Q3 2024 Summit Midstream Corp Earnings Call
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Speaker Change: Hello, and welcome to Summit Midstream Corporation third quarter 2024 earnings Conference call.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one on your telephone.
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Speaker Change: I would now like to hand, the conference over to Randall Burton you may begin.
Randall Burton: Thanks, operator, and good morning, everyone. If you don't already have a copy of our earnings release. Please visit our website at Www Dot summit midstream Dot com, where you'll find it on the homepage events and presentation section of our quarterly results section.
With me today to discuss our third quarter of 2024 financial and operating results is Heath Deneke, Our President Chief Executive Officer, and Chairman Bill Moore, 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 statements may include but are not limited to our estimates of future.
Randall Burton: 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.
Randall Burton: 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 I smell piece 2023 annual report on Form 10-K, and exhibit 99, one to the partnerships current report on form 8-K filed with the SEC on June three 2024.
Randall Burton: As well as <unk> registration statement on form S. Four is declared effective on June 14th 2024 for a listing of 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 distributable cash flow and free cash flow. These are non-GAAP financial measures.
Randall Burton: And we've provided reconciliations to the most directly comparable GAAP measures in our most recent earnings release and with that I'll turn the call over to Keith.
Keith: Thanks, Randall and good morning, everyone.
Keith: <unk> had a strong third quarter generating $45 2 million in adjusted EBITDA, representing about 9% quarter over quarter growth all while we continue to execute on our broader corporate strategy through several critical transactions.
Before jumping into the operations I wanted to quickly recap the progress we've made on the corporate strategy front.
Keith: During the third quarter, we reorganized stomach from an MLP to a C Corp, which simplified our corporate structure made our stock appeal to a broader set of investors more than doubled our overall trading liquidity thus far.
Keith: We also executed on a series of refinancing transactions, which significantly reduced the total quantum of debt outstanding reduced our overall cost of capital and pushed the nearest debt maturity out to 2029.
Keith: And finally on October one we announced the acquisition of tall up midstream in the Arkoma basin. This is a very value accretive and balance sheet enhancing transaction, which we believe increases our scale further diversifies our portfolio with the addition of a high growth gas weighted asset and accelerates the potential timing of a return of capital program for our share.
Keith: Holders.
Keith: Our format for the tall Oak transaction, some had expected to be about three eight times levered at closing was approximately $250 million of pro forma 2020 for adjusted EBITDA.
So all three of these strategic transactions position summit, we believe for continued growth and substantial value creation for our shareholders going forward.
Keith: Now turning to operations, we continue to see encouraging levels of activity behind our systems, which we expect will lead to continued adjusted EBITDA growth in the fourth quarter as well.
Keith: The third quarter, we connected 38 wells and currently have six rigs running behind our systems.
Keith: One of the wells connected during the quarter were in the Barnett region, which brings total year to date Barnett well connects to <unk> 27, which exceeds the high end of our original 24 guidance range, but probably magical and from segment EBITDA standpoint.
Keith: Oh. This is too early to provide formal guidance for 2025, we continue to have a rig running behind the system drilling wells that we think are issues that are currently scheduled to be completed in 2025. So it wouldn't be surprised if twenty-five ends up fairly similar 24 from a total well connect perspective in the Barnett.
Keith: Moving over to the Rocky segment, we turned in line 29 wells in the DJ during the quarter, bringing total year to date well connects in the segment to 105 wells.
Keith: Currently have five rigs running in the region and over 90 docs accumulated behind our system.
Keith: And we're expecting another pretty active fourth quarter and first half of 2025.
Keith: I would also like to highlight a few operational and engineering accomplishments during the third quarter.
Keith: You may recall during the second quarter, we experienced some operational downtime at one of our major compressor stations in the DJ which pushed us to have to utilize third party processing, offloads, which significantly impacted margins during the second quarter and to some degree in the third quarter as well.
Keith: I'm happy to report that added at the beginning of October we are back to full operating capacity in the DJ and we expect our margins will improve on into the fourth quarter.
Keith: Additionally, during the third quarter, we made a final investment decision and began construction on a $10 million optimization project in the Rockies segment. There is anticipated to have an approximate one year payback and improve our adjusted EBITDA margins beginning in the second quarter of 2025, when it's turned online.
Keith: I'm moving to the rest of the year outlook as I've already mentioned, we continue to see robust activity levels behind our system with six rigs running in over 100 docs on the system, thus far and.
Keith: We expect the fourth quarter to be another very active quarter, and we expect to generate $45 million to $50 million of adjusted EBITDA during the quarter, which would represent about 5% growth at the midpoint from a.
Keith: Quarter over quarter.
Speaker Change: So with that let me hand, the call over to bill to provide some additional details on our financial results.
Bill: Thanks, Keith and good morning, everyone Summit reported a second quarter net loss of $197 million.
Speaker Change: Which is impacted by a $142 million of noncash income tax expense associated with establishing summit's deferred tax liability associated with the C Corp conversion.
Speaker Change: We generated adjusted EBITDA of $45 2 million, representing solid quarter over quarter growth and capital expenditures of $10 9 million with the majority of the Capex spend and the Rockies associated with <unk> and the New project Keith mentioned.
Speaker Change: With respect to ask Mlp's balance sheet, we had net debt of approximately.
Speaker Change: <unk> $728 million, our available borrowing capacity at the end of third quarter totaled approximately $350 million, which included $1 million of Lcs.
Speaker Change: Now on to the segments in the Rockies segment, which is inclusive of our DJ and Williston Basin systems, we generated adjusted EBITDA of $24 9, Million% to 9% increase relative to the second quarter. The increase in adjusted EBITDA is due primarily to increased product margin as Steve mentioned, we finished up some.
Speaker Change: Maintenance on the DJ system, which really negatively impacted earnings in the second quarter without maintenance complete we're not offloading as much gas neighboring shutdowns. In addition, while volumes were relatively flat quarter over quarter, we had relatively more volume coming from higher margin contracts.
Speaker Change: The crude side liquids volumes averaged 70000 barrels a day a decrease of about 5000 barrels a day relative to the second quarter due primarily to natural production declines and no new wells connected to the system.
Speaker Change: Natural gas volumes averaged 128 million cubic feet a day, a decrease of 2 million cubic feet per day relative to the second quarter and we connected 28 wells in the DJ during the quarter the.
Speaker Change: The Rockies segment currently has five rigs running behind our systems and approximately 90 docs.
Speaker Change: The Permian Basin segment, which includes our 70% interest in the <unk> pipeline reported adjusted EBITDA of $8 4 million an increase of.
Speaker Change: 0.8 million relative to the second quarter due primarily to higher volume throughput on the pipe.
Speaker Change: Volume throughput on doubly averaged 661 million cubic feet per day, representing an increase of 20% relative to the second quarter, an increase of approximately 100% from the third quarter of last year.
Speaker Change: We're excited about the momentum we're seeing behind the pipe and continue to work on additional commercial contracts.
Speaker Change: The PFS segment reported adjusted EBITDA of $12 8 million consistent with the second quarter volume throughput averaged 284 million cubic feet per day during the quarter a decrease of approximately 2%.
Speaker Change: The Barnett segment reported adjusted EBITDA of $7 3 million, an increase of $1 9 million relative to the second quarter, primarily due to a 26% increase in volume throughput from the second quarter.
Speaker Change: The volume throughput increase is primarily due to our anchor customer completing and connecting nine new wells during the quarter.
Speaker Change: Additionally, as we mentioned last quarter another customer on the system, who is half production shut in partially resumed flowing approximately 10 to 15 million cubic feet per day of shut in gas and Jim.
For the past month, they're slowly increase production and are now flowing approximately 20% to 25 million cubic feet per day.
Speaker Change: We still believe there is approximately 20 million cubic feet per day of shut in production behind the system.
With that there is still currently one rig running in 14 docks behind the system today and with that I'll turn the call back over to Heath for closing remarks. Thank.
Speaker Change: Thank you Bill.
Speaker Change: Before I hand, the call over for questions I wanted to remind everyone of our upcoming special meeting of shareholders scheduled for November 29, 2024, we filed a definitive proxy related to the tall oak acquisition with the SEC on October 31 materials have been mailed out to all shareholders.
Speaker Change: I encourage all shareholders to vote for this very important value enhancing transaction, if there any questions related to the proxy or otherwise please don't hesitate to reach out to us and with that operator. Please open the line for questions.
Speaker Change: Thank you.
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Speaker Change: That concludes today's conference call. Thank you for your participation you may now disconnect.
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