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SemGroup (SEMG) to Divest Asphalt Unit in Mexico for $70M

Zacks

Midstream energy company, SemGroup Corporation SEMG recently agreed to divest SemMaterials México, its asphalt business to Ergon Asfaltos México HC, LLC. The deal is expected to be valued at $70 million, which incorporates a compensation of around $15 million of net working capital. The deal is expected to be closed by the second quarter of 2018.

Following the news of the divestment, the company's stock has gained more than 3%.

Semgroup Corporation Price

Semgroup Corporation Price | Semgroup Corporation Quote


Move Rationale

SemGroup plans to utilize the proceeds from the deal for pre-funding capital growth projects and support the Houston Fuel Oil Terminal Company acquisition. Notably, the company was supposed to pay $600 million in cash as second payment for the acquisition to Alinda Capital Partners.

The deal also falls in line with the company's strategy to strengthen its balance sheet and focus on its midstream services in Canada, the Gulf Coast, and Mid-Continent. As of Sep 30, 2017, the company had cash and equivalents of $68 million, while its long-term debt amounted to more than $3 billion.

About SemMaterials México

It offers asphalt products, technology and pavement services in Mexico. It has two national laboratories and 14 in-country terminals. SemMaterials México has its presence in every region of the country.

Price Performance

SemGroup has lost 28.9% of its value in the last year against 1.1% growth of its industry.

About SemGroup

SemGroup provides gathering, transportation, storage, distribution, blending, marketing and other midstream services to producers, refiners of petroleum products and others market participants located in Midwest and Rocky Mountain regions of the United States of America. The company operates in the pipeline gathering and processing segments of the natural gas midstream industry in the United States and Canada. SemGroup Corp is headquartered in Tulsa, OK.

Zacks Rank and Stocks to Consider

SemGroup has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the oil and energy sector include Cabot Oil & Gas Corp. COG, Royal Dutch Shell plc RDS.A and Delek US Holdings, Inc. DK. All these companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Houston, TX-based Cabot is an independent energy company. Its sales for the fourth quarter of 2017 are expected to grow 39.5% year over year. Earnings for the year 2017 are expected to be up 357.14%.

Shell, based in The Hague, Netherlands, is an integrated energy company. Its earnings for 2017 are expected to increase 99.5% year over year. The company delivered a positive earnings surprise of 18.1% in the third quarter of 2017.

Brentwood, TN-based Delek is an integrated energy company. Its sales for the fourth quarter of 2017 are expected to increase 90.3% year over year. The company delivered a positive earnings surprise of 19.1% in the third quarter of 2017.

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