Semgroup’S Track Record of Building Shareholder Value
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60% 40% 20% 0% -20% 2012 Annual Report 12/2010 2/2011 4/2011 6/2011 8/2011 Shareholder Value SemGroup 10/2011 S &P 12/2011 5 Al 00 I eria n n d ML e 2/2012 P x In d e 4/2012 x 6/2012 8/2012 10/2012 12/2012 SemGroup’s Track Record of Building Shareholder Value Purchased additional 25% interest in Glass Mountain Pipeline Launched IPO Accomplished for MLP, Rose Announced SemGroup planned Rock Midstream plans to expand stock refinancing- Completed White Cliffs begins 40% cash RRMS stock 1.95 million Pipeline to trading on interest savings begins trading barrel Cushing 150,000 barrels NYSE over 2010 on NYSE expansion per day May June March March October February November November 2010 2011 December 2012 Agreement with Eagle Contributed Announced plans Agreement Energy Company to SemStream to for Joint Venture finalized for Glass gather and process NGL Energy with Chesapeake Mountain Pipeline natural gas in the Partners for cash and Gavilon Joint Venture with Mississippi Lime Play and equity interests Chesapeake and in Oklahoma Gavilon Announced Cushing Announced plans expansion 1.95 million with Noble to additional barrels build Wattenberg Oil Trunkline in Colorado Dear Fellow Stockholders, 2012 was a year of exceptional performance for SemGroup Corporation (NYSE: SEMG). We delivered strong results at the high end of our guidance range, saw stock price increase 50% and launched new infrastructure projects to continue the growth. It is an exciting time for midstream energy. Taking advantage of the need for new infrastructure, we: • completed 1.95 million barrel expansion at our Cushing, Oklahoma terminal; • purchased an additional 25% interest in Glass Mountain Pipeline; • benefited from the growing need for the White Cliffs Pipeline where volumes increased 69% over 2011 and • increased our U.S. gas processing 23% over the fourth quarter of 2011. Our SemCAMS plants in Canada received increased capital fee recoveries for the year. And our SemGas business benefited from higher volumes and commodity prices in 2012 as demand for processing in the Mississippi Lime Play has grown dramatically. But the year wasn’t without its challenges. While the SemGas business benefited from higher volumes, lower natural gas prices constrained earnings. The SemLogistics business faced continuing difficult market conditions in Europe. While the business did finish the year slightly positive, we continue to look for opportunities to improve on this result as we move into 2013. We announced our intent to begin paying a dividend to shareholders in the second quarter of 2013. The strategy of moving assets into the Rose Rock Midstream MLP (NYSE: RRMS) (Rose Rock) also began in 2013 with the drop down of 1/3 of our ownership of White Cliffs Pipeline to Rose Rock. This progresses our plan to transition SemGroup into a holding company for the Rose Rock general partner. In 2012, Rose Rock delivered a total return of 60% to its unitholders. Strong investments continue for 2013 and include additional organic growth projects like the Glass Mountain Pipeline and Wattenberg Oil Trunkline. The 140,000 barrel-per-day Glass Mountain Pipeline will connect the Granite Wash and Mississippi Lime Play crude oil production to Cushing. The Wattenberg Oil Trunkline is a 37-mile gathering system that will transport Noble Energy’s crude production to the White Cliffs Pipeline in Platteville, Colorado. Growth continues for White Cliffs Pipeline, strategically located as the only pipeline bringing crude oil from the DJ Basin to Cushing. We are expanding the pipeline to a capacity of 150,000 barrels per day with a looping project expected to complete in 2014. SemGroup is committed to operating safely and has one of the strongest records in the industry. Our pipelines and facilities are designed, tested, operated and maintained in accordance with comprehensive system integrity plans. We know we operate at the license of the community and we work diligently to protect the environment and our neighbors. We continue a disciplined look for appropriate acquisitions that make sense and we remain focused on maximizing the long-term value of our current assets. Thank you for your investment in SemGroup and for the confidence you have placed in us. We take our responsibilities to you very seriously and we look forward to exceeding your expectations. It is an exciting point in time for SemGroup and our strategy to grow. Sincerely, John Chlebowski Norm Szydlowski Chairman, Board of Directors President & Chief Executive Officer April 2013 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________________________________________________ Form 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2012 or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-34736 ______________________________________________________________ SEMGROUP CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-3533152 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Two Warren Place 6120 S. Yale Avenue, Suite 700 Tulsa, OK 74136-4216 (918) 524-8100 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which Registered Class A Common Stock, par value $0.01 per share New York Stock Exchange Warrants to Purchase Common Stock New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None ______________________________________________________________ Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large Accelerated Filer Accelerated Filer Non-Accelerated Filer (Do not check if a smaller reporting company) Smaller Reporting Company Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No The aggregate market value of the registrant’s Class A and Class B Common Stock held by non-affiliates at June 29, 2012, was $1,326,413,230, based on the closing price of the Class A Common Stock on the New York Stock Exchange on June 29, 2012. Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No At January 31, 2013, there were 41,930,289 shares of Class A Common Stock and 28,235 shares of Class B Common Stock outstanding. ______________________________________________________________ DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant’s Proxy Statement to be filed pursuant to Regulation 14A of the Securities Exchange Act of 1934, in connection with the registrant’s Annual Stockholders’ Meeting to be held on May 22, 2013, are incorporated by reference into Part III of this Form 10-K. [This page intentionally left blank] SEMGROUP CORPORATION AND SUBSIDIARIES FORM 10-K—2012 ANNUAL REPORT Table of Contents Page PART I Items 1 and 2. Business and Properties 1 Item 1A. Risk Factors 18 Item 1B. Unresolved Staff Comments 31 Item 3. Legal Proceedings 31 Item 4. Mine Safety Disclosures 31 Executive Officers of the Registrant 31 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 33 Item 6. Selected Financial Data 34 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 36 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 64 Item 8. Financial Statements and Supplementary Data 66 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 66 Item 9A. Controls and Procedures 66 Item 9B. Other Information 66 PART III Item 10. Directors, Executive Officers and Corporate Governance 67 Item 11. Executive Compensation 67 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 67 Item 13.