Q3 2020 Summit Midstream Partners LP Earnings Call

November 6, 2020

[music].

To the Q3 2020 Summit Midstream Partners LP Earnings Conference call. My name is John I'll be your operator for today's call. At this time all participants are in listen only mode. Later, we will conduct a question and answer session. During the question and answer session. If you do have a question press Star then one on your Touchtone phone and then when I will turn the call over to Rob.

Swann senior director of corporate development and finance.

Thanks, operator, and good morning, everyone. If you don't already have a copy of our earnings release that was issued earlier. This morning. Please visit our website at www dot so administering dot com.

You will find on the homepage.

Some presentations section or quarterly result section.

With me today to discuss our third quarter 2020 financial operating results because he has done to keep our president Chief Executive Officer, and Chairman, Marc Stratton, Our Chief Financial Officer, along with other members of our senior management team.

Before we start I'd like to remind you that our discussion today may contain forward looking statements. These.

These statements May include but are not limited to our estimates of future volumes operating expenses and capital expenditures.

They may also include statements concerning anticipated cash flow liquidity business strategy and other plans and objectives for future operations although.

Although we believe that the expectations reflected in such forward looking statements are reasonable we can provide no assurance that such expectations will prove to be correct.

Please see our 2019 annual report on form 10-K, which was filed with the FCC March like 2020, as well as our other SEC filings for a list of the factors that could cause actual results to differ materially from expected results.

Please also note that on this call we use the terms EBITDA adjusted EBITDA and distributable cash flow. These are non-GAAP financial measures and we've provided reconciliations to the most directly comparable GAAP measures. Our most recent earnings release and with that I will turn the call over to Heath.

Great Hey, Thanks, Thank you Ross and good morning, everyone. Thanks for joining us on our summits third quarter 2020 earnings call.

So this morning summit reported third quarter 2020, adjusted EBITDA of 59.8 million and distributable cash flow of $38 million, which was slightly better than our expectations from earnings call that we had in early August.

Approximately 74% of our segment adjusted EBITDA originated from our assets, where producer activity is driven by improving natural gas pricing, which highlights we think the benefits of our diversified gas weighted assets.

Some of the generated $22.4 million of free cash flow in the third quarter, which was based on 41.4 million of cash from operations in the quarter, which was offset by $19.1 million of capital expenditures and we.

With those expenditures, including roughly 11.2 million that MLP used to fund the doubly project.

Year to date cement has generated more than $100 million of free cash flow from its primarily fixed fee based revenue streams and very modest capital expenditures that are required to support our both our legacy and core systems, which by the way have largely been built out over the past several years.

So earlier in the year.

A reminder, we made the decision to spend approximately 76 million of aggregate annual common and preferred equity distributions.

And we reallocated our free cash flow to pursue a series of liability management activities that were designed to accelerate de levering and simplifying the balance sheet, reducing our fixed capital obligations and generating long term equity value for our unit holders.

Throughout the quarter, we continued to make significant progress on this front.

Completing and announcing several several transactions.

Since closing of the GP buy in transaction in May we have repurchased nearly $307 million face value of our aggregate senior notes.

And reduced net indebtedness by more than 150 million relative to that at the end of 2019.

This represents an approximate 10% reduction in net debt since year end 2018 will more than a half a turn reduction in leverage based on ethanol piece.

Latest 12 months adjusted EBITDA as of September Thirtyth.

Additionally in July we exchanged approximately 62.8 thousand series a preferred units were 12.3 million ethanol the common units in a cashless exchange and this resulted in our ability to reduce the face value of MLP aggregate series a preferred units approximately 62.

Point $8 million.

Which implies roughly an 84% discount.

Based on the common unit trading price at the time.

On the close.

On September 29 after several months of negotiations we were also able to announce a transaction support agreement to retire the $155.2 million non recourse term loan at SMB holdings. This.

This was done through a consensual out of court restructuring.

Which also enabled us to fully settle the $181 million deferred purchase price obligation.

So in connection with the closing of the term loan restructuring we plan to make a 26 and a half million dollars payment S&P holdings.

Which again will represent a and b utilize to fully settle and retired 181 point $181 million DBO.

So S&P holdings, we use this cash together with the 34 point sixmillion ethanol be common units that are pledged as collateral for this long as consideration provided to the term loan lenders.

In exchange the entire $155.2 million term loan will be forgiven and the non economic general partnership interest will be released from the associated collateral package.

So the term loan restructuring has garnered the consent from 100% of the lenders and we do expect the deal to close in the fourth quarter and of course at closing both the DPP show as well as the term loan will cease to exist.

So together with the series a preferred equity exchange the senior note repurchases and the full settlement of the DPP show through the term loan restructuring.

The you know someone has been able to eliminate more than $550 million of its capital obligations since closing the JV buy in transaction in May.

These liability management transactions are highly accretive to ethanol piece equity valuation given the substantial discounts that we've been able to capture really across the capital structure and I believe that the company has substantially improved its positioning for long term success as a results of the liability management initiatives.

As we look forward, we will continue to look for opportunities to capture further value for our stakeholders through the liability management program.

But we will also begin turning our attention to extending them the remaining $234 million balance of our 5.5% senior notes, which mature in August 2022, as well as our revolving credit facility that matures in may of 2022.

[noise] extending lease maturities, we'll we'll provide more runway for us to continue to generate a significant amount of free cash flow that we'll use to further reduce our outstanding indebtedness and improve our overall credit metrics.

We also continued to make excellent progress advancing the double we project a while you know able to being able to lock in significant savings relative to the original development budget.

Despite the you know the broader industry downturn to doubling the pipeline continues to be a critical natural gas infrastructure project that we believe it is necessary to provide incremental takeaway capacity to help eliminate flaring and support further development of the northern Delaware Basin, which by the way still remains one of the most economic regions will.

And gas production really in the world.

So a few months later than originally expected.

We were pleased that FERC issued the Sevenci certificate, which authorized the project on October 15th.

This approval is a key milestone for the development of the project and as importantly enables us to begin advancing our plans to secure third party financing, which we expect will be sufficient to fund virtually all of our remaining doubly capital expenditures once it's in place.

We expect to be in a position to close on our financing plans concurrently with with the receipt of Fercs notice to proceed with construction, which we now expect to be obtained in the first quarter of 2021.

So look also since the last quarter are doubly team as I mentioned has been very successful in locking down incremental capital savings relative to our original development budget.

As it stands today that the total project cost is now expected to be less than 430 million. That's on an eighth basis and at which you know at that level that represents an approximate 15% reduction.

<unk> costs relative to our original budget that we had at the F.I.D.

And by the way, that's an incremental reduction of roughly $20 million of cost savings or $20 million of additional savings relative to the estimate that we will get back in our during our second quarter earnings call.

Back in August so look as a result, seven that's MLP, 70% share of the development capital is now estimated to be approximately 300 million.

Of which about 175 million remains to be spent as of the end of the third quarter.

So look we're very excited with the progress that the team is making towards executing the project and we very much look forward to bringing doubly online towards the end of 22.

And so with that update I'd like to turn it over to Mark to discuss more of our details around some of our financial and segment results Mark.

It's a multi reported third quarter 2020, net income of $25.6 million adjusted EBITDA of 59.8 million and distributable cash flow of $38 million.

Net income was positively impacted by a $24.7 million gain on early extinguishment of debt as a result of debt repurchases that we closed during the quarter.

Capital expenditures totaled $7.9 million during the quarter, a decrease of 10.8% compared to the second quarter of 2020 and.

And included maintenance capital expenditures of 3.5 million.

We continued to maintain financial discipline and will work to minimize our capex going forward.

Due to receiving our FERC seven CE approval later than expected in 2020 and based on our expectation that we won't receive our notice to proceed with construction until the first quarter of 2021, we now expect that ethanol P. will directly fund a total of $20 million to $30 million in double lead development capital in 2020.

This is the primary reason for increasing our full year 2020 capital expenditure guidance to a new range of $55 million to $65 million.

Operating natural gas volumes averaged nearly 1.4 Bcf a day during the quarter, which was relatively flat compared to the second quarter 2020.

The largest volume changes came from our Marcellus DJ and Utica shale reportable segment.

Our Marcellus and DJ volumes increased by 64 million cubic feet a day in the aggregate those volumes were offset by a 64 million a day decrease on our Utica segment, primarily due to a five well pad site, representing more than 150 million cubic feet, a day, which was shut down from mid June through mid August.

Quarterly liquids volumes decreased by 9.2% from the second quarter of 2020, primarily due to natural declines and limited activity from customers in our Williston Basin segment.

In general.

Our operating and financial results across most of our assets improved steadily throughout the third quarter as customers return previously shut in production to service and new wells driven largely by strengthening natural gas prices were turned in line.

Given that most of the temporary production shut ins that impacted our financial results in the second and third quarters have been restored or in the process of being restored. We continue to expect full year 2020, adjusted EBITDA to be within our 250 million to $260 million guidance range.

Now touching on the segments that comprise our core focus areas.

The Utica shale segment averaged 352 million cubic feet a day in the third quarter and segment adjusted EBITDA totaled $7.5 million, which was down by 30% or $3.2 million from the second quarter of 2020.

As I just mentioned this decrease was primarily due to the shut in of a 150 million a day five well pad site through mid August.

Producers behind our SXEW system completed 10, new wells during the third quarter seven of which were turned in line upstream of the TPL seven connector pipeline.

However, the majority of these new wells came online in September so only the tail end of the quarter benefited from this incremental production.

We don't expect any new wells for the remainder of the year. However, we do expect four new wells in the first half of 2021 due to a previously announced gathering agreement amendment with one of our largest customers to incentivize accelerated drilling.

We expect this amendment will increase drilling and completion activities over the next several years on the system.

On our Ohio gathering segment, adjusted EBITDA totaled $70.1 million for the quarter, which represented a 5.1% decrease from the second quarter of 2020, primarily due to a 5.2% lower volume throughput, which was driven by approximately 139 million cubic feet a day gross volumes shut in for the quarter.

Oil and natural production declines.

As of September Thirtyth SDLP is interest in Ohio gathering was 38.2% so shut in volumes impacted SMP by approximately 53 million cubic feet per day on a net basis.

As I mentioned during last quarters earnings call. We expect the shut in volumes will remain offline until late in the fourth quarter.

Of the 15, new wells turned in line behind or did you see during the quarter 10 were connected in September and had no impact on our third quarter financial and operating results due to the one month lag in our reporting for Ohio gathering.

Now moving to our Williston Basin segment.

Adjusted EBITDA of $11.7 million was down by $1 million relative to the second quarter of 2020, primarily due to a 9.2% decrease in liquids volumes, which was mainly due to natural production decline and approximately 5000 barrels per day of production shut up.

Wilson adjusted EBITDA was also modestly impacted by two amended gathering contracts with marginally lower gathering right that became effective in September upon our customers emergence from bankruptcy proceeding.

In exchange for these amendments we protected our Prepetition claims extended our acreage dedication terms and strength and many other contractual terms.

At the end of the third quarter, our customers had six ducs in inventory and eight wells that were recently completed.

Just recently four of those eight completed wells were turned in line and this customer has indicated that the remaining four wells will be turned in line by year end.

DJ Basin segment, adjusted EBITDA totaled $4.8 million in the third quarter and 9.8% increase from the second quarter of 2020, largely due to a 35% increase in natural gas throughput to 27 million cubic feet per day.

This volume increase was primarily driven by the return of production that was shut in during the second quarter as well as nine new wells are connected during the quarter.

Looking forward, we've had four new wells connected in October and we expect another six wells in the coming weeks.

We continue to monitor the Colorado regulatory environment, particularly considering recent momentum for our 2000 foot setback rule, which could limit activity in more populated areas.

We do not expect adverse implications to our DJ segment. If this new regulatory step back rules approved since.

The acreage dedicated to our system is located in the rural areas in Weld County, and in Laramie County, Wyoming.

Permian Basin segment, adjusted EBITDA totaled $900000 for the quarter.

A decrease of approximately $900000 relative to the second quarter of 2020, primarily due to decreased margins on natural gas and NGL sales a change in customer volume mix and higher operating expenses.

Lower margins on our marketing activities were primarily driven by higher cost of natural gas and NGL.

Although volume was up by 6.3% relative to the second quarter. The increase was primarily due to more volumes from a customer with lower rate.

We also had approximately $250000 of higher expenses during the quarter from compressor related maintenance and property taxes.

At quarter end, our customers had two ducs in inventory, which we do not expect to come online until 2021.

On the commercial front, we amended the gathering contract with one of our customers to increase dedicated acreage, providing more exposure to potential drilling activities and locations going forward.

Our legacy areas, which include the payout Barnett and Marcellus segment.

January $34.7 million of combined segment adjusted EBITDA in the third quarter and produced Unlevered free cash flow of $33.4 million based on $1.3 million of combined quarterly capex.

Our legacy areas continued to provide predictable and reliable cash flow highlighting the benefits of our diversified asset business model.

Our legacy area had nine new well connections during the quarter and there are preliminary indications that there will be as many as 15, new wells behind these legacy areas.

In 2021 compared to nine expected in all of 2020.

Our anchor customer in the Marcellus connective nine wells in July which was the primary driver of that segment, 17% volume increase and 23% increase in segment adjusted EBITDA relative to the second quarter of 2020.

At quarter end, there were nine ducs and inventory behind our Marcellus system, and we expect those to be turned in line in the first half of 2021.

We have also received early indications from multiple Barnett customers of new potential drilling and completion activity in 2021, which would be the first new upstream activity behind our Barnett system.

Late 2019.

Now turning back to the partnership.

We had nearly $809 million of outstanding debt under our $1.25 billion revolving credit facility at September 32020, and approximately $172 million of available borrowing capacity.

At the end of the third quarter. We also had over $50 million of cash on hand, and a total leverage ratio of 4.87 times and a senior secured leverage ratio of 2.74 times.

As Heath mentioned earlier in his remarks, our liability management actions have made a significant impact on our balance sheet in short order.

Despite offsetting draws on our revolving credit facility to acquire a privately held GP in may for $35 billion and subsequently repaid the $35 million of DCP loans in August.

Year to date, we have reduced net debt by approximately $151 million, which represents a 10% reduction in our debt balance as of the end of 2019.

I would encourage you to review the table on page three of our third quarter earnings press release for a detailed summary of our liability management transactions that we closed or pending.

We will remain focused on our liability management strategy and we continue to expect leverage at year end to be highly dependent on the results of those ongoing initiatives.

However, now that the majority of our plan liability management initiatives have been successfully executed.

We are well positioned to address our 2022 maturities over the coming quarters.

Now turning to doubly.

During the third quarter ethanol, Pete made cash investments totaling $11.2 million with respect to a 70% interest in doubly.

And as of September Thirtyth, we have invested approximately $125 million inception to date.

Which approximately $80 million was funded with the redeemable preferred equity from TPG.

Due to the approximately 15% reduction in overall estimated cost to complete project at Sanofi is responsible for approximately $300 million of doubling of development costs with an estimated $175 million remaining to be funded at the end of the third quarter.

Now that the FERC Sevenci certificate has been received the next major milestone for the project is obtaining and notice to proceed with construction, which is not expected until the first quarter of 2021.

We've been working closely with a third party to finalize financing for doubly, which would fund all of ethanol piece remaining development cost and expected to be in place upon receiving perks notice to proceed with construction.

Finally last Friday, we announced a one for 15 reverse unit stock split in which our common unit holders of record at the close of business on November nine 2020, we received one new common unit for every 15 units phone.

This reverse split is important because it enables us MLP to regain compliance with the New York stock exchange is listening standards.

As a result of the reverse unit split SLP current outstanding common unit count will be reduced to approximately 3.8 million unit.

The 34.6 million common units that are pledged to S&P holdings term loan will also be converted at the same one for 15 ratio before they are released to the terminal term loan lenders, which pro forma for the closing of the term loan restructuring will add an incremental 2.3 million common units to ethanol piece outstanding.

Unit count for a total of approximately 6.1 million common units outstanding.

Now with that I will turn the call back over to Heath for closing remarks.

Great. Thanks, Mark.

Look I'd like to close by thanking all of our employees for the hard work and focus that demonstrated really across the company.

Despite the very challenging business and frankly personal conditions that have been brought on by the independent and 2020.

Look as evidenced by our continued strong safety record and our operating results.

Successful advancement of the doubly project to through the FERC approval process and the tremendous success that we've had in executing the liability management program and improving the balance sheet to date, we remain committed and highly capable as a team to successfully operate and control our cost and execute on the strategic initiatives.

So I think we set forth despite the tough environment that we're in.

Looking forward, while we remain hopeful for an accelerated recovery of oil and gas fundamentals 2021.

We are committed to remain laser focused on controlling what we can control to further position summit to successfully navigate through what could be another very challenging year for the industry.

Our plan is to continue to maximize free cash flow and liquidity by further reducing our cost optimizing our capital expenditures obtaining third party financing for the double Lee project.

And continuing to execute on our liability management program, which will continue to allocate capital to further reduce our debt extend our 2022 maturities and create long term value for our unit holders.

By achieving these objectives, we're confident that we'll continue to enhance summit's ability to persevere through the near term challenges of the American ahead.

I'll, just generating tremendous upside for our unit holders as industry fundamentals improve out into the future.

So with that operator, I would like to open the call up for questions.

Thank you and now begin the question and answer session. If you do have a question press Star then one on your Touchtone phone.

If you wish to be removed from the queue. Please press the pound sign or the hash key.

If using a speakerphone you may need to pick up the handset first before pressing the numbers.

Once again, if you do have a question press Star then one on your Touchtone phone.

And at this time I have seen no questions in queue.

And once again, if you do have a question press Star then one on your Touchtone phone.

Thank you, ladies and gentlemen that concludes today's call. Thank you for participating and you may now disconnect.

[music].

Welcome to the Q3 2020 Summit Midstream Partners LP Earnings Conference call. My name is John I'll be your operator for today's call at this time all participants.

Well you are we will conduct a question and answer session. During the question and answer session. If you do have a question press Star then one on your Touchtone phone and I will now turn the call over sure Ross Senior director of corporate development and finance.

Thanks, operator, good morning, everyone.

If you don't already have a copy of our earnings release that was issued earlier. This morning. Please visit our website www dot so administering dot com.

On page and that's the presentations section or quarterly result section.

With me today to discuss our third quarter 2020 financial and operating results.

Okay.

<unk>, Chief Executive Officer, and Chairman, Marc Stratton, Chief Financial Officer.

Other members of our sales team.

Before we start the wife will need our discussion today may contain forward looking statements. These.

These statements may include but are not well into two or estimates of future volumes operating expenses and capital expenditures.

May also include statements concerning anticipated cash flow liquidity business strategy and other plans and objectives for future operations although.

Although we believe that the expectations reflected in such forward looking statements are reasonable we can provide low shirts that such expectations will prove to be correct.

Please see our 29 <unk> annual report on form 10-K, which was filed with the FCC out March like twice what it was was there other FCC filings for a list of the factors that could cause actual results to differ materially from expected results.

Also note that on this call we use the terms EBITDA adjusted EBITDA and distributable cash flow. These are long GAAP financial measures. We have provided reconciliations to the most directly comparable GAAP measures or most recent earnings release.

Well part of the call over to <unk>.

Hi, Great Hey, Thanks, Thank you Ross and good morning, everyone. Thanks for joining us on <unk> third quarter 2020 earnings call.

So this morning summit I reported third quarter 2020, adjusted EBITDA of 69.8 million and distributable cash flow of 38 million, which was slightly better than our expectations from earnings call that we had a in early August.

Fortunately, 74% of our segment adjusted EBITDA originated from our assets were pretty sure activity is driven by improving natural gas pricing, which highlights we think the benefits of our diversified gas weighted assets that's.

That's an L.P. generated 22.4 million of free cash flow in the third quarter, which was based on 41.4 million of cash from operations in the quarter, which was offset by 19.1 million of capital expenditures.

Well that was expenditures, including roughly 11.2 million that's MLP used to fund the double the project.

Year to date someone has generated more than 100 million of free cash flow from its primarily fixed fee based revenue streams and very modest capital expenditures that are required to support our both our legacy in core systems, which by the way have largely been built out over the past several years.

So earlier in the year.

And are we made the decision to spend approximately 76 million aggregate annual common and preferred equity distributions and.

Throughout the quarter, we continued to make significant progress on those fronts by completing and announcing several several transactions.

Since closing of the GP by interns actually maybe.

Purchased nearly $307 million face value of our aggregate senior notes.

And reduced net indebtedness by more than 150 million relative to that at the end of 2019.

This represents an approximate 10% reduction in debt since year end 2019, well more than a half a turn.

Actually leverage based on ethanol piece.

Latest 12 months adjusted EBITDA as of September Thirtyth.

Additionally in July we exchanged approximately 62.8 thousand series a preferred units were 12.4 million EPS multi common units in a cashless exchange. This resulted in our ability to reduce the face value. It's about the aggregate series a preferred units approximately 62.

Point 8 million.

Which implies roughly an 84% discount based on the common unit trading price at the time of close.

On September 29 after several months of negotiations we were also able to announce a transaction support agreement to retire the $155.2 million non recourse term long SMB holdings. This was done through a consensual out of court restructuring, which also enabled us.

To fully settled $181 million deferred purchase price obligation.

So in connection with the closing of the term loan restructuring we plan to make a 26 and a half million dollar payment S&P holdings.

Which again will represent a in be utilized to fully settle and retired 181 point $881 million DBO.

So that's an P. holdings will use this cash together with 34 point sixmillion ethanol be common units that are pledged as collateral for this long as consideration provided to the term loan lenders.

In exchange the entire $155.2 million term loan will be forgiven and the non economic general partnership interest will be released from the associated collateral package.

So the term loan restructuring has garnered the consent from 100% of the lenders and we do expect the deal to close in the fourth quarter and of course at closing boasted CBPO as well as the term loan will cease to exist.

So together with the series a preferred equity exchange the senior note repurchases and the full settlement that up the DPP show do the term loan restructuring.

The you know someone has been able to eliminate more than 550 million sets capital obligations.

Since closing the GP buy in transaction in May.

As we look forward, we will continue to look for opportunities to capture further value for our stakeholders through the liability management program.

But we will also begin turning our attention to extending the the remaining 234 million dollar balance of our 5.5% senior notes, which mature in August the 2022 as.

Well as our revolving credit facility that matures in may of 2022.

You know extending lease maturities are well well provide more runway for us to continue to generate a significant amount of free cash flow that will used to further reduce our outstanding indebtedness and improve our overall credit metrics.

We also continue to make excellent progress advancing the w. projects, well able to being able to lock in significant savings relative to the original development budget.

Despite the yeah, the broader industry downturn, the doubly pipeline continues to be a critical natural gas infrastructure project that we believe it is necessary to provide incremental takeaway capacity to help eliminate flaring and support further development of the northern Delaware Basin, which by the way still remains one of the most economic regions will.

On gas production really in the world.

Though a few months later than originally expected we were pleased that FERC issue. The seven seas certificate, which authorized the project on October 15th.

This approval is a key milestone for the development of the project and as importantly enables us to begin advancing our plan to secure third party financing, which we expect will be sufficient to fund virtually all of our remaining doubly capital expenditures once it's in place.

So look also since the last quarter I believe team as I mentioned has been very successful in locking down incremental capital savings relative to our original development budget.

As it stands today that the total project cost is now expected to be less than 430 million. That's on an eighth basis, and which you know at that level that represents an approximate 15% reduction.

<unk> costs relative to our original budget that we had at the end.

The way that that's an incremental reduction of roughly 20 million of cost savings or sorry, $20 million of additional savings relative to the estimate that we were back in our during our second quarter earnings call.

Back in August so look as a result, seven that's MLP, 70% share of the development capital is now estimated to be approximately 300 million of which about 175 million remains to be spent as of the end of the third quarter.

Look we're very excited with the progress that the team is making towards executing the project and we very much look forward to bringing doubly online towards the end of 22.

And so with that update I'd like to turn it over to mark to to discuss more of our details around some of our financial and segment results Mark.

Great. Thanks Heath and good morning, everyone.

It's a multi reported third quarter 2020, net income of $25.6 million.

Adjusted EBITDA of 59.8 million and distributable cash flow of $38 million.

Net income was positively impacted by a $24.7 million gain on early extinguishment of debt as a result of debt repurchases that we closed during the quarter.

Capital expenditures totaled $7.9 million during the quarter, a decrease of 10.8% compared to the second quarter of 2020.

And included maintenance capital expenditures of 3.5 million.

We continue to maintain financial discipline and will work to minimize our capex going forward.

Due to receiving our FERC Sevenc CE approval later than expected in 2020 and based on our expectation that we won't receive our notice to proceed with construction until the first quarter of 2021, we now expect that ethanol people directly fund a total of $20 million to $30 million and double lead development capital in 2020.

This is the primary reason for increasing our full year 2020 capital expenditure guidance to a new range of $55 million to $65 million.

Operated natural gas volumes averaged nearly 1.4 Bcf a day during the quarter, which was relatively flat compared to the second quarter 2020.

The largest volume changes came from our Marcellus DJ and Utica shale reportable segment.

Our Marcellus DJ volumes increased by 64 million cubic feet a day in the aggregate those volumes were offset by a 64 million a day decrease on our Utica segment, primarily due to a five well pad site, representing more than 150 million could be today.

It was shut down for mid June through mid August.

Quarterly liquids volumes decreased by 9.2% from the second quarter of 2020, primarily due to natural declines and limited activity from customers in our Williston Basin segment.

In general.

Now touching on the segments that comprise our core focus areas.

As I just mentioned this decrease was primarily due to the shut in of a 150 million a day five well pad site through mid August.

Producers behind our SXEW system completed 10, new wells during the third quarter seven of which were turned in line upstream of the TPL seven conductor pipe.

However, the majority of these new wells came online in September the only the tail end of the quarter benefited from this incremental production.

We don't expect any new wells for the remainder of the year. However, we do expect four new wells in the first half of 2021 due to our previously announced gathering agreement amendment with one of our largest customers to incentivize accelerated drilling.

We expect this amendment will increase drilling and completion activities over the next several years on the system.

And natural production declines.

As of September Thirtyth ethanol piece interest in Ohio gathering was 38.2% so shut in volumes impacted EPS and lumpy by approximately 53 million cubic feet per day on a net basis.

As I mentioned during last quarters earnings call. We expect the shut in volumes were named offline until late in the fourth quarter.

Now moving to our Williston Basin segment.

In exchange for these amendments we protected our pre petition claims extended our acreage dedication terms and strength of many other contractual terms.

At the end of the third quarter, our customers had six ducs in inventory and eight wells that were recently completed.

Just recently or of those eight completed wells turned in line and this customer has indicated that the remaining four wells will be turned in line by year end.

This volume increase was primarily driven by the return of production that was shut in during the second quarter as well as nine new wells are connected during the quarter.

Looking forward, we've had four new wells connected in October.

We expect another six wells in the coming weeks.

We continue to monitor the Colorado regulatory environment, particularly considering recent momentum for our 2000 foot setback rule, which could limit activity and more populated areas.

We do not expect adverse implications to our DJ segment. If this new regulatory step back rules approved since the acreage dedicated to our system is located in the rural areas in Weld County, and in Laramie County, Wyoming.

Permian Basin segment, adjusted EBITDA totaled $900000 for the quarter, a decrease of approximately $500000 relative to the second quarter of 2020, primarily due to decreased margins on natural gas and NGL sales, a changing customer volume mix and higher operating expenses.

Lower margins on our marketing activities were primarily driven by higher cost of natural gas and NGL.

Although volume was up by 6.3% relative to the second quarter. The increase was primarily due to more volumes from a customer with lower rate.

We also had approximately $250000 of higher expenses during the quarter from compressor related maintenance and property taxes.

At quarter end, our customers had two ducs in inventory, which we do not expect to come online until 2021.

Our legacy areas, which include the piano Barnett and Marcellus segment.

Generating $34.7 million of combined segment adjusted EBITDA in the third quarter and produced Unlevered free cash flow of $33.4 million based on $1.3 million of combined quarterly capex.

Our legacy areas continued to provide predictable and reliable cash flow highlighting the benefits of our diversified asset business model.

Our legacy area had nine new well connections during the quarter and there are preliminary indications that there will be as many as 15, new wells behind these legacy areas into.

In 2021 compared to nine expected in all of 2020.

Our anchor customer on the Marcellus connected nine wells in July which was the primary driver of that segment, 17% volume increase and 23% increase in segment adjusted EBITDA relative to the second quarter of 2020.

At quarter end, there were nine ducs and inventory behind our Marcellus system, and we expect those to be turned in line in the first half of 2021.

Now turning back to the partnership.

We had nearly $809 million of outstanding debt under our $1.25 billion revolving credit facility at September 32020, and approximately $172 million of available borrowing capacity.

At the end of the third quarter. We also had over $50 million of cash on hand, and a total leverage ratio of 4.87 times and a senior secured leverage ratio of 2.74 times.

As Pete mentioned earlier in his remarks, our liability management actions have made a significant impact on our balance sheet in short order.

Despite offsetting draws on our revolving credit facility to acquire a privately held GP in may for $35 billion and subsequently repaid the $35 million of DCP loans in August.

Year to date, we have reduced net debt by approximately $151 million, which represents a 10% reduction in our debt balance as of the end of 2019.

I would encourage you to review the table on page three of our third quarter earnings press release for a detailed summary of our liability management transactions that we closed or pending.

We will remain focused on our liability management strategy and we continue to expect leverage at year end to be highly dependent on the results of those ongoing initiatives.

However, now that the majority of our plan liability management initiatives have been successfully executed well.

We are well positioned to address our 2022 maturities over the coming quarters.

Now turning to doubly during the third quarter ethanol, Pete made cash investments totaling $11.2 million with respect to a 70% interest in Dublin.

And as of September Thirtyth, we have invested approximately $125 million inception to date.

It's approximately $80 million was funded with the redeemable preferred equity from TPG.

Due to the approximately 15% reduction in overall estimated cost to complete project ethanol. He is responsible for approximately $300 million of doubling development costs with an estimated $175 million remaining to be funded at the end of the third quarter.

Now that the FERC Sevenc Easter took it has been received the next major milestone for the project is obtaining and notice to proceed with construction, which is not expected until the first quarter of 2021.

We've been working closely with a third party to finalize financing for the double H, which would fund all of that small piece remaining development cost and is expected to be in place upon receiving FERC notice to proceed with construction.

Finally last Friday, we announced a one for 15 reverse units stock split in which our common unit holders of record at the close of business on November nine 2020 or received one new common units for every 15 units.

This reverse split is important because it enables us MLP to regain compliance with the New York stock exchange is listening standards.

As a result of the reverse units split.

<unk> current outstanding common unit count will be reduced to approximately 3.8 million units.

Add an incremental 2.3 million common units to ethanol piece outstanding unit count for a total of approximately 6.1 million common units outstanding.

Now with that I'll turn the call back over to Heath for closing remarks.

Great. Thanks, Mark Okay.

Look I'd like to close by thanking all of our employees for the hard work and focus that demonstrated really across the company.

Despite the very challenging business and frankly personal conditions that have been brought on by the by the pandemic and 2020.

Look as evidenced by our continued strong safety record and our operating results. The successful advancement of the doubly project to through the FERC approval process and the tremendous success that we've had in executing the liability management program and improving the balance sheet to date you know.

We remain committed and highly capable as a team to successfully operate and control our cost and execute on the strategic initiatives that we set forth. Despite the tough environment that we're in.

Looking forward, while we remain hopeful for an accelerated recovery of oil and gas fundamentals 2021 are.

We are committed to remain laser focused on controlling what we can control to further position summit to successfully navigate through what could be another very challenging year for the industry are.

Our plan is to continue to maximize free cash flow and liquidity by further reducing our cost optimizing our capital expenditures obtaining third party financing for the double lead project.

By achieving these objectives were confident that we will continue to enhance summit's ability to press severe through the near term challenges of the American ahead.

Roger generating tremendous upside for our unit holders as industry fundamentals improve out into the future.

So with that operator, I would like to open the call up for questions.

Thank you and now begin the question and answer session. If you do have a question press Star then one on your Touchtone phone if you wish to be removed from the queue. Please press the pound sign or the hash key.

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Once again, if you do have a question press Star then one on your Touchtone phone.

And at this time I have seen no questions in queue.

And once again, if you do have a question press Star then one on your Touchtone phone.

Thank you, ladies and gentlemen that concludes today's call. Thank you for participating and you may now disconnect.

Q3 2020 Summit Midstream Partners LP Earnings Call

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