolve their remaining claims amongst themselves.On January 2, 2015, Bettina M. Whyte, the duly appointed Trustee of the SemGroup Litigation Trust (the “Litigation Trustee”), filed a notice of appeal of the Bankruptcy Court’s December 18, 2014 order closing the aforementioned bankruptcy cases. However, the Bankruptcy Court’s order of final decree was effective upon entry, and the appeal does not stay the effect of the order. The Litigation Trustee’s appeal to the United States District Court for the District of Delaware is currently pending and will be opposed by SemGroup Corporation and the other remaining reorganized debtors.
Dimmit County, TX claims
An employee of Rose Rock Midstream Field Services, LLC was involved in a tractor trailer accident on January 15, 2015 in Dimmit County, Texas.  A second accident followed resulting in six fatalities and multiple injuries. At this time, the following lawsuits have been filed in either the District Court of Zavala County, Texas or the District Court of Dimmit County, Texas: Olga D. Rubio and Carlos Rubio, Individually and on Behalf of All Statutory Wrongful Death Beneficiaries of Carlos Rubio, Jr., Deceased vs. Rose Rock Midstream Field Services, LLC and Jesus T. Riojas; David Rodriguez and Maribel Rodriguez vs. Rose Rock Midstream Field Services, LLC and Jesus T. Riojas; David Rodriguez and Maribel Rodrigues, Plaintiffs and Alejandra Abigail Ortega, Individually and as next friend of K.A.P., a minor, and as Representative of the Estate of Eduardo Pena, and Julian Pena and Nelva G. Suifuentes Pena Intervenors vs. Rose Rock Midstream Field Services, LLC, Jesus Riojas, and Roberto Rivera; Derek Muhlenbruch vs. Rose Rock Midstream Field Services, LLC and Jesus T. Riojas; and Agustin Lara, Sr., Individually, and Elsa Zamarripa, Individually and As Representative of the Estate of Justin Lara, Deceased vs. Rose Rock Midstream Field Services, LLC and Jesus T. Riojas; Jorge A Porras vs. Rose Rock Midstream Field Services, LLC; Nancy Garcia vs. Rose Rock Midstream Field Services, LLC; Veronica Veyro vs. Rose Rock Midstream Field Services, LLC; Veronica Veyro a/n/f of Sergio Veyro, Jr. vs. Rose Rock Midstream Field Services, LLC; Veronica Veyro as Rep of Estate of Sergio Veyro Sr., deceased vs. Rose Rock Midstream Field Services, LLC; Veronica Kimberly Veyro vs. Rose Rock Midstream Field Services, LLC; Roberto Rivera-Castilla vs. Rose Rock Midstream Field Services, LLC; Mary Alice Medellin vs. Rose Rock Midstream Field Services, LLC; Mary Medellin as Rep of Estate of Juan Medellin, Jr. vs. Rose Rock Midstream Field Services, LLC; Mary Medellin on behalf of those entitled to recover for the Wrongful Death of Juan Medellin, Jr. vs. Rose Rock Midstream Field Services, LLC; Elizabeth Rolon vs. Rose Rock Midstream Field Services, LLC and Juan Francisco Medellin, III vs. Rose Rock Midstream Field Services, LLC.   We are currently working with counsel for the interested parties to investigate the accident, and no determination of liability has been made.  We will continue to defend our position and believe that any liability that may arise from this incident will be covered by our insurance; however, we cannot predict the outcome.
Blueknight claim
Blueknight Energy Partners, L.P. ("Blueknight"), which was formerly a subsidiary of SemGroup, together with other entities related to Blueknight, entered into a Shared Services Agreement on April 7, 2009, with SemCrude, L.P., now known as Rose Rock Midstream Crude, L.P. ("SemCrude") and SemManagement, L.L.C. (which are currently subsidiaries of SemGroup). The services provided by SemCrude to Blueknight under this agreement included assisting Blueknight with movement of crude oil belonging to Blueknight’s customers and with the operation of Blueknight’s Oklahoma pipeline system and its Cushing, Oklahoma terminal. Under the subsequent amendments to the agreements beginning in May 2010, certain of these services were phased out, and Blueknight began to perform all services necessary for the movement of its crude oil and the operation of its Cushing terminal without SemCrude’s assistance.
In a letter dated August 18, 2011, Blueknight claimed that SemCrude owes Blueknight approximately 141,000 barrels of crude oil. We responded to Blueknight’s letter denying their charges and requesting documentation from Blueknight of its claim. On February 14, 2012, after months of interaction between the parties through which Blueknight was requested to substantiate its claim, Blueknight filed suit against SemCrude and other related companies in the District Court of Oklahoma County, Oklahoma. On May 1, 2012, the case was transferred to Tulsa County, Oklahoma. On July 2, 2012, the Tulsa County District Court appointed a Special Master to review terminal operations accounting records and determine whether 141,000 barrels of crude oil owned by Blueknight is missing after three months of operations in April through June, 2010. On June 11, 2013, the Special Master’s Report was filed with the District Court finding a shortage in Blueknight’s Cushing terminal and Oklahoma pipeline system of 148,000 barrels. However, after a review of all records created during that three month time period, the Special Master was unable to determine how the shortage might have occurred and was unable to determine the ownership of the potential shortage.
We are currently seeking discovery in the District Court of documentation and testimony on the potential cause and the impact, if any, of the shortage found by the Special Master. We will continue to defend our position; however, we cannot predict the outcome.
Environmental
We may from time to time experience leaks of petroleum products from our facilities and, as a result of which, we may incur remediation obligations or property damage claims. In addition, we are subject to numerous environmental regulations. Failure to comply with these regulations could result in the assessment of fines or penalties by regulatory authorities.
The Kansas Department of Health and Environment ("the KDHE") initiated discussions during our bankruptcy proceeding regarding six of our sites in Kansas (five owned by Crude and one owned by SemGas) that KDHE believes, based on their historical use, may have soil or groundwater contamination in excess of state standards. KDHE sought our agreement to undertake assessments of these sites to determine whether they are contaminated. We reached an agreement with KDHE on this matter and entered into a Consent Agreement and Final Order with KDHE to conduct environmental assessments on the sites and to pay KDHE’s costs associated with their oversight of this matter. We have conducted Phase II investigations at all sites. Four of the sites have limited amounts of soil contamination that will be excavated and/or remediated on site. Four of the sites appeared to have ground water contamination requiring further delineation and/or ongoing monitoring. Work plans have been submitted to, and approved by, the KDHE. One site was closed and we anticipate closure in 2015 for three of the remaining five sites. We do not anticipate any penalties or fines for these historical sites.
Other matters
We are party to various other claims, legal actions, and complaints arising in the ordinary course of business. In the opinion of our management, the ultimate resolution of these claims, legal actions and complaints, after consideration of amounts accrued, insurance coverage and other arrangements, will not have a material adverse effect on our consolidated financial position, results of operations or cash flows. However, the outcome of such matters is inherently uncertain, and estimates of our consolidated liabilities may change materially as circumstances develop.
Asset retirement obligations
We will be required to incur significant removal and restoration costs when we retire our natural gas gathering and processing facilities in Canada. We have recorded an asset retirement obligation liability of $40.2 million at March 31, 2015, which is included within other noncurrent liabilities on our condensed consolidated balance sheets. This amount was calculated using the $87.6 million cost we estimate we would incur to retire these facilities, discounted based on our risk-adjusted cost of borrowing and the estimated timing of remediation.
The calculation of the liability for an asset retirement obligation requires the use of significant estimates, including those related to the length of time before the assets will be retired, cost inflation over the assumed life of the assets, actual remediation activities to be required, and the rate at which such obligations should be discounted. Future changes in these estimates could result in material changes in the value of the recorded liability. In addition, future changes in laws or regulations could require us to record additional asset retirement obligations.
Our other segments may also be subject to removal and restoration costs upon retirement of their facilities. However, we are unable to predict when, or if, our pipelines, storage tanks and other facilities would become completely obsolete and require decommissioning. Accordingly, we have not recorded a liability or corresponding asset, as both the amount and timing of such potential future costs are indeterminable.
Purchase and sale commitments
We routinely enter into agreements to purchase and sell petroleum products at specified future dates. We account for derivatives at fair value with the exception of commitments which have been designated as normal purchases and sales for which we do not record assets or liabilities related to these agreements until the product is purchased or sold. At March 31, 2015, such commitments included the following (in thousands):
 
Volume
(Barrels)
 
Value
Fixed price purchases
13,145

 
$
1,064,246

Fixed price sales
14,125

 
$
1,127,864

Floating price purchases
7,149

 
$
333,777

Floating price sales
14,538

 
$
508,968


Certain of the commitments shown in the table above relate to agreements to purchase product from a counterparty and to sell a similar amount of product (in a different location) to the same counterparty. Many of the commitments shown in the table above are cancellable by either party, as long as notice is given within the time frame specified in the agreement (generally 30 to 120 days).
Our SemGas segment has a take or pay contractual obligation related to the fractionation of natural gas liquids through June 2023. At March 31, 2015, no amounts were due under the contract. The approximate amount of future obligation is as follows (in thousands):
For year ending:
 
December 31, 2015
$
7,817

December 31, 2016
11,804

December 31, 2017
11,938

December 31, 2018
10,060

December 31, 2019
9,121

Thereafter
24,392

Total expected future payments
$
75,132


SemGas further has a take or pay contractual obligation related to pipeline transportation through October 2015. The amount of future obligation is approximately $2.6 million. SemGas also enters into contracts under which we are responsible for marketing the majority of the gas and natural gas liquids produced by the counterparties to the agreements. The majority of SemGas’ revenues were generated from such contracts.
See Note 3 for capital contribution requirements related to the White Cliffs expansion.
Equity
EQUITY
EQUITY
Unaudited condensed consolidated statement of changes in owners’ equity
The following table shows the changes in our consolidated owners’ equity accounts from December 31, 2014 to March 31, 2015 (in thousands):
 
Common
Stock
Additional
Paid-in
Capital
Treasury
Stock
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Noncontrolling
Interests
Total
Owners’
Equity
Balance at December 31, 2014
$
436

$
1,245,877

$
(1,332
)
$
(68,332
)
$
(27,141
)
$
69,929

$
1,219,437

Net income



1,466


4,310

5,776

Other comprehensive loss, net of income taxes




(9,060
)

(9,060
)
Distributions to noncontrolling interests





(8,953
)
(8,953
)
Dividends paid

(14,846
)




(14,846
)
Unvested dividend equivalent rights

(66
)



(44
)
(110
)
Non-cash equity compensation

2,434




298

2,732

Issuance of common stock under compensation plans
3

762





765

Repurchase of common stock


(3,630
)



(3,630
)
Rose Rock Midstream, L.P. equity issuance





89,119

89,119

Transfer of WOT and Glass Mountain to Rose Rock

32,164




(51,452
)
(19,288
)
Balance at March 31, 2015
$
439

$
1,266,325

$
(4,962
)
$
(66,866
)
$
(36,201
)
$
103,207

$
1,261,942


Accumulated other comprehensive loss
The following table presents the changes in the components of accumulated other comprehensive loss from December 31, 2014 to March 31, 2015 (in thousands):
 
Currency
Translation
 
Employee
Benefit
Plans
 
Total
Balance at December 31, 2014
$
(25,059
)
 
$
(2,082
)
 
$
(27,141
)
Currency translation adjustment, net of income tax benefit of $5,684
(9,068
)
 

 
(9,068
)
Changes related to benefit plans, net of income tax expense of $3

 
8

 
8

Balance at March 31, 2015
$
(34,127
)
 
$
(2,074
)
 
$
(36,201
)

There were no significant items reclassified out of accumulated other comprehensive loss to net income for the three months ended March 31, 2015.
Common stock
During the three months ended March 31, 2015, we issued 9,145 shares under the Employee Stock Purchase Plan and 157,005 shares related to our equity based compensation awards. Of these vested shares related to compensation awards, recipients sold back to the Company 54,783 shares to satisfy tax withholding obligations which are being recognized at cost as treasury stock on the condensed consolidated balance sheet.
Equity-based compensation
At March 31, 2015, there were approximately 428,000 unvested shares that have been granted under our director and employee compensation programs. The par value of these shares is not reflected in common stock on the condensed consolidated balance sheet, as these shares have not yet vested. For certain of the awards, the number of shares that will vest is contingent upon our achievement of certain specified targets. If we meet the specified maximum targets, approximately 172,000 additional shares could vest.
The holders of certain restricted stock awards are entitled to equivalent dividends ("UDs") to be settled in cash upon vesting of the related restricted stock awards. At March 31, 2015, the value of the UDs to be settled in cash related to unvested restricted stock awards was approximately $307 thousand.
During the three months ended March 31, 2015, we granted 139,286 restricted stock awards with a weighted average grant date fair value of $89.38 per award.
Dividends
The following table sets forth the quarterly dividends per share declared and/or paid to shareholders for the periods indicated:

Quarter Ending
 
Dividend Per Share
 
Date Declared
 
Date of Record
 
Date Paid
March 31, 2014
 
$
0.22

 
February 25, 2014
 
March 10, 2014
 
March 20, 2014
June 30, 2014
 
$
0.24

 
May 8, 2014
 
May 19, 2014
 
May 29, 2014
September 30, 2014
 
$
0.27

 
August 6, 2014
 
August 18, 2014
 
August 28, 2014
December 31, 2014
 
$
0.30

 
November 6, 2014
 
November 17, 2014
 
November 28, 2014
March 31, 2015
 
$
0.34

 
February 26, 2015
 
March 9, 2015
 
March 20, 2015
June 30, 2015
 
$
0.38

 
May 6, 2015
 
May 18, 2015
 
May 29, 2015
Earnings Per Share
EARNINGS PER SHARE
EARNINGS PER SHARE

Earnings per share is calculated based on income from continuing and discontinued operations less any income attributable to noncontrolling interests. Income attributable to noncontrolling interests represents third-party limited partner unitholders' interests in the earnings of our consolidated subsidiary, Rose Rock.  Rose Rock allocates net income to its limited partners based on the distributions pertaining to the current period's available cash as defined by Rose Rock's partnership agreement. After adjusting for the appropriate period's distributions, the remaining undistributed earnings or excess distributions over earnings, if any, are allocated to Rose Rock's general partner, limited partners and participating securities in accordance with the contractual terms of Rose Rock's partnership agreement and as further prescribed under the two-class method. Incentive distribution rights do not participate in undistributed earnings.
Basic earnings per share is calculated based on the weighted average shares outstanding during the period. Diluted earnings per share includes the dilutive effect of warrants and unvested equity compensation awards.
The following summarizes the calculation of basic earnings per share for the three months ended March 31, 2015 and 2014 (in thousands, except per share amounts):
 
Three Months Ended March 31, 2015
 
Three Months Ended March 31, 2014
 
Continuing
Operations
 
Discontinued
Operations
 
Net
 
Continuing
Operations
 
Discontinued
Operations
 
Net
Income (loss)
$
5,776

 
$

 
$
5,776

 
$
19,743

 
$
(5
)
 
$
19,738

less: Income attributable to noncontrolling interests
4,310

 

 
4,310

 
6,150

 

 
6,150

Income attributable to SemGroup
$
1,466

 
$

 
$
1,466

 
$
13,593

 
$
(5
)
 
$
13,588

Weighted average common stock outstanding
43,717

 
43,717

 
43,717

 
42,631

 
42,631

 
42,631

Basic earnings per share
$
0.03

 
$

 
$
0.03

 
$
0.32

 
$

 
$
0.32


The following summarizes the calculation of diluted earnings per share for the three months ended March 31, 2015 and 2014 (in thousands, except per share amounts):

 
Three Months Ended March 31, 2015
 
Three Months Ended March 31, 2014
 
Continuing
Operations
 
Discontinued
Operations
 
Net
 
Continuing
Operations
 
Discontinued
Operations
 
Net
Income (loss)
$
5,776

 
$

 
$
5,776

 
$
19,743

 
$
(5
)
 
$
19,738

less: Income attributable to noncontrolling interests
4,310

 

 
4,310

 
6,150

 

 
6,150

less: Income resulting from the change in fair value of warrants

 

 

 
980

 

 
980

Numerator
$
1,466

 
$

 
$
1,466

 
$
12,613

 
$
(5
)
 
$
12,608

Weighted average common stock outstanding
43,717

 
43,717

 
43,717

 
42,631

 
42,631

 
42,631

Effect of warrants outstanding

 

 

 
825

 
825

 
825

Effect of dilutive securities
223

 
223

 
223

 
305

 
305

 
305

Denominator
43,940

 
43,940

 
43,940

 
43,761

 
43,761

 
43,761

Diluted earnings per share
$
0.03

 
$

 
$
0.03

 
$
0.29

 
$

 
$
0.29


All outstanding warrants expired on November 30, 2014 and therefore have no dilutive effect for the three months ended March 31, 2015.
Supplemental Cash Flow Information
SUPPLEMENTAL CASH FLOW INFORMATION
SUPPLEMENTAL CASH FLOW INFORMATION
The following table summarizes the changes in the components of operating assets and liabilities, net of the effects of acquisitions, shown on our condensed consolidated statements of cash flows (in thousands):

 
Three Months Ended March 31,
 
2015
 
2014
Decrease (increase) in restricted cash
$
342

 
$
(2,585
)
Decrease (increase) in accounts receivable
56,863

 
(58,879
)
Decrease (increase) in receivable from affiliates
1,663

 
14,992

Decrease (increase) in inventories
(25,857
)
 
3,715

Decrease (increase) in derivatives and margin deposits
(2,356
)
 
(546
)
Decrease (increase) in other current assets
2,280

 
1,636

Decrease (increase) in other assets
(628
)
 
(33
)
Increase (decrease) in accounts payable and accrued liabilities
(51,435
)
 
49,754

Increase (decrease) in payable to affiliates
2,728

 
(24,075
)
Increase (decrease) in payables to pre-petition creditors
(2
)
 
(2
)
Increase (decrease) in other noncurrent liabilities
95

 
(2,525
)
 
$
(16,307
)
 
$
(18,548
)
  

Other supplemental disclosures
In the first quarter of 2015, we recorded a $51.5 million reduction to noncontrolling interests in consolidated subsidiaries and an offsetting increase to additional paid-in capital of $32.2 million (net of tax impact of $19.3 million). This non-cash entry represents the portion of the proceeds in excess of historical cost which were attributed to Rose Rock's third-party unitholders related to Rose Rock's purchase of WOT and a 50% interest in Glass Mountain from SemGroup (Note 2).
We paid cash interest of $15.0 million and $3.6 million for the three months ended March 31, 2015 and 2014, respectively.
We paid cash for income taxes (net of refunds received) of $3.3 million and $12.2 million for the three months ended March 31, 2015 and 2014, respectively.
We incurred liabilities for construction work in process that had not been paid of $16.6 million and $10.0 million as of March 31, 2015 and 2014, respectively. Such amounts are not included in capital expenditures on the consolidated statements of cash flows.
Related Party Transactions
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS
NGL Energy Partners LP and subsidiaries (Gavilon, LLC and High Sierra Crude Oil and Marketing, LLC)
As described in Note 3, we own interests in NGL Energy, which we account for under the equity method.
During the three months ended March 31, 2015 and 2014, we generated the following transactions with NGL Energy and its subsidiaries (in thousands):
 
Three Months Ended March 31,
 
2015
 
2014
Revenues
$
45,469

 
$
172,438

Purchases
$
35,234

 
$
157,691

Reimbursements from NGL Energy for services
$
42

 
$
42


Transactions with NGL Energy and its subsidiaries primarily relate to marketing, leased storage and transportation services of crude oil, including buy/sell transactions. In accordance with ASC 845-10-15, these transactions were reported as revenue on a net basis in our condensed consolidated statements of operations and comprehensive income because the purchases of inventory and subsequent sales of the inventory were with the same counterparty.
White Cliffs
As described in Note 3, we account for our ownership interest in White Cliffs under the equity method. During the three months ended March 31, 2015 and 2014, we generated storage revenue from White Cliffs of approximately $1.0 million and $0.8 million, respectively. We incurred $0.7 million and $0.9 million of cost for the three months ended March 31, 2015, respectively, related to transportation fees for shipments on White Cliffs.
Glass Mountain
We incurred $0.5 million of cost for the three months ended March 31, 2015 related to transportation fees for shipments on the Glass Mountain Pipeline. We received $0.2 million and $0.1 million in fees from Glass Mountain for the three months ended March 31, 2015 and 2014, respectively, related to support and administrative services associated with pipeline operations. We made purchases of crude oil of $1.5 million from Glass Mountain during the three months ended March 31, 2015.
Legal services
The law firm of Conner & Winters, LLP, of which Mark D. Berman is a partner, performs legal services for us. Mr. Berman is the spouse of Candice L. Cheeseman, General Counsel and Secretary. Mr. Berman does not perform any legal services for us. SemGroup paid $0.3 million and $0.3 million in legal fees and related expenses to this law firm during the three months ended March 31, 2015 and 2014, respectively (of which $3.3 thousand and $54.0 thousand was paid by White Cliffs during the three months ended March 31, 2015 and 2014, respectively).
Condensed Consolidating Guarantor Financial Statements (Notes)
Condensed Consolidating Guarantor Financial Statements [Text Block]
CONDENSED CONSOLIDATING GUARANTOR FINANCIAL STATEMENTS

Our Notes are guaranteed by certain of our subsidiaries as follows: SemGas, L.P., SemCanada, L.P., SemCanada II, L.P., SemMaterials, L.P., SemGroup Europe Holding, L.L.C., SemOperating G.P., L.L.C., SemMexico, L.L.C., SemDevelopment, L.L.C., Rose Rock Midstream Holdings, LLC and Mid-America Midstream Gas Services, L.L.C. (collectively, the "Guarantors").
Each of the Guarantors is 100% owned by SemGroup Corporation (the "Parent"). Such guarantees of the Notes are full and unconditional and constitute the joint and several obligations of the Guarantors. There are no significant restrictions upon the ability of the Parent or any of the Guarantors to obtain funds from its respective subsidiaries by dividend or loan. None of the assets of the Guarantors represent restricted net assets pursuant to Rule 4-08(e)(3) of Regulation S-X under the Securities Act.
In February 2015, we contributed our interests in Wattenberg Holding, LLC and Glass Mountain Holding, LLC to Rose Rock (Note 2). As a result of this transaction, Wattenberg Holding, LLC and Glass Mountain Holding, LLC no longer guarantee our Notes. Prior year comparative information has been recast to reflect Wattenberg Holding, LLC and Glass Mountain Holding, LLC as non-guarantors.
Unaudited condensed consolidating financial statements for the Parent, the Guarantors and non-guarantors as of March 31, 2015 and December 31, 2014 and for the three months ended March 31, 2015 and 2014 are presented on an equity method basis in the tables below (in thousands).
Intercompany receivable and payable balances, including notes receivable and payable, are capital transactions primarily to facilitate the capital needs of our subsidiaries. As such, subsidiary intercompany balances have been reported as a reduction to equity on the condensed consolidating Guarantor balance sheets. The Parent's net intercompany balance, including note receivable, and investments in subsidiaries have been reported in equity method investments on the condensed consolidating Guarantor balance sheets. Intercompany transactions, such as daily cash management activities, have been reported as financing activities within the condensed consolidating Guarantor statements of cash flows. The Parent's investing activities with subsidiaries, such as the drop down of WOT and Glass Mountain to Rose Rock in the first quarter of 2015, have been reflected as cash flows from investing activities. Quarterly cash distributions from Rose Rock representing a return on capital have been included in the Parent's cash flows from operations. These balances are eliminated through consolidating adjustments below.
Condensed Consolidating Guarantor Balance Sheets
 
 
March 31, 2015
 
 
Parent
 
Guarantors
 
Non-guarantors
 
Consolidating Adjustments
 
Consolidated
ASSETS
 
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
252,412

 
$

 
$
66,021

 
$
(2,908
)
 
$
315,525

Restricted cash
 
3,832

 

 
2,564

 

 
6,396

Accounts receivable, net
 
741

 
31,732

 
257,880

 

 
290,353

Receivable from affiliates
 
959

 
3,339

 
13,969

 
(3,111
)
 
15,156

Inventories
 

 
254

 
67,516

 

 
67,770

Other current assets
 
7,359

 
82

 
8,329

 

 
15,770

Total current assets
 
265,303

 
35,407


416,279


(6,019
)

710,970

Property, plant and equipment, net
 
4,589

 
480,959

 
818,233

 

 
1,303,781

Equity method investments
 
1,366,535

 
563,003

 
425,655

 
(1,793,730
)
 
561,463

Goodwill
 

 
13,052

 
45,107

 

 
58,159

Other intangible assets, net
 
24

 
150,333

 
20,005

 

 
170,362

Other noncurrent assets, net
 
37,443

 
1,617

 
17,745

 

 
56,805

Total assets
 
$
1,673,894

 
$
1,244,371


$
1,743,024


$
(1,799,749
)

$
2,861,540

LIABILITIES AND OWNERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
$
203

 
$
17,796

 
$
204,713

 
$

 
$
222,712

Payable to affiliates
 
17

 
2

 
19,279

 
(3,110
)
 
16,188

Accrued liabilities
 
10,774

 
13,330

 
59,369

 

 
83,473

Payables to pre-petition creditors
 
3,130

 

 

 

 
3,130

Deferred revenue
 

 

 
20,602

 

 
20,602

Other current liabilities
 
1,249

 
704

 
1,283

 

 
3,236

Current portion of long-term debt
 

 

 
47

 

 
47

Total current liabilities
 
15,373

 
31,832

 
305,293

 
(3,110
)
 
349,388

Long-term debt
 
366,000

 

 
716,647

 
(55,575
)
 
1,027,072

Deferred income taxes
 
130,818

 

 
44,744

 

 
175,562

Other noncurrent liabilities
 
2,968

 

 
44,608

 

 
47,576

Commitments and contingencies
 


 


 


 


 


Owners’ equity excluding noncontrolling interests in consolidated subsidiaries
 
1,158,735

 
1,212,539

 
528,525

 
(1,741,064
)
 
1,158,735

Noncontrolling interests in consolidated subsidiaries
 

 

 
103,207

 

 
103,207

Total owners’ equity
 
1,158,735

 
1,212,539


631,732


(1,741,064
)

1,261,942

Total liabilities and owners’ equity
 
$
1,673,894


$
1,244,371