This year, SemGroup holds the sixth spot on Oklahoma Inc.’s ranking of 36 companies that were evaluated.

Carlin Conner, SemGroup’s CEO, said the company’s results over the past year validate its path.

“Really, our forecast and our results are about the execution of our strategy,” Conner said. “We have been preparing for a lower-for-longer commodity cycle.“

Conner explained that SemGroup has been moving away from agreements where its pay is dependent upon commodity price and how much of the product is moved through its system.

Instead, particularly with two recent, significant expansions, SemGroup is using “take-or-pay” agreements that require the customer to pay for storage or transportation services, regardless of the volume.

The contract arrangement already is widely used by the refining segment, a segment that SemGroup is paying more attention to, he said.

“The majority of our cash flows now come through take-or-pay agreements with investor-grade counter parties,” Conner said. “That provides a lot of stability for our business, and for our investors.”

Growth Helps Fuel Results

SemGroup not only has boosted its cash flows. It also continues to build out its assets, both through organic growth and acquisitions.

This past summer, the Maurepas Pipeline project in Louisiana that consists of a network of three, separate lines totaling 100 miles in length was brought online by the company.

The Maurepas Pipeline is designed to help local refineries both integrate and optimize their operations and to give them access to domestically produced crude oil.

Earlier this year, SemGroup also closed its deal to acquire the Houston Fuel Oil Terminal Co., which operates one of the largest crude and fuel oil terminals in the U.S. The terminal is located on 330 acres fronting the Houston Ship Channel.

The asset added 16.8 million barrels of storage capacity to SemGroup’s inventory in Cushing and other locations in a deal worth about $2.1 billion.

At the time of the sale, the terminal’s storage was divided among 144 tanks ranging in size from 10,000 to 400,000 barrels and it had multiple receipt and delivery pipelines, four ship docks with a fifth under construction, as well as seven barge docks able to accommodate 23 barges simultaneously.

The complex also is building a new pipeline and an additional 1.45 million barrels of crude oil storage that should be operational by the middle of 2018.

“Through those projects, we not only grew, but we grew on the backs of more secure, take-or-pay contracts” Conner said. “The majority of our cash flow now is based on these take-or-pay contracts.”

Plus, that same contractual concept is being implemented in other areas where SemGroup is growing.

Conner noted two areas of interest, in particular: SemCAMS’ operations in the Wapiti field in Alberta, Canada, and Rose Rock’s and SemGas’ operations the Mississippi Lime and STACK plays in the U.S. Mid-Continent.

In the Wapiti field, SemCAMS operates two sour gas plants and two sweet gas plants. It also is building another sour gas plant that’s expected to be operational by the second quarter of 2019, and proposes to build an additional pipeline system and plant to process both sour and sweet natural gas to support producers in Canada’s Montney Formation in Alberta and British Columbia.

SemGroup is in the process of seeking regulatory approval for the work and hopes for the plant and system to be online in a few years.

As for its Mid-Continent operations, Conner said Rose Rock’s White Cliffs Pipeline that carries oil produced in Colorado to Cushing continues to do well.

And Rose Rock’s Glass Mountain Pipeline, which serves the Granite Wash and Mississippi Lime plays, also is being expanded into the STACK play in Oklahoma.

STACK, an acronym for the Sooner Trend, Anadarko (Basin), Canadian and Kingfisher (counties), is a play that can be accessed by wells drilled in six counties north and west of Oklahoma City.

The company also is extending its gathering system serving the Mississippi Lime play to take natural gas produced from wells in the STACK play to its Rose Valley gas processing plant in northern Oklahoma.

“We have investment grade customers that have underwritten those projects and have entered into more secure contracts,” he said. “We are looking for more volume using that type of arrangement.“

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