HOUSTON, Oct. 3, 2023
/PRNewswire/ -- Summit Midstream Partners, LP (NYSE: SMLP)
("Summit", "SMLP" or the "Partnership") announced today an
operational update for the third quarter of 2023. In connection
with this operational update, SMLP also announced that its Board of
Directors has initiated a formal review process to evaluate
strategic alternatives for the Partnership with a view of
maximizing unitholder value.
Highlights
- Significant quarterly volume growth across nearly every
segment, including ~20% volume growth in our Northeast segment and
~20% liquids volume growth in the Rockies segment
- Connected 74 wells during the third quarter, resulting in 224
wells connected year-to-date and remain on pace to connect a total
of ~300 wells by the end 2023
- Expect third quarter Adjusted EBITDA of ~$70 million, representing ~20% growth relative
to second quarter
- Reiterating fourth quarter Adjusted EBITDA guidance of
$75 million to $85 million
- Active customer base with eight drilling rigs and more than 170
DUCs behind our systems
- Launched strategic alternatives review with the goal of
maximizing unitholder value
Management Commentary
Heath Deneke, President, Chief
Executive Officer, and Chairman, commented, "After a slower than
expected start to the first half of the year, primarily driven by
low commodity prices and well completion timing delays, we have
reestablished significant positive momentum with robust growth in
quarterly Adjusted EBITDA, natural gas and liquids volume and well
interconnects. And while we are optimistic about our outlook, which
includes significant free cash flow generation and debt reduction,
we also believe that our current unit price does not reflect the
true value of the Partnership and that the best way to maximize
unitholder value is to explore our options, while remaining focused
on the Partnership's operational performance and execution of its
business strategy."
Strategic Review
Based on the Partnership's recent and expected financial
performance, as well as interest recently received from third
parties for potential transactions, ranging from the sale of
specific assets to consideration for the whole Partnership, SMLP
is announcing that its Board of Directors has engaged external
advisors to evaluate strategic alternatives for the Partnership
with the goal of maximizing value for the Partnership's
unitholders.
These alternatives may include, but are not limited to,
continued execution of the Partnership's business plan, sale of
assets, refinancing parts or the entirety of its capital structure,
sale of the Partnership by merger or cash, or any combination of
these and other alternatives.
While the Board conducts its review, the Partnership remains
focused on its operational performance and execution of its
business strategy to increase unitholder value.
There is no deadline or definitive timetable set for completion
of the strategic alternatives review and no guarantee that the
process will result in the Partnership pursuing a transaction or
other strategic outcome or, if a transaction is undertaken, the
terms or timing of such a transaction. SMLP does not intend to make
further public comment regarding the review until it has been
completed or SMLP determines that a disclosure is required by law
or otherwise deemed appropriate.
Volume Throughput
Summary
|
|
|
Q2
2023
Actual
|
Q3
2023
Estimate
|
Q-o-Q
%
Change
|
Current(4)
|
Average daily
throughput (MMcf/d):
|
|
|
|
|
Northeast
(1)
|
629
|
~750
|
19 %
|
~810
|
Rockies
|
99
|
~115
|
16 %
|
~125
|
Piceance
|
297
|
~310
|
4 %
|
~300
|
Barnett
|
182
|
~170
|
(7) %
|
~190
|
Aggregate average
daily throughput
|
1,207
|
~1,345
|
11 %
|
~1,425
|
|
|
|
|
|
Average daily
throughput (Mbbl/d):
|
|
|
|
|
Rockies
|
71
|
~85
|
20 %
|
~85
|
Aggregate average
daily throughput
|
71
|
~85
|
20 %
|
~85
|
|
|
|
|
|
Ohio Gathering
average daily throughput (MMcf/d)
(2)
|
781
|
~870
|
11 %
|
N/A
|
|
|
|
|
|
Double E average
daily throughput (MMcf/d) (3)
|
243
|
~325
|
34 %
|
~425
|
|
|
|
|
|
|
____________________
|
(1)
|
Exclusive of Ohio
Gathering and Double E 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.
|
(4)
|
Represents estimated
average daily volume from 9/26/2023 through 9/30/2023 for all
operated assets and Double E.
|
Volume Highlights
SMLP's average daily natural gas throughput for its wholly owned
operated systems is expected to increase 11% to approximately 1,345
MMcf/d, and liquids volumes are expected to increase 20% to
approximately 85 Mbbl/d, relative to the second quarter of 2023.
OGC natural gas throughput expected to increase 11% to
approximately 870 MMcf/d relative to the second quarter of 2023.
Double E Pipeline gross volumes transported are expected to
increase 34% to approximately 325 MMcf/d relative to the second
quarter of 2023.
Natural gas-price driven segments:
- Northeast segment volumes are expected to increase 19% on our
wholly owned systems and 11% from our OGC joint venture, relative
to the second quarter of 2023. 14 new wells were brought online
behind our wholly owned Summit Midstream Utica ("SMU") system and 8 new wells were connected behind
our OGC joint venture during the third quarter. The 14 new wells
behind our SMU system were brought
online throughout the third quarter. As such, current operated
volumes are trending approximately 60 MMcf/d higher than expected
as-reported third quarter volumes. We expect approximately 10 new
wells to be connected during the fourth quarter. There are
currently three rigs running and 14 DUCs behind our systems.
- Piceance segment volumes expected to increase 4% relative to
the second quarter of 2023, primarily due to 12 new wells connected
during the third quarter. We expect approximately 20 new wells to
be connected during the fourth quarter. There is currently one rig
running and 21 DUCs behind the system.
- Barnett segment volumes are expected to decrease 7% relative to
the second quarter of 2023, primarily due to the continuation of
production being temporarily shut-in by one of our customers. We
estimate these curtailments impacted segment volumes by
approximately 20 MMcf/d during the quarter. Our anchor customer
completed 6 new wells in September that has increased segment
volumes to approximately 190 MMcf/d currently. While we do not
expect any new wells during the fourth quarter, our anchor customer
is expected to bring online 11 new wells during the first quarter
of 2024. There is currently one rig running and 18 DUCs behind the
system.
Oil price-driven segments
- Permian segment volumes expected to increase 34% relative to
the second quarter of 2023. Our anchor customer behind the Double E
Pipeline started to increase production during the quarter and is
currently running 13 rigs in New
Mexico, relative to a low of two rigs during the pandemic.
The volume increase occurred throughout the quarter, with current
volumes trending at approximately 425 MMcf/d, or 100 MMcf/d above
expected as-reported third quarter volumes. We remain confident in
the fundamental long-term outlook for the Double E Pipeline with
105 rigs running in Eddy and Lea Counties, New Mexico currently and the recent and
expected trajectory of our anchor customer's production in the
basin.
- Rockies segment natural gas and liquids volumes expected to
increase 16% and 20%, respectively, relative to the second quarter
of 2023. Current natural gas volumes are trending approximately 10
MMcf/d higher than expected as-reported third quarter volumes and
we continue to expect volumes to increase in the fourth quarter due
to the 38 DJ Basin wells connected during the second quarter. There
were 34 new wells connected during the quarter, including 6 in the
DJ Basin and 28 in the Williston
Basin. We expect over 50 new wells to be connected during the
fourth quarter, including over 40 new wells in the DJ Basin that
are expected to reach peak production in the second quarter of
2024. One of our anchor customers in the Williston announced the acquisition of our
other anchor customer during the quarter. While integration has
historically delayed development for a few months, we are excited
about the highly contiguous pro forma dedicated acreage position.
We expect this will enable our anchor customer to develop more
3-mile laterals versus 2-mile laterals, historically. There are
currently three rigs running and approximately 117 DUCs behind the
systems.
Third Quarter 2023 Earnings Call
SMLP will host a conference call at 10:00
a.m. Eastern on November 3,
2023, to discuss its quarterly operating and financial
results. The call can be accessed via teleconference at: Q3 2023
Summit Midstream Partners LP Earnings Conference Call
(https://register.vevent.com/register/BIc42a8b051b4d40e8902304edf61e8ef7).
Once registration is completed, participants will receive a dial-in
number along with a personalized PIN to access the call. While not
required, it is recommended that participants join 10 minutes prior
to the event start. The conference call, live webcast and archive
of the call can be accessed through the Investors section of SMLP's
website at www.summitmidstream.com.
Use of Non-GAAP Financial Measures
We report financial results in accordance with U.S. generally
accepted accounting principles ("GAAP"). We also present adjusted
EBITDA, a non-GAAP financial measure.
Adjusted EBITDA
We define adjusted EBITDA as net income or loss, plus interest
expense, income tax expense, depreciation and amortization, our
proportional adjusted EBITDA for equity method investees,
adjustments related to MVC shortfall payments, adjustments related
to capital reimbursement activity, unit-based and noncash
compensation, impairments, items of income or loss that we
characterize as unrepresentative of our ongoing operations and
other noncash expenses or losses, income tax benefit, income (loss)
from equity method investees and other noncash income or
gains. Because adjusted EBITDA may be defined differently by
other entities in our industry, our definition of this
non-GAAP financial measure may not be comparable to similarly
titled measures of other entities, thereby diminishing its
utility.
Management uses adjusted EBITDA in making financial, operating
and planning decisions and in evaluating our financial performance.
Furthermore, management believes that adjusted EBITDA may provide
external users of our financial statements, such as investors,
commercial banks, research analysts and others, with additional
meaningful comparisons between current results and results of prior
periods as they are expected to be reflective of our core ongoing
business.
Adjusted EBITDA is used as a supplemental financial measure to
assess:
- the ability of our assets to generate cash sufficient to make
future potential cash distributions and support our
indebtedness;
- the financial performance of our assets without regard to
financing methods, capital structure or historical cost basis;
- our operating performance and return on capital as compared to
those of other entities in the midstream energy sector, without
regard to financing or capital structure;
- the attractiveness of capital projects and acquisitions and the
overall rates of return on alternative investment opportunities;
and
- the financial performance of our assets without regard to (i)
income or loss from equity method investees, (ii) the impact of the
timing of MVC shortfall payments under our gathering agreements or
(iii) the timing of impairments or other income or expense items
that we characterize as unrepresentative of our ongoing
operations.
Adjusted EBITDA has limitations as an analytical tool and
investors should not consider it in isolation or as a substitute
for analysis of our results as reported under GAAP. For
example:
- certain items excluded from adjusted EBITDA are significant
components in understanding and assessing an entity's financial
performance, such as an entity's cost of capital and tax
structure;
- adjusted EBITDA does not reflect our cash expenditures or
future requirements for capital expenditures or contractual
commitments;
- adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs; and
- although depreciation and amortization are noncash charges, the
assets being depreciated and amortized will often have to be
replaced in the future, and adjusted EBITDA does not reflect any
cash requirements for such replacements.
We compensate for the limitations of adjusted EBITDA as an
analytical tool by reviewing the comparable GAAP financial
measures, understanding the differences between the financial
measures and incorporating these data points into our
decision-making process.
We do not provide the GAAP financial measures of net income or
loss or net cash provided by operating activities on a
forward-looking basis because we are unable to predict, without
unreasonable effort, certain components thereof including, but not
limited to, (i) income or loss from equity method investees and
(ii) asset impairments. These items are inherently uncertain
and depend on various factors, many of which are beyond our
control. As such, any associated estimate and its impact on
our GAAP performance and cash flow measures could vary materially
based on a variety of acceptable management assumptions.
About Summit Midstream Partners, LP
SMLP is a value-driven limited partnership focused on
developing, owning and operating midstream energy infrastructure
assets that are strategically located in the core producing areas
of unconventional resource basins, primarily shale formations, in
the continental United States.
SMLP provides natural gas, crude oil and produced water gathering,
processing and transportation services pursuant to primarily
long-term, fee-based agreements with customers and counterparties
in five unconventional resource basins: (i) the Appalachian Basin,
which includes the Utica and
Marcellus shale formations in Ohio
and West Virginia; (ii) the
Williston Basin, which includes
the Bakken and Three Forks shale formations in North Dakota; (iii) the Denver-Julesburg
Basin, which includes the Niobrara
and Codell shale formations in Colorado and Wyoming; (iv) the Fort Worth Basin, which includes the Barnett
Shale formation in Texas; and (v)
the Piceance Basin, which includes the Mesaverde formation as well
as the Mancos and Niobrara shale formations in Colorado. SMLP has an equity method investment
in Double E Pipeline, LLC, which provides interstate natural gas
transportation service from multiple receipt points in the
Delaware Basin to various delivery
points in and around the Waha Hub in Texas. SMLP also has an equity method
investment in Ohio Gathering, which operates extensive natural gas
gathering and condensate stabilization infrastructure in the Utica
Shale in Ohio. SMLP is
headquartered in Houston,
Texas.
Forward Looking Statements
This press release includes certain statements concerning
expectations for the future that are forward-looking within the
meaning of the federal securities laws. Forward-looking statements
include, without limitation, any statement that may project,
indicate or imply future results, events, performance or
achievements and may contain the words "expect," "intend," "plan,"
"anticipate," "estimate," "believe," "will be," "will continue,"
"will likely result," and similar expressions, or future
conditional verbs such as "may," "will," "should," "would," and
"could", any statement concerning future financial or operational
performance (including future revenues, earnings or growth rates)
guidance, ongoing business strategies and possible actions taken by
us or our subsidiaries are also forward-looking statements.
Forward-looking statements also contain known and unknown risks and
uncertainties (many of which are difficult to predict and beyond
management's control) that may cause SMLP's actual results in
future periods to differ materially from anticipated or projected
results. An extensive list of specific material risks and
uncertainties affecting SMLP is contained in its 2022 Annual Report
on Form 10-K filed with the Securities and Exchange Commission (the
"SEC") on March 1, 2023, as amended
and updated from time to time. Any forward-looking statements in
this press release are made as of the date of this press release
and SMLP undertakes no obligation to update or revise any
forward-looking statements to reflect new information or
events.
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SOURCE Summit Midstream Partners, LP