Q1 2025 Summit Midstream Corp Earnings Call
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Thank you for standing by my name is D and I will be your conference operator today.
This time I would like to welcome everyone to the first quarter 2025 Summit Midstream Corporation earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during peacetime simply press star followed by the number.
One on your telephone keypad, if he would like to withdraw your question brushed star one again.
Speaker Change: Thank you I would now like to turn the call over to Ron Bell Burton. Please go ahead.
Speaker Change: 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 sounds midstream dot com, where you'll find it on the homepage events and presentations section of our quarterly results section with me today to discuss our first quarter of 2025 financial and operating results is Heath deneke.
Bill Moore: Our president and Chief Executive Officer, and Chairman Bill Moore, our Chief Financial Officer, along with other members of our senior management team who.
Speaker Change: 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 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.
Speaker Change: 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 <unk> annual report on Form 10-K for the fiscal year ended December 31, 2020 for which the company filed with the SEC on March 11, 2025, as well as our other SEC filings for a listing of factors that could cause actual.
Speaker Change: Results to differ materially from expected results.
Speaker Change: Please also note that on this call we use the terms EBITDA adjusted EBITDA distributable cash flow and free cash flow is a non-GAAP financial measures and we have provided reconciliations to the most directly comparable GAAP measures in our most recent earnings release and with that I will turn the call over to Heath.
Heath Deneke: Thanks, Randall and good morning, everyone. Thank you for joining us today to discuss our financial and operating results for the first quarter of 2025.
Heath Deneke: We had an active first quarter, both from a corporate and operational perspective, and we remain on track to continue to execute on our strategic objectives for the remainder of the year.
Heath Deneke: Combined with the various strategic activities, we implemented in 2020 for some of this position with a strong balance sheet to remain resilient. Despite the latest macro down cycle, while opportunistic on the M&A front.
Heath Deneke: In January we raised $250 million of additional senior secured second lien notes the proceeds of which were used to repay revolver borrowings and positioned the company with over $350 million of liquidity.
Heath Deneke: In March the board of directors reinstated a cash dividend on our series a preferred stock which is the first step as we continue to work towards reinstatement of common dividend in the future.
Heath Deneke: Also in March we closed on the accretive acquisition of <unk> midstream, which further expands our DJ basin footprint, while providing additional operating synergies and capacity to help meet future growth in the basin over the years to come.
Heath Deneke: Operationally, we connected 41 wells during the first quarter, which was inline with expectations and we continue to have an active customer base with six active drilling rigs in over 100 drilled but uncompleted wells currently behind our system.
Heath Deneke: Now obviously there has been a significant reduction in crude oil prices. Since we released guidance in 2025 back in early March and that does have some potential to dampen activity levels in the second half of the year and our crude oriented Rocky segment. However, the outlook on the natural gas side remains strong which from an overall summit portfolio perspective has the potential to.
Heath Deneke: The potential downside exposure associated with the crude segment for the year.
Heath Deneke: Yes.
Heath Deneke: In the Rockies segment, we connected 30, new wells to the system during the first quarter, including 22 in the DJ and eight in the Williston and to date substantially all of the wells scheduled to come online in the first half of the year have already been turned in line or are in the process of being completed.
Heath Deneke: Additionally, we commissioned a significant optimization project in March that is expected to improve our adjusted EBITDA margins beginning in the second quarter.
Heath Deneke: Looking at the second half of the year for the Rockies segment. We currently have four rigs running behind our systems and with the exception of one pad on a schedule that is expected to be completed in December all of the remaining wells are expected to be turned in line. During the second half of the year are either drilled but uncompleted wells or are currently in the process of being <unk>.
Heath Deneke: Drilled.
Heath Deneke: So as you would expect we remain in very close communication with our customer base to evaluate the potential implications of the current crude price environment on well completion activities and turn in line dates during the second half of the year.
Heath Deneke: While there has been some relatively minor revisions to date and there is potential for slippage if prices were to weaken further towards the low fifty's our customers expect second half of 2025 completion schedules to largely remain intact at this time.
Heath Deneke: And just as a reminder, as we said in the earnings release, our Rockies segment adjusted EBITDA guidance for the year is $100 million to $125 million with a low end of the range already reflecting a two to three month delay relative to current customer drilling and completion schedule that had been provided for the second half of the year.
Heath Deneke: And the mid Con segment, we turned in line 11 wells during the quarter, including five in the Barnett and fixed in the Arkoma and subsequent to quarter end, we turned in line and additional six wells in the Barnett and three in the Arkoma.
Heath Deneke: While the wells in the a karma.
Heath Deneke: <unk> did have lower than expected btu and NGL content. The initial production rates outperformed our internal expectations, which led to significant volume growth relative to the fourth quarter.
Heath Deneke: We continue to remain very excited about the mid Con segment as natural gas strip prices remained favorable and we have significant dedicated inventory remaining as demand is expected to grow in the coming years in the Gulf Coast region.
Heath Deneke: And finally in the Permian segment, we continue to see gas volumes increase on the <unk> pipeline with average daily volumes growing by 8% quarter over quarter.
Heath Deneke: And as of this week, we're actually averaging close to 700 million a day of throughput on the system.
Heath Deneke: So even with the recent softening in crude prices, we still anticipate a tremendous amount of growth in residue gas in the Delaware basin over the next five years and given that most of the existing in basin pipeline takeaway capacity is approaching full utilization, we remain very optimistic in our ability to further commercial wise <unk> in the years ahead.
Heath Deneke: So given the activity levels, we're seeing today behind our footprint and real time feedback from our customers. We are at this time reiterating our full year 2025 financial guidance range of $245 million to $280 million and adjusted EBITDA and total capital expenditures of $65 million to $75 million as.
Heath Deneke: As I said in the earnings release to the extent all of the remaining wells anticipated to come online during the second half of the year in the Rockies segments on our deferred we would expect to trend towards the lower end of our existing guidance range.
Heath Deneke: As always we will continue to monitor activity levels beyond our footprint and we'll provide updates throughout the year as they become available.
Heath Deneke: And with that I'll hand, it over to bill to provide additional details on our financial results.
Bill Moore: Thanks, Steve and good morning, everyone Summit reported first quarter, adjusted EBITDA of $57 5 million and capital expenditures of $20 6 million.
Bill Moore: With the majority of the Capex spend in the Rockies and mid con segments associated with pad connections and the previously announced optimization project and the Rockies.
Bill Moore: With respect to <unk> balance sheet, we had net debt of approximately $959 million and our available borrowing capacity at the end of the first quarter totaled approximately 354 million, which included 1 million of Undrawn letters of credit.
Bill Moore: Now moving on to the segments.
Bill Moore: The Rockies segment, which is inclusive of our DJ and Williston Basin systems generated adjusted EBITDA of $24 9 million, an increase of $1 6 million from the fourth quarter, primarily due to an eight 8% increase in liquids volume throughput higher freshwater sales and the acquisition of Moonrise midstream.
Bill Moore: In the DJ Basin on March 10, 2025.
Bill Moore: This was partially offset by a one 5% decrease in natural gas volume throughput.
Bill Moore: Liquids volumes averaged 74000 barrels a day.
Bill Moore: An increase of 6000 barrels a day relative to the fourth quarter, primarily due to 17, new wells connected to the system late in the fourth quarter of 2024, eight new wells connected because of the system during the quarter and a partial month contribution from moonrise mixture.
Bill Moore: Natural gas volumes averaged 129 million cubic feet per day, a decrease of 2 million cubic feet per day relative to the fourth quarter, primarily due to natural production declines from wells brought online during the second half of 2024 behind our DJ Basin system, partially offset by 2022.
Bill Moore: Two new wells connected during the quarter and partial month contribution of Linde Regiment Sir.
Bill Moore: The Rockies segment currently has four rigs running behind our systems, including three in the Williston and one in the DJ and more than 90 docs.
Bill Moore: Our Permian Basin segment, which includes our 70% interest in the double E pipeline reported adjusted EBITDA of $8 3 million, an increase of $5 million relative to the fourth quarter.
Bill Moore: Due primarily to higher volume throughput on the pipe.
Bill Moore: Volume throughput on <unk> averaged 664 million cubic feet per day during the first quarter.
Bill Moore: The <unk> segment reported adjusted EBITDA of $11 8 million flat relative to the fourth quarter.
Bill Moore: Due primarily to lower operating expenses, partially offset by a 4% decrease in volume throughput.
Bill Moore: The mid Con segment reported adjusted EBITDA of $22 5 million, an increase of $9 6 million relative to the fourth quarter, primarily due to the acquisition of <unk> that closed in December 2024.
Bill Moore: And an increase in volume throughput.
Bill Moore: Volume throughput on the system increased 48% relative to the fourth quarter, primarily due to incremental volume throughput from a full quarter contribution of the tall oak assets.
Bill Moore: At 11, new well connections incremental production from a new customer connected to the Arkoma system.
Bill Moore: A full quarter contribution of production that was previously shut in in the Barnett.
Bill Moore: All of which was partially offset by initial production declines from wells connected in the second half of 2024.
Bill Moore: There are currently two rigs running including one in the Barnett and one in the Arkoma and 16 docks behind the system.
Bill Moore: Additionally, our customer in the Barnett has recently completed and started flowing.
Bill Moore: Three well pad that was drilled in held in DUC inventory since 2023 the.
Bill Moore: The same customer continues to run a completion crew on an another existing dock behind the system.
Heath Deneke: And with that I'll turn the call back over to Heath for closing remarks.
Heath Deneke: Thank you Bill and conclusion summit is well positioned with a strong balance sheet and active customer base to navigate the current market environment and capitalize on growth opportunities.
Heath Deneke: We will continue to focus on executing our strategic initiatives, maintaining financial discipline and delivering value to our shareholders.
Heath Deneke: Thank you for your continued support and confidence in summit and I look forward to updating you on our progress in the coming quarters ahead with that operator, I'd like to open up the call for questions.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: We have now eight I would like to ask a question. Please press star one on your telephone keypad you raise your hand in China Q. If you would like to withdraw your question simply press Star one again.
Speaker Change: All the bonds as your question of listening via loud speakers on your device. Please pickup your handset and ensure that your pone Stefan yet youre asking questions.
Speaker Change: There are no question at this time. This concludes today's conference call you may now disconnect.
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Speaker Change: Thank you for standing by my name is <unk> and I will be your conference operator today at this time I would like to welcome everyone to the first quarter 2020 Summit Midstream Corporation earnings Conference call. All lines have been placed on mute to prevent any background noise update the speaker's remarks, there will be a question and answer.
Speaker Change: Session.
Speaker Change: We'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.
Speaker Change: I would now like to turn the call over to Ron Dell Burton. Please go ahead.
Speaker Change: 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 youll find it on the homepage events and presentations section of our quarterly results section.
Speaker Change: With me today to discuss our first quarter of 2025 financial and operating results is Heath Deneke, our president and Chief Executive Officer, and Chairman Bill Moore, Our Chief Financial Officer, along with other members of our senior management team who.
Speaker Change: 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 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.
Speaker Change: 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 <unk> annual report on Form 10-K for the fiscal year ended December 31, 2020 for which the company filed with the SEC on March 11, 2025, as well as our other SEC filings for a listing of factors that could cause actual.
Speaker Change: Results to differ materially from expected results.
Speaker Change: Also note that on this call we use the terms EBITDA adjusted EBITDA distributable cash flow and free cash flow is a non-GAAP financial measures 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. Thank you for joining us today to discuss our financial and operating results for the first quarter of 2025.
Keith: We had an active first quarter, both from a corporate and operational perspective, and we remain on track to continue to execute on our strategic objectives for the remainder of the year.
Keith: Combined with the various strategic activities, we implemented in 2020 for some of this position with a strong balance sheet to remain resilient. Despite the latest macro down cycle, while opportunistic on the M&A front.
Keith: In January we raised $250 million of additional senior secured second lien notes the proceeds of which were used to repay revolver borrowings and positioned the company with over $350 million of liquidity.
Keith: In March the board of directors reinstated a cash dividend on our series a preferred stock which is the first step as we continue to work towards reinstatement of common dividend in the future.
Keith: Also in March we closed on the accretive acquisition of Moonrise midstream, which further expands our DJ basin footprint, while providing additional operating synergies and capacity to help meet future growth in the basin over the years to come.
Keith: Operationally, we connected 41 wells during the first quarter, which was inline with expectations and we continue to have an active customer base with six active drilling rigs in over 100 drilled but uncompleted wells currently behind our system.
Keith: Now obviously there has been a significant reduction in crude oil prices. Since we released guidance in 2025 back in early March and that does have some potential to dampen activity levels in the second half of the year and our crude oriented Rocky segment. However, the outlook on the natural gas side remained strong which from an overall summit portfolio perspective has the potential to.
Keith: The potential downside exposure associated with the crude segment for the year.
Keith: Thanks.
Keith: In the Rockies segment, we connected 30, new wells to the system during the first quarter, including 22 in the DJ and eight in the Williston and to date substantially all of the wells scheduled to come online in the first half of the year have already been turned in line or are in the process of being completed.
Keith: Additionally, we commissioned a significant optimization project in March that is expected to improve our adjusted EBITDA margins beginning in the second quarter.
Keith: Looking at the second half of the year for the Rockies segment. We currently have four rigs running behind our systems and with the exception of one pad on a schedule that is expected to be completed in December all of the remaining wells are expected to be turned in line. During the second half of the year are either drilled but uncompleted wells or are currently in the process of being <unk>.
Keith: Drilled.
Keith: So as you would expect we remain in very close communication with our customer base to evaluate the potential implications of the current crude price environment on well completion activities and turn in line dates during the second half of the year.
Keith: While there has been some relatively minor revisions to date and there is potential for slippage if prices were to weaken further towards the low fifty's our customers expect second half of 2025 completion schedules to largely remain intact at this time.
Keith: And just as a reminder, as we said in the earnings release, our Rockies segment adjusted EBITDA guidance for the year is $100 million to $125 million with a low end of the range already reflecting a two to three month delay relative to current customer drilling and completion schedule that had been provided for the second half of the year.
Keith: And the mid Con segment, we turned in line 11 wells during the quarter, including five in the Barnett and fixed in the Arkoma and subsequent to quarter end, we turned in line and additional six wells in the Barnett and three in the Arkoma.
Keith: While the wells in the a karma arkoma did have lower than expected Btu and NGL content. The initial production rates outperformed our internal expectations, which led to significant volume growth relative to the fourth quarter.
Keith: We continue to remain very excited about the mid Con segment as natural gas strip prices remained favorable and we have significant dedicated inventory remaining as demand is expected to grow in the coming years in the Gulf Coast region.
Keith: And finally in the Permian segment, we continue to see gas volumes increase on the <unk> pipeline with average daily volumes growing by 8% quarter over quarter.
Keith: And as of this week, we're actually averaging close to 700 million a day of throughput on the system.
Keith: So even with the recent softening in crude prices, we still anticipate a tremendous amount of growth in residue gas in the Delaware basin over the next five years and given that most of the existing in basin pipeline takeaway capacity is approaching full utilization, we remain very optimistic in our ability to further commercial wise globally in the years ahead.
Keith: So given the activity levels, we're seeing today behind our footprint and real time feedback from our customers. We are at this time reiterating our full year 2025 financial guidance range of 245 million to $280 million and adjusted EBITDA and total capital expenditures of $55 million to $75 million.
Keith: As I said in the earnings release to the extent all of the remaining wells anticipated to come online during the second half of the year in the Rockies segments on our deferred we would expect to trend towards the lower end of our existing guidance range.
Keith: As always we will continue to monitor activity levels beyond our footprint and we'll provide updates throughout the year as they become available.
Bill Moore: And with that I'll hand, it over to bill to provide additional details on our financial results.
Bill Moore: Thanks, Keith and good morning, everyone reported.
Bill Moore: Reported first quarter, adjusted EBITDA of $57 5 million and capital expenditures of $20 6 million.
Bill Moore: With the majority of the Capex spend in the Rockies and mid con segments associated with pad connections and the previously announced optimization project in the Rockies.
Bill Moore: With respect to <unk> balance sheet, we had net debt of approximately $959 million and our available borrowing capacity at the end of the first quarter totaled approximately 354 million, which included 1 million of Undrawn letters of credit.
Bill Moore: Now moving on to the segments.
Bill Moore: Rockies segment, which is inclusive of our DJ and Williston Basin systems generated adjusted EBITDA of $24 9 million, an increase of $1 6 million from the fourth quarter, primarily due to an eight 8% increase in liquids volume throughput higher freshwater sales and the acquisition of Moonrise midstream.
Bill Moore: In the DJ Basin on March 10, 2025.
Bill Moore: This was partially offset by a one 5% decrease in natural gas volume throughput.
Bill Moore: Liquids volumes averaged 74000 barrels a day.
Bill Moore: An increase of 6000 barrels a day relative to the fourth quarter, primarily due to 17, new wells connected to the system late in the fourth quarter of 2024, eight new wells connected to the system during the quarter and a partial month contribution from moonrise mixture.
Bill Moore: Natural gas volumes averaged 129 million cubic feet per day, a decrease of 2 million cubic feet per day relative to the fourth quarter, primarily due to natural production declines from wells brought online during the second half of 2024 beyond our DJ basin system, partially offset by 2022.
Bill Moore: New wells connected during the quarter and partial month contribution of Linde RASM right Sir.
Bill Moore: The Rockies segment currently has four rigs running behind our systems, including three in the Williston and one in the DJ and more than 90 docs.
Bill Moore: The Permian Basin segment, which includes our 70% interest in the <unk> pipeline.
Bill Moore: Adjusted EBITDA of $8 3 million, an increase of half a million dollars relative to the fourth quarter.
Bill Moore: Due primarily to higher volume throughput on the pipe.
Bill Moore: Volume throughput <unk> averaged 664 million cubic feet per day during the first quarter.
Bill Moore: The PR segment reported adjusted EBITDA of $11 8 million flat relative to the fourth quarter.
Bill Moore: Due primarily to lower operating expenses, partially offset by a 4% decrease in volume throughput.
Bill Moore: The mid Con segment reported adjusted EBITDA of $22 5 million, an increase of $9 6 million relative to the fourth quarter, primarily due to the acquisition of call up that closed in December 2024.
Bill Moore: And an increase in volume throughput.
Bill Moore: Volume throughput on the system increased 48% relative to the fourth quarter, primarily due to incremental volume throughput from a full quarter contribution of the tall oak assets.
Bill Moore: At 11, new well connections incremental production from a new customer connected to the Arkoma system.
Bill Moore: A full quarter contribution of production that was previously shut in in the Barnett.
Bill Moore: All of which was partially offset by initial production declines from wells connected in the second half of 2024.
Bill Moore: There are currently two rigs running including one in the Barnett and one in the Arkoma and 16 docks behind the system.
Bill Moore: Additionally, our customer in the Barnett has recently completed and starting slowing a three well pad that was drilled in held in DUC inventory since 2023 the.
Bill Moore: The same customer continues to run a completion crew on another existing dock behind the system.
Heath Deneke: And with that I'll turn the call back over to Heath for closing remarks.
Heath Deneke: Thank you Bill and conclusion summit is well positioned with a strong balance sheet and active customer base to navigate the current market environment and capitalize on growth opportunities. We will continue to focus on executing our strategic initiatives, maintaining financial discipline and delivering value to our shareholders.
Speaker Change: We thank you for your continued support and confidence in the stomach and I look forward to updating you on our progress in the coming quarters ahead, and with that operator, I'd like to open up the call for questions.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: You have dialed in and would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question simply press Star one again.
Speaker Change: All the bonds as your question of listening via loud speaker on your device. Please pickup your handset and ensure that your pone Stefan mute that youre asking questions.
Speaker Change: There are no question at this time. This concludes today's conference call you may now disconnect.