Summit Midstream Corporation Reports Third Quarter 2024 Financial and Operating Results
HOUSTON, Nov. 12, 2024 /PRNewswire/ -- Summit Midstream Corporation (NYSE:SMC) ("Summit", "SMC" or the "Company") announced today its financial and operating results for the three months ended September 30, 2024.
Highlights
Third quarter 2024 net loss of $197.5 million, including $142.6 million non-cash income tax expense to primarily establish SMC's deferred tax liability associated with the C-Corp conversion
Generated adjusted EBITDA of $45.2 million, representing approximately 9% quarter-over-quarter growth1, cash flow available for distributions ("Distributable Cash Flow" or "DCF") of $22.1 million and free cash flow ("FCF") of $9.9 million
Expect to generate approximately $45 million to $50 million of adjusted EBITDA in the fourth quarter 2024
Connected 38 wells during the third quarter and maintained an active customer base with six active drilling rigs and more than 100 drilled but uncompleted wells ("DUCs") behind our systems
Closed the C-Corp conversion and a series of re-financing transactions, further simplifying our corporate structure, extending debt maturities and lowering our cost of capital
Announced the transformative acquisition of Tall Oak Midstream III in the Arkoma Basin and filed the definitive proxy with the special meeting of stockholders expected to occur on November 29, 2024
1
Normalized for $1.6 million of Northeast segment adjusted EBITDA generated in the second quarter 2024
Management Commentary
Heath Deneke, President, Chief Executive Officer and Chairman, commented, "Summit's third quarter operating and financial results were in line with management expectations, reflecting a very active quarter both corporately and operationally. From a corporate perspective, we closed out the C-Corp conversion, successfully refinanced our balance sheet and announced the transformative acquisition of Tall Oak Midstream III. We believe these transactions continue to position Summit for further growth and significant value-creation for our shareholders.
From an operational perspective, we connected 38 wells to the system, have six rigs currently operating behind our footprint and made final investment decision on a $10 million optimization project in the Rockies segment that is anticipated to have an approximate one-year payback period and improve our Adjusted EBITDA margin beginning in the second quarter 2025. Nine of the 38 wells were connected behind our Barnett system which brings total year-to-date well connections in the Barnett to 27 wells, with a rig continuing to drill wells expected in 2025. The other 29 wells connected during the quarter came from the DJ Basin, bringing total year-to-date wells to 86, exceeding our expectations with activity levels and volumes behind the system remaining robust.
Additionally, as a brief update to our recently announced Tall Oak acquisition, we continue to expect to close the transaction during the fourth quarter of 2024. Since announcement, the Tall Oak management team executed a new contract for approximately 20 MMcf/d of existing in-basin production that is expected to begin deliveries to Tall Oak in the second half of 2025 and continue to see the active rig drilling wells that are expected to come online as soon as the end of this year. We filed the definitive proxy on October 31, 2024 with the special meeting of stockholders currently scheduled on November 29, 2024. Each shareholder's vote is important to us so we encourage all shareholders to vote."
Third Quarter 2024 Business HighlightsSMC's average daily natural gas throughput for its wholly owned operated systems decreased 6.8% to 667 MMcf/d, and liquids volumes decreased 6.7% to 70 Mbbl/d, relative to the second quarter of 2024. Double E Pipeline gross volumes transported increased from 549 MMcf/d to 661 MMcf/d, a 20.4% increase quarter-over-quarter and generated $8.5 million of adjusted EBITDA, net to SMC, for the third quarter of 2024.
Natural gas price-driven segments:
Natural gas price-driven segments had combined quarterly segment adjusted EBITDA of $20.1 million, representing a 1.1% increase relative to the second quarter and combined capital expenditures of $1.7 million in the third quarter of 2024.
Piceance segment adjusted EBITDA totaled $12.8 million, consistent from the second quarter of 2024. Volume throughput decreased 1.7% from the second quarter primarily due to natural production declines and no new wells connected to the system during the quarter.
Barnett segment adjusted EBITDA totaled $7.3 million, an increase of $1.9 million relative to the second quarter of 2024, primarily due to a 26.2% increase in volumes from a customer continuing to increase flow of curtailed volumes and 9 new wells connected to the system from our anchor customer during the quarter. We estimate there is still approximately 20 MMcf/d of shut-in production behind the system. There is currently one rig running and 14 DUCs behind the system.
Oil price-driven segments:
Oil price-driven segments generated $33.3 million of combined segment adjusted EBITDA, representing a 9.1% increase relative to the second quarter, and had combined capital expenditures of $8.7 million.
Permian segment adjusted EBITDA totaled $8.5 million, an increase of $0.8 million from the second quarter of 2024, primarily due to 20% increase in volumes shipped on the Double E Pipeline leading to an increase in proportionate adjusted EBITDA from our Double E joint venture.
Rockies segment adjusted EBITDA totaled $24.9 million, an increase of 8.7% relative to the second quarter of 2024, primarily due to increased product margin in the DJ Basin, partially offset by a 6.7% decrease in liquids volume throughput. Operational downtime continued to impact volume throughput in the DJ Basin, however, repairs were completed during the quarter, and all systems have now returned to normal operational capacity. There were 29 new wells connected during the quarter, all in the DJ Basin. There are currently five rigs running and approximately 90 DUCs behind the systems.
The following table presents average daily throughput by reportable segment for the periods indicated:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
Average daily throughput (MMcf/d):
Northeast (1)
—
752
269
658
Rockies
128
117
127
108
Piceance
284
313
295
299
Barnett
255
170
212
184
Aggregate average daily throughput
667
1,352
903
1,249
Average daily throughput (Mbbl/d):
Rockies
70
85
73
76
Aggregate average daily throughput
70
85
73
76
Ohio Gathering average daily throughput(MMcf/d) (2)
—
870
283
763
Double E average daily throughput (MMcf/d) (3)
661
327
559
278
_________
(1)
Exclusive of Ohio Gathering due to equity method accounting.
(2)
Gross basis, represents 100% of volume throughput for Ohio Gathering, subject to a one-month lag.
(3)
Gross basis, represents 100% of volume throughput for Double E.
The following table presents adjusted EBITDA by reportable segment for the periods indicated:
Three Months Ended
September 30,
Nine Months Ended
September 30,
2024
2023
2024
2023
(In thousands)
(In thousands)
Reportable segment adjusted EBITDA (1):
Northeast (2)
$ ,
$ 27,751
$ 30,634
$ 65,806
Rockies
24,850
24,998
70,582
64,986
Permian (3)
8,472
5,840
23,434
16,283
Piceance
12,831
15,292
40,912
43,640
Barnett
7,278
6,084
17,798
20,380
Total
$ 53,431
$ 79,965
$ 183,360
$ 211,095
Less: Corporate and Other (4)
8,193
7,175
24,915
19,267
Adjusted EBITDA (5)
$ 45,238
$ 72,790
$ 158,445
$ 191,828
__________
(1)
Segment adjusted EBITDA is a non-GAAP financial measure. We define segment adjusted EBITDA as total revenues less total costs and expenses, plus (i) other income (excluding interest income), (ii) our proportional adjusted EBITDA for equity method investees, (iii) depreciation and amortization, (iv) adjustments related to minimum volume commitments ("MVC") shortfall payments, (v) adjustments related to capital reimbursement activity, (vi) unit-based and noncash compensation, (vii) impairments and (viii) other noncash expenses or losses, less other noncash income or gains.
(2)
Includes our proportional share of adjusted EBITDA for Ohio Gathering. Summit records financial results of its investment in Ohio Gathering on a one-month lag and is based on the financial information available to us during the reporting period. With the divestiture of Ohio Gathering in March 2024, proportional adjusted EBITDA includes financial results from December 1, 2023 through March 22, 2024. We define proportional adjusted EBITDA for our equity method investees as the product of (i) total revenues less total expenses, excluding impairments and other noncash income or expense items and (ii) amortization for deferred contract costs; multiplied by our ownership interest during the respective period.
(3)
Includes our proportional share of adjusted EBITDA for Double E. We define proportional adjusted EBITDA for our equity method investees as the product of total revenues less total expenses, excluding impairments and other noncash income or expense items; multiplied by our ownership interest during the respective period.
(4)
Corporate and Other represents those results that are not specifically attributable to a reportable segment or that have not been allocated to our reportable segments, including certain general and administrative expense items and transaction costs.
(5)
Adjusted EBITDA is a non-GAAP financial measure.
Capital Expenditures
Capital expenditures totaled $10.9 million in the third quarter of 2024, inclusive of maintenance capital expenditures of $1.3 million. Capital expenditures in the third quarter of 2024 were primarily related to pad connections in the Rockies segment.
Nine Months Ended September 30,
2024
2023
(In thousands)
Cash paid for capital expenditures (1):
Northeast
$ 2,980
$ 2,502
Rockies
29,211
40,089
Piceance
2,278
3,910
Barnett
686
109
Total reportable segment capital expenditures
$ 35,155
$ 46,610
Corporate and Other
2,706
3,253
Total cash paid for capital expenditures
$ 37,861
$ 49,863
__________
(1)
Excludes cash paid for capital expenditures by Ohio Gathering and Double E due to equity method accounting.
Capital & Liquidity
As of September 30, 2024, SMC had $17.8 million in unrestricted cash on hand and $150 million drawn under its $500 million ABL Revolver with $349.2 million of borrowing availability, after accounting for $0.8 million of issued, but undrawn letters of credit. As of September 30, 2024, SMC's gross availability based on the borrowing base calculation in the credit agreement was $539 million, which is $39 million greater than the $500 million of lender commitments to the ABL Revolver. As of September 30, 2024, SMC was in compliance with all financial covenants, including interest coverage of 2.4x relative to a minimum interest coverage covenant of 2.0x and first lien leverage ratio of 0.8x relative to a maximum first lien leverage ratio of 2.5x. As of September 30, 2024, SMC reported a total leverage ratio of approximately 4.58x.
As of September 30, 2024, the Permian Transmission Credit Facility balance was $133.3 million, a reduction of $3.9 million relative to the June 30, 2024 balance of $137.2 million due to scheduled mandatory amortization. The Permian Transmission Term Loan remains non-recourse to SMC.
MVC Shortfall Payments
SMC billed its customers $5.5 million in the third quarter of 2024 related to MVC shortfalls. For those customers that do not have MVC shortfall credit banking mechanisms in their gathering agreements, the MVC shortfall payments are accounted for as gathering revenue in the period in which they are earned. In the third quarter of 2024, SMC recognized $5.5 million of gathering revenue associated with MVC shortfall payments. SMC had no adjustments to MVC shortfall payments in the third quarter of 2024. SMC's MVC shortfall payment mechanisms contributed $5.5 million of total adjusted EBITDA in the third quarter of 2024.
Three Months Ended September 30, 2024
MVC Billings
Gatheringrevenue
Adjustmentsto MVCshortfallpayments
Net impact toadjustedEBITDA
(In thousands)
Net change in deferred revenue related to MVC
shortfall payments:
Piceance Basin
$ ,
$ ,
$ ,
$ ,
Total net change
$ ,
$ ,
$ ,
$ ,
MVC shortfall payment adjustments:
Rockies
$ 426
$ 426
$ ,
$ 426
Piceance
4,998
4,998
—
$ 4,998
Northeast
—
—
—
—
Barnett
40
40
—
40
Total MVC shortfall payment adjustments
$ 5,464
$ 5,464
$ ,
$ 5,464
Total (1)
$ 5,464
$ 5,464
$ ,
$ 5,464
Nine Months Ended September 30, 2024
MVC Billings
Gatheringrevenue
