INVESTMENTS IN NON-CONSOLIDATED SUBSIDIARIES

White Cliffs

We account for our 51% ownership of White Cliffs Pipeline, L.L.C. (“White Cliffs”) under the equity method, as the other owners have substantive rights to participate in its management. Under the equity method, we do not report the individual assets and liabilities of White Cliffs on our condensed consolidated balance sheets. Instead, our ownership interest is reflected in one line as a noncurrent asset on our condensed consolidated balance sheets. Certain summarized income statement information of White Cliffs for the three months and nine months ended September 30, 2012 and September 30, 2011 is shown below (in thousands):



	Three Months Ended September 30, 2012			Three Months Ended September 30, 2011			Nine Months Ended September 30, 2012			Nine Months Ended September 30, 2011
Revenue	$	28,522		$	17,515		$	76,910		$	47,878
Operating, general and administrative expenses	$	3,857		$	3,824		$	11,382		$	10,029
Depreciation and amortization expense	$	4,995		$	5,214		$	14,964		$	15,622
Net income	$	19,670		$	8,477		$	50,564		$	22,227
Distributions paid to SemGroup	$	(10,794	)	$	(7,239	)	$	(30,561	)	$	(19,912	)

The equity in earnings of White Cliffs for the three months and nine months ended September 30, 2012 and September 30, 2011 reported in our condensed consolidated statement of operations and comprehensive income (loss) is less than 51% of the net income of White Cliffs for the same period. 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 $24.0 thousand and $0.6 million of such general and administrative expense for the three months ended September 30, 2012 and September 30, 2011, respectively. White Cliffs recorded $1.5 million and $2.4 million of such general and administrative expense for the nine months ended September 30, 2012 and September 30, 2011, respectively. The decrease in allocated costs from prior year is primarily due to revisions to our cost allocations based on a transfer pricing study completed in the third quarter for which year to date adjustments were booked in September 2012.

In September 2012, we received $3.5 million from the other owners of White Cliffs related to the September 2010 exercise of their rights to purchase additional ownership interests in White Cliffs. This gain is reported in gain on disposal or impairment of long-lived assets, net in the condensed consolidated statements of operations and comprehensive income (loss).

NGL Energy

We own 9,133,409 common units representing limited partner interests in NGL Energy Partners LP (NYSE: NGL) (“NGL Energy”), which represents approximately 18.0% of the total 50,669,109 limited partner units of NGL Energy outstanding at June 30, 2012, and a 6.42% interest in the general partner of NGL Energy. Our limited and general partner ownership interests reflect the dilution caused by an NGL Energy acquisition completed June 19, 2012. In conjunction with the June 2012 transaction, we received 201,378 additional common units.

At September 30, 2012, the fair market value of our 9,133,409 common unit investment in NGL Energy was $219.6 million, based on a September 28, 2012 closing price of $24.04 per common unit. This does not reflect our interest in the general partner of NGL Energy. The excess of the recorded amount of our investment over the book value of our share of the underlying net assets primarily represents equity method goodwill. 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, we have recorded losses representing our equity in earnings of NGL Energy of $6.9 million and $2.2 million in our condensed consolidated statements of operations and comprehensive income (loss) for the three months and nine months ended September 30, 2012, respectively, which relate to the earnings of NGL Energy for the three months and nine months ended June 30, 2012, prorated for the period of time we held our ownership interest in NGL Energy. We received cash distributions of $2.1 million and $5.1 million for the three months and nine months ended September 30, 2012, respectively, related to these earnings from NGL Energy. The agreement to waive our distribution rights on approximately 3.9 million common units expired in the third quarter 2012 and any third quarter distributions declared related to these units will be received in the fourth quarter 2012.

Certain unaudited summarized income statement information of NGL Energy for the three months and nine months ended June 30, 2012 is shown below (in thousands):



	Three Months Ended June 30, 2012			Nine Months Ended June 30, 2012
	Three Months Ended June 30, 2012			Nine Months Ended June 30, 2012
Revenue	$	326,436		$	1,236,023
Cost of products sold	$	298,985		$	1,128,581
Operating, general and administrative expenses	$	33,298		$	76,015
Depreciation and amortization expense	$	9,227		$	21,260
Net income	$	(24,710	)	$	(4,678	)

Glass Mountain Pipeline LLC

In May 2012, we formed a joint venture, Glass Mountain Pipeline, LLC (“GMP”), to construct, maintain and operate a 210-mile crude oil pipeline system originating in Alva and Arnett, Oklahoma and terminating at Cushing, Oklahoma. Construction of the pipeline is expected to be completed by the end of 2013. Once the pipeline is in service, it will be operated by a subsidiary of Rose Rock. In September 2012, we acquired an additional 25% ownership interest in GMP. As of September 30, 2012, we have invested $62.5 million in GMP, including our capital contributions and amounts paid to acquire the additional ownership percentage. We also assumed the responsibility for future capital contributions related to the additional 25% ownership. Subsequent to this transaction, we have a 50% ownership interest in GMP and account for our investment in GMP using the equity method.

As of September 30, 2012, we expect to make additional contributions of approximately $11.2 million and $51.6 million in 2012 and 2013, respectively.