Summit Reports 1Q:24 Results

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(Summit Midstream, 2.May.2024) — Summit Midstream Partners, LP (NYSE: SMLP) (SMLP or the “Partnership”) announced its financial and operating results for the three months ended 31 Mar. 2024.

Highlights

  • Reduced net leverage ratio to approximately 3.9x, a dramatic reduction from 5.4x in the fourth quarter of 2023, furthering progress toward achieving 3.5x net leverage target
  • First quarter 2024 net income of $132.9mn, adjusted EBITDA of $70.1mn, cash flow available for distributions (“Distributable Cash Flow” or “DCF”) of $32.5mn and free cash flow (“FCF”) of $17.2mn
  • Connected 71 wells during the first quarter
  • Active customer base with three drilling rigs and more than 80 DUCs behind our systems
  • Successful conclusion to the Double E open season resulting in an incremental 75 MMcfd, 10-year take or pay commitment and primary term extension with an existing customer plus an additional 150 MMcfd of non-binding bids from third parties
  • Sold remaining Northeast assets in West Virginia for approximately $75mn1
  • Revised pro forma 2024 Adjusted EBITDA guidance of $170mn to $200mn2
1Includes $70mn asset sale to Antero Midstream LLC and ~$5mn in retained latent compressor units sold to a third party.
2Represents pro forma Adjusted EBITDA assuming the Utica Transaction and Mountaineer Transaction each closed on 31 Dec. 2023.

Management Commentary

Heath Deneke, President, Chief Executive Officer, and Chairman, commented, “Summit’s first quarter 2024 financial and operating results were generally in line with management expectations, despite severe winter weather in the DJ Basin impacting volumes in January. With the previously announced Utica transaction and today’s announced sale of our Mountaineer Gathering System in West Virginia to Antero Midstream LLC, we have now fully exited the Northeast segment and will focus on several organic and bolt-on acquisition opportunities in our Rockies and Permian segments. Pro forma for the Utica and Mountaineer transactions, we have dramatically reduced net leverage to approximately 3.9x, a 1.5x reduction from the fourth quarter of 2023. We have significant liquidity with a $400mn undrawn revolver and more than $350mn of unrestricted cash to pursue these organic growth and bolt-on acquisition opportunities, while continuing to de-lever the balance sheet and progress toward achieving our 3.5x net leverage target.

We had a very active quarter operationally, connecting 71 wells to the system, with a vast majority of those coming from the Rockies region, which represents nearly half of the total well connects we’re expecting in 2024, pro forma for the combined Northeast asset divestitures. Our customers on our remaining segments are completing wells on schedule and continue to hold to their original timing expectations on future wells. As a result, our new Revised 2024 Adjusted EBITDA guidance range of $170mn to $200mn remains generally in-line with our original guidance for the year as adjusted to remove full year contributions of the Northeast segment divestitures.

In the Permian, we’ve continued to make great progress commercializing the available firm capacity on the Double E Pipeline as natural gas production continues to grow in the Delaware Basin. Earlier this week we concluded a successful open season that resulted in the awarding of 75 MMcf/d of incremental take-or-pay commitments with a subsidiary of Matador Resources to support their Marlan Processing Plant expansion in New Mexico, plus, we received an additional 150 MMcf/d of non-binding 10-year take-or-pay bids from other third parties desiring new plant connections in 2025. The amended and restated Matador agreement also provided for an extension of their existing firm service agreements to a new 10-year term effective 1 May. Additionally, we recently executed a new max-rate interruptible agreement for up to 150 MMcf/d of incremental volume from a new customer in New Mexico. We’re excited to see the increasing level of demand for residue gas takeaway capacity out of the Delaware Basin materialize and we continue to believe Double E is uniquely positioned to meet the growing near-term and long-term needs of the market.”   

First Quarter 2024 Business Highlights

SMLP’s average daily natural gas throughput for its wholly owned operated systems decreased 6.5% to 1,327 MMcf/d, and liquids volumes decreased 8.6% to 74 Mbbl/d, relative to the fourth quarter of 2023. OGC natural gas throughput increase from 826 MMcf/d to 849 MMcf/d, a 2.9% increase quarter-over-quarter and generated $14.3mn of adjusted EBITDA, net to SMLP, for the first quarter of 2024. Double E Pipeline gross volumes transported increased from 386 MMcf/d to 467 MMcf/d, a 21% increase quarter-over-quarter and generated $7.3mn of adjusted EBITDA, net to SMLP, for the first quarter of 2024.

Natural gas price-driven segments:

  • Natural gas price-driven segments had combined quarterly segment adjusted EBITDA of $49.4mn, representing a 2.0% decrease relative to the fourth quarter, and combined capital expenditures of $2.6mn in the first quarter of 2024.
  • Northeast segment adjusted EBITDA totaled $29mn, an increase of $0.6mn from the fourth quarter 2023, primarily due a 2.9% increase in volume and an increase in proportionate EBITDA from the OGC joint venture, partially offset by a 10% decrease in volume on our wholly owned systems. During the first quarter, three new wells were brought online behind the Summit Midstream Utica (“SMU”) system and seven new wells were connected behind the OGC joint venture. On 22 Mar., Summit sold Summit Midstream Utica, LLC, which included its approximately 36% interest in Ohio Gathering Company, LLC, approximately 38% interest in Ohio Condensate Company, LLC and SMU assets to a subsidiary of MPLX LP for $625mn in cash. On 1 May Mountaineer Midstream, LLC, a wholly owned subsidiary of SMLP, sold the Mountaineer Midstream System to Antero Midstream LLC.
  • Piceance segment adjusted EBITDA totaled $15.2mn, a decrease of $0.9mn from the fourth quarter of 2023, primarily due to a 1.6% decrease in volume throughput driven by natural production declines and no new wells connected to the system during the quarter.
  • Barnett segment adjusted EBITDA totaled $5.1mn, a decrease of $0.7mn relative to the fourth quarter of 2023, primarily due to 1.6% decrease in volumes from a customer continuing to curtail volumes by approximately 30 MMcf/d, partially offset by four new wells connected to the system from our anchor customer during the quarter. There is currently one rig running and 25 DUCs behind the system.

Oil price-driven segments:

  • Oil price-driven segments generated $30.1mn of combined segment adjusted EBITDA, representing a 0.6% decrease relative to the fourth quarter, and had combined capital expenditures of $12.6 million.
  • Permian segment adjusted EBITDA totaled $7.3mn, a decrease of $0.7mn from the fourth quarter of 2023, primarily due to a decrease in proportionate EBITDA from our Double E joint venture.
  • Rockies segment adjusted EBITDA totaled $22.9mn, an increase of $0.5mn relative to the fourth quarter of 2023, primarily due to increased product margin related to our percent-of-proceeds contracts in the DJ Basin, partially offset by an 8.6% decrease in liquids volume throughput and a 1.6% decrease in natural gas volume throughput. Extreme weather and operational downtime negatively impacted gas volumes in the DJ Basin by approximately 9 MMcf/d during the quarter. There were 57 new wells connected during the quarter, including 39 in the DJ Basin and 18 in the Williston Basin. There are currently two rigs running and approximately 50 DUCs behind the systems.

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