UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 2, 2024
(Exact name of registrant as specified in its charter)
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(Registrants’ telephone number, including area code): (832 ) 413-4770
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
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Securities registered pursuant to Section 12(b) of the Securities Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company | ||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On May 2, 2024 , Summit Midstream Partners, LP (the “Partnership,” “we” and “our”) issued a press release announcing its results of operations for the three months ended March 31, 2024. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information furnished in this Item 2.02 shall not be deemed “filed” for purposes of the Securities Exchange Act of 1934, as amended (the “1934 Act”), and shall not be deemed incorporated by reference in any filing with the Securities and Exchange Commission, whether or not filed under the Securities Act of 1933 or the 1934 Act, regardless of any general incorporation language in such document.
Use of Non-GAAP Financial Measures
In addition to reporting financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Partnership presents certain non-GAAP financial measures. Specifically, the Partnership presents adjusted EBITDA, distributable cash flow and free cash flow. 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. We define Distributable Cash Flow as adjusted EBITDA, as defined above, less cash interest paid, cash paid for taxes, net interest expense accrued and paid on the senior notes, and maintenance capital expenditures. We define free cash flow as distributable cash flow attributable to common and preferred unitholders less growth capital expenditures, less investments in equity method investees, less distributions to common and preferred unitholders. Free cash flow excludes proceeds from asset sales and cash consideration paid for acquisitions.
We exclude these items because they are considered unusual and not indicative of our ongoing operations. Our definitions of these non-GAAP financial measures may differ from the definitions of similar measures used by other companies, thereby diminishing the utility of these measures. Management uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating the Partnership’s financial performance. Furthermore, management believes that these non-GAAP financial measures may provide users of the Partnership’s financial statements with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business. These measures have limitations, and investors should not consider them in isolation or as a substitute for analysis of the Partnership’s results as reported under GAAP.
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.
Reconciliations of GAAP to non-GAAP financial measures are included as attachments to the press release which has been posted to the “Investors” section of our website at www.summitmidstream.com.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit Number | Description | |||||||
| 104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document | |||||||
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Summit Midstream Partners, LP | |||||||||||
| (Registrant) | |||||||||||
| By: | Summit Midstream GP, LLC (its general partner) | ||||||||||
| Dated: | /s/ Matthew B. Sicinski | ||||||||||
| Matthew B. Sicinski, Senior Vice President and Chief Accounting Officer | |||||||||||
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EXHIBIT 99.1
 | Summit Midstream Partners, LP 910 Louisiana Street, Suite 4200 Houston, TX 77002 | ||||
Summit Midstream Partners, LP Reports First Quarter 2024
Financial and Operating Results
Houston, Texas (May 2, 2024) – Summit Midstream Partners, LP (NYSE: SMLP) (“Summit”, “SMLP” or the “Partnership”) announced today its financial and operating results for the three months ended March 31, 2024.
Highlights
•Reduced net leverage ratio to approximately 3.9x, a dramatic reduction from 5.4x in the fourth quarter of 2023, furthering progress toward achieving 3.5x net leverage target
•First quarter 2024 net income of $132.9 million, adjusted EBITDA of $70.1 million, cash flow available for distributions ("Distributable Cash Flow" or “DCF”) of $32.5 million and free cash flow (“FCF”) of $17.2 million
•Connected 71 wells during the first quarter
•Active customer base with three drilling rigs and more than 80 DUCs behind our systems
•Successful conclusion to the Double E open season resulting in an incremental 75 MMcfd, 10-year take or pay commitment and primary term extension with an existing customer plus an additional 150 MMcfd of non-binding bids from third parties
•Sold remaining Northeast assets in West Virginia for approximately $75 million1
•Revised pro forma 2024 Adjusted EBITDA guidance of $170 million to $200 million2
Management Commentary
Heath Deneke, President, Chief Executive Officer, and Chairman, commented, “Summit's first quarter 2024 financial and operating results were generally in line with management expectations, despite severe winter weather in the DJ Basin impacting volumes in January. With the previously announced Utica transaction and today’s announced sale of our Mountaineer Gathering System in West Virginia to Antero Midstream LLC, we have now fully exited the Northeast segment and will focus on several organic and bolt-on acquisition opportunities in our Rockies and Permian segments. Pro forma for the Utica and Mountaineer transactions, we have dramatically reduced net leverage to approximately 3.9x, a 1.5x reduction from the fourth quarter of 2023. We have significant liquidity with a $400 million undrawn revolver and more than $350 million of unrestricted cash to pursue these organic growth and bolt-on acquisition opportunities, while continuing to de-lever the balance sheet and progress toward achieving our 3.5x net leverage target.
We had a very active quarter operationally, connecting 71 wells to the system, with a vast majority of those coming from the Rockies region, which represents nearly half of the total well connects we're expecting in 2024, pro forma for the combined Northeast asset divestitures. Our customers on our remaining segments are completing wells on schedule and continue to hold to their original timing expectations on future wells. As a result, our new Revised 2024 Adjusted EBITDA guidance range of $170 million to $200 million remains generally in-line with our original guidance for the year as adjusted to remove full year contributions of the Northeast segment divestitures.
In the Permian, we’ve continued to make great progress commercializing the available firm capacity on the Double E Pipeline as natural gas production continues to grow in the Delaware Basin. Earlier this week we concluded a successful open season that resulted in the awarding of 75 MMcf/d of incremental take-or-pay commitments with a subsidiary of Matador Resources to support their Marlan Processing Plant expansion in New Mexico, plus, we received an additional 150 MMcf/d of non-binding 10-year take-or-pay bids from other third parties desiring new plant connections in 2025. The amended and restated Matador agreement also provided for an extension of their existing firm service agreements to a new 10-year term effective May 1, 2024. Additionally, we recently executed a new max-rate interruptible agreement for up to 150 MMcf/d of incremental volume from a new customer in New
1 Includes $70.0 million asset sale to Antero Midstream LLC and ~$5.0 million in retained latent compressor units sold to a third party.
2 Represents pro forma Adjusted EBITDA assuming the Utica Transaction and Mountaineer Transaction each closed on December 31, 2023.
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EXHIBIT 99.1
Mexico. We’re excited to see the increasing level of demand for residue gas takeaway capacity out of the Delaware Basin materialize and we continue to believe Double E is uniquely positioned to meet the growing near-term and long-term needs of the market."
First Quarter 2024 Business Highlights
SMLP’s average daily natural gas throughput for its wholly owned operated systems decreased 6.5% to 1,327 MMcf/d, and liquids volumes decreased 8.6% to 74 Mbbl/d, relative to the fourth quarter of 2023. OGC natural gas throughput increase from 826 MMcf/d to 849 MMcf/d, a 2.9% increase quarter-over-quarter and generated $14.3 million of adjusted EBITDA, net to SMLP, for the first quarter of 2024. Double E Pipeline gross volumes transported increased from 386 MMcf/d to 467 MMcf/d, a 21% increase quarter-over-quarter and generated $7.3 million of adjusted EBITDA, net to SMLP, for the first quarter of 2024.
Natural gas price-driven segments:
•Natural gas price-driven segments had combined quarterly segment adjusted EBITDA of $49.4 million, representing a 2.0% decrease relative to the fourth quarter, and combined capital expenditures of $2.6 million in the first quarter of 2024.
•Northeast segment adjusted EBITDA totaled $29.0 million, an increase of $0.6 million from the fourth quarter 2023, primarily due a 2.9% increase in volume and an increase in proportionate EBITDA from the OGC joint venture, partially offset by a 10% decrease in volume on our wholly owned systems. During the first quarter, three new wells were brought online behind the Summit Midstream Utica (“SMU”) system and seven new wells were connected behind the OGC joint venture. On March 22, 2024, Summit sold Summit Midstream Utica, LLC, which included its approximately 36% interest in Ohio Gathering Company, LLC, approximately 38% interest in Ohio Condensate Company, LLC and SMU assets to a subsidiary of MPLX LP for $625 million in cash. On May 1, 2024 Mountaineer Midstream, LLC, a wholly owned subsidiary of SMLP, sold the Mountaineer Midstream System to Antero Midstream LLC.
•Piceance segment adjusted EBITDA totaled $15.2 million, a decrease of $0.9 million from the fourth quarter of 2023, primarily due to a 1.6% decrease in volume throughput driven by natural production declines and no new wells connected to the system during the quarter.
•Barnett segment adjusted EBITDA totaled $5.1 million, a decrease of $0.7 million relative to the fourth quarter of 2023, primarily due to 1.6% decrease in volumes from a customer continuing to curtail volumes by approximately 30 MMcf/d, partially offset by four new wells connected to the system from our anchor customer during the quarter. There is currently one rig running and 25 DUCs behind the system.
Oil price-driven segments:
•Oil price-driven segments generated $30.1 million of combined segment adjusted EBITDA, representing a 0.6% decrease relative to the fourth quarter, and had combined capital expenditures of $12.6 million.
•Permian segment adjusted EBITDA totaled $7.3 million, a decrease of $0.7 million from the fourth quarter of 2023, primarily due to a decrease in proportionate EBITDA from our Double E joint venture.
•Rockies segment adjusted EBITDA totaled $22.9 million, an increase of $0.5 million relative to the fourth quarter of 2023, primarily due to increased product margin related to our percent-of-proceeds contracts in the DJ Basin, partially offset by an 8.6% decrease in liquids volume throughput and a 1.6% decrease in natural gas volume throughput. Extreme weather and operational downtime negatively impacted gas volumes in the DJ Basin by approximately 9 MMcf/d during the quarter. There were 57 new wells connected during the quarter, including 39 in the DJ Basin and 18 in the Williston Basin. There are currently two rigs running and approximately 50 DUCs behind the systems.
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EXHIBIT 99.1
The following table presents average daily throughput by reportable segment for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Average daily throughput (MMcf/d): | |||||||||||
Northeast (1) | 712 | 591 | |||||||||
| Rockies | 124 | 108 | |||||||||
| Piceance | 312 | 287 | |||||||||
| Barnett | 179 | 199 | |||||||||
| Aggregate average daily throughput | 1,327 | 1,185 | |||||||||
| Average daily throughput (Mbbl/d): | |||||||||||
| Rockies | 74 | 74 | |||||||||
| Aggregate average daily throughput | 74 | 74 | |||||||||
Ohio Gathering average daily throughput (MMcf/d) (2) | 849 | 636 | |||||||||
Double E average daily throughput (MMcf/d) (3) | 467 | 264 | |||||||||
_________
(1)Exclusive of Ohio Gathering due to equity method accounting.
(2)Gross basis, represents 100% of volume throughput for Ohio Gathering, subject to a one-month lag.
(3)Gross basis, represents 100% of volume throughput for Double E.
The following table presents adjusted EBITDA by reportable segment for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
Reportable segment adjusted EBITDA (1): | |||||||||||
Northeast (2) | $ | 29,021 | $ | 17,854 | |||||||
| Rockies | 22,874 | 23,130 | |||||||||
Permian (3) | 7,265 | 5,073 | |||||||||
| Piceance | 15,233 | 13,983 | |||||||||
| Barnett | 5,100 | 7,027 | |||||||||
| Total | $ | 79,493 | $ | 67,067 | |||||||
Less: Corporate and Other (4) | 9,434 | 6,632 | |||||||||
| Adjusted EBITDA | $ | 70,059 | $ | 60,435 | |||||||
__________
(1)We define segment adjusted EBITDA as total revenues less total costs and expenses, plus (i) other income, (ii) our proportional adjusted EBITDA for equity method investees, (iii) depreciation and amortization, (iv) adjustments related to MVC shortfall payments, (v) adjustments related to capital reimbursement activity, (vi) unit-based and noncash compensation, (vii) impairments and (viii) other noncash expenses or losses, less other noncash income or gains.
(2)Includes our proportional share of adjusted EBITDA for Ohio Gathering. The Partnership records financial results of its investment in Ohio Gathering on a one-month lag and is based on the financial information available to us during the reporting period. With the divestiture of Ohio Gathering in March 2024, proportional adjusted EBITDA includes financial results from December 1, 2023 through March 22, 2024. We define proportional adjusted EBITDA for our equity method investees as the product of (i) total revenues less total expenses, excluding impairments and other noncash income or expense items and (ii) amortization for deferred contract costs; multiplied by our ownership interest during the respective period.
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EXHIBIT 99.1
(3)Includes our proportional share of adjusted EBITDA for Double E. We define proportional adjusted EBITDA for our equity method investees as the product of total revenues less total expenses, excluding impairments and other noncash income or expense items; multiplied by our ownership interest during the respective period.
(4)Corporate and Other represents those results that are not specifically attributable to a reportable segment or that have not been allocated to our reportable segments, including certain general and administrative expense items and transaction costs.
Capital Expenditures
Capital expenditures totaled $16.4 million in the first quarter of 2024, inclusive of maintenance capital expenditures of $2.7 million. Capital expenditures in the first quarter of 2024 were primarily related to pad connections in the Rockies segment.
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
Cash paid for capital expenditures (1): | |||||||||||
| Northeast | $ | 1,535 | $ | 659 | |||||||
| Rockies | 12,558 | 13,360 | |||||||||
| Piceance | 685 | 1,032 | |||||||||
| Barnett | 406 | 65 | |||||||||
| Total reportable segment capital expenditures | $ | 15,184 | $ | 15,116 | |||||||
| Corporate and Other | 1,214 | 1,322 | |||||||||
| Total cash paid for capital expenditures | $ | 16,398 | $ | 16,438 | |||||||
__________
(1)Excludes cash paid for capital expenditures by Ohio Gathering and Double E due to equity method accounting.
Capital & Liquidity
As of March 31, 2024, SMLP had $344.6 million in unrestricted cash on hand and a fully undrawn $400 million ABL Revolver with $383.7 million of borrowing availability, after accounting for $4.3 million of issued, but undrawn letters of credit and $12 million of commitment reserve for the 2025 Senior Notes. As of March 31, 2024, SMLP’s gross availability based on the borrowing base calculation in the credit agreement was $684 million, which is $284 million greater than the $400 million of lender commitments to the ABL Revolver. As of March 31, 2024, SMLP was in compliance with all financial covenants, including interest coverage of 1.87x relative to a minimum interest coverage covenant of 1.50x and first lien leverage ratio of -0.26x relative to a maximum first lien leverage ratio of 2.5x. As of March 31, 2024, SMLP reported a total leverage ratio of approximately 3.9x.
As of March 31, 2024, the Permian Transmission Credit Facility balance was $141.1 million, a reduction of $3.8 million relative to the December 31, 2023 balance of $144.8 million due to scheduled mandatory amortization. The Permian Transmission Term Loan remains non-recourse to SMLP.
MVC Shortfall Payments
SMLP billed its customers $7.3 million in the first quarter of 2024 related to MVC shortfalls. For those customers that do not have MVC shortfall credit banking mechanisms in their gathering agreements, the MVC shortfall payments are accounted for as gathering revenue in the period in which they are earned. In the first quarter of 2024, SMLP recognized $7.3 million of gathering revenue associated with MVC shortfall payments. SMLP had no adjustments to MVC shortfall payments in the first quarter of 2024. SMLP’s MVC shortfall payment mechanisms contributed $7.3 million of total adjusted EBITDA in the first quarter of 2024.
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EXHIBIT 99.1
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| MVC Billings | Gathering revenue | Adjustments to MVC shortfall payments | Net impact to adjusted EBITDA | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
Net change in deferred revenue related to MVC shortfall payments: | |||||||||||||||||||||||
| Piceance Basin | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Total net change | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| MVC shortfall payment adjustments: | |||||||||||||||||||||||
| Rockies | $ | 790 | $ | 790 | $ | — | $ | 790 | |||||||||||||||
| Piceance | 4,763 | 4,763 | — | 4,763 | |||||||||||||||||||
| Northeast | 1,707 | 1,707 | — | 1,707 | |||||||||||||||||||
| Total MVC shortfall payment adjustments | $ | 7,260 | $ | 7,260 | $ | — | $ | 7,260 | |||||||||||||||
Total (1) | $ | 7,260 | $ | 7,260 | $ | — | $ | 7,260 | |||||||||||||||
__________
(1)Exclusive of Ohio Gathering and Double E due to equity method accounting.
Quarterly Distribution
The Board of Directors of SMLP’s general partner continued to suspend cash distributions payable on its common units and on its Series A fixed-to-floating rate cumulative redeemable perpetual preferred units (the "Series A Preferred Units") for the period ended March 31, 2024. Unpaid distributions on the Series A Preferred Units will continue to accumulate.
Asset Sale Overview
On May 1, 2024, Mountaineer Midstream, LLC, a wholly owned subsidiary of SMLP, sold the Mountaineer Midstream System to Antero Midstream LLC for $70 million in cash, (the “Mountaineer Transaction”). Separately, Mountaineer Midstream, LLC sold latent compressor inventory to a third party for approximately $5 million in cash.
The Mountaineer Midstream System, within the Marcellus shale, is in Doddridge and Harrison counties in West Virginia where it gathers natural gas under a long-term, fee-based contract with Antero Resources Corporation. Volume throughput on the Mountaineer Midstream system is underpinned by minimum revenue commitments from Antero Resources Corporation. These minimum revenue commitments generated ~$6.6 million of shortfall payments in 2023, with contractual expirations in 2025 and 2026. The Mountaineer Midstream system consists of a high-pressure natural gas gathering system and two compressor stations, delivering natural gas to the inlet of the Sherwood Processing Complex and other high pressure gathering lines.
RBC Capital Markets, LLC served as financial advisor for the Mountaineer Transaction and Locke Lord L.L.P. served as legal advisor to Summit.
First Quarter 2024 Earnings Call Information
SMLP will host a conference call at 10:00 a.m. Eastern on May 3, 2024, to discuss its quarterly operating and financial results. The call can be accessed via teleconference at: Q1 2024 Summit Midstream Partners LP Earnings Conference Call (https://register.vevent.com/register/BIece413d1f8d74a20adea2361c8d96184). 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.
Upcoming Investor Conference
Members of SMLP’s senior management team will attend the 2024 Energy Infrastructure CEO & Investor Conference which will take place on May 21–23, 2024, the 2024 RBC Capital Markets Global Energy, Power & Infrastructure Conference taking place on June 4–5, 2024, and the BofA Securities 2024 Energy Credit Conference
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EXHIBIT 99.1
on June 5–6, 2024. The presentation materials associated with these events will be accessible through the Investors section of SMLP’s website at www.summitmidstream.com prior to the beginning of the conference.
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, Distributable Cash Flow, and Free Cash Flow, non-GAAP financial measures.
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.
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EXHIBIT 99.1
Distributable Cash Flow
We define Distributable Cash Flow as adjusted EBITDA, as defined above, less cash interest paid, cash paid for taxes, net interest expense accrued and paid on the senior notes, and maintenance capital expenditures.
Free Cash Flow
We define free cash flow as distributable cash flow attributable to common and preferred unitholders less growth capital expenditures, less investments in equity method investees, less distributions to common and preferred unitholders. Free cash flow excludes proceeds from asset sales and cash consideration paid for acquisitions.
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 four unconventional resource basins: (i) the Williston Basin, which includes the Bakken and Three Forks shale formations in North Dakota; (ii) the Denver-Julesburg Basin, which includes the Niobrara and Codell shale formations in Colorado and Wyoming; (iii) the Fort Worth Basin, which includes the Barnett Shale formation in Texas; and (iv) 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 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.” In addition, any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies and possible actions taken by SMLP or its 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 2023 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2024. 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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SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, 2024 | December 31, 2023 | ||||||||||
| (In thousands) | |||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 344,590 | $ | 14,044 | |||||||
| Restricted cash | 3,454 | 2,601 | |||||||||
| Accounts receivable | 66,587 | 76,275 | |||||||||
| Other current assets | 5,935 | 5,502 | |||||||||
| Total current assets | 420,566 | 98,422 | |||||||||
| Property, plant and equipment, net | 1,447,443 | 1,698,585 | |||||||||
| Intangible assets, net | 147,304 | 175,592 | |||||||||
| Investment in equity method investees | 273,476 | 486,434 | |||||||||
| Other noncurrent assets | 31,786 | 35,165 | |||||||||
| TOTAL ASSETS | $ | 2,320,575 | $ | 2,494,198 | |||||||
| LIABILITIES AND CAPITAL | |||||||||||
| Trade accounts payable | $ | 18,063 | $ | 22,714 | |||||||
| Accrued expenses | 36,554 | 32,377 | |||||||||
| Deferred revenue | 8,899 | 10,196 | |||||||||
| Ad valorem taxes payable | 3,282 | 8,543 | |||||||||
| Accrued compensation and employee benefits | 2,824 | 6,815 | |||||||||
| Accrued interest | 44,826 | 19,298 | |||||||||
| Accrued environmental remediation | 1,854 | 1,483 | |||||||||
| Accrued settlement payable | 6,667 | 6,667 | |||||||||
| Current portion of long-term debt | 29,098 | 15,524 | |||||||||
| Other current liabilities | 7,476 | 10,395 | |||||||||
| Total current liabilities | 159,543 | 134,012 | |||||||||
| Long-term debt, net of issuance costs | 1,127,287 | 1,455,166 | |||||||||
| Noncurrent deferred revenue | 28,761 | 30,085 | |||||||||
| Noncurrent accrued environmental remediation | 1,278 | 1,454 | |||||||||
| Other noncurrent liabilities | 28,298 | 30,266 | |||||||||
| TOTAL LIABILITIES | 1,345,167 | 1,650,983 | |||||||||
Commitments and contingencies | |||||||||||
| Mezzanine Capital | |||||||||||
| Subsidiary Series A Preferred Units | 126,794 | 124,652 | |||||||||
| Partners' Capital | |||||||||||
| Series A Preferred Units | 100,113 | 96,893 | |||||||||
| Common limited partner capital | 748,501 | 621,670 | |||||||||
Total partners' capital | 848,614 | 718,563 | |||||||||
TOTAL LIABILITIES AND CAPITAL | $ | 2,320,575 | $ | 2,494,198 | |||||||
8
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
| Revenues: | |||||||||||
| Gathering services and related fees | $ | 61,985 | $ | 57,371 | |||||||
| Natural gas, NGLs and condensate sales | 49,092 | 49,163 | |||||||||
| Other revenues | 7,794 | 5,965 | |||||||||
| Total revenues | 118,871 | 112,499 | |||||||||
| Costs and expenses: | |||||||||||
| Cost of natural gas and NGLs | 30,182 | 30,882 | |||||||||
| Operation and maintenance | 25,012 | 23,972 | |||||||||
| General and administrative | 14,785 | 9,987 | |||||||||
| Depreciation and amortization | 27,867 | 29,824 | |||||||||
| Transaction costs | 7,791 | 302 | |||||||||
| Acquisition integration costs | 40 | 1,502 | |||||||||
| Gain on asset sales, net | (27) | (68) | |||||||||
| Long-lived asset impairments | 67,916 | — | |||||||||
| Total costs and expenses | 173,566 | 96,401 | |||||||||
| Other income (expense), net | (13) | 56 | |||||||||
| Gain (loss) on interest rate swaps | 2,590 | (1,273) | |||||||||
| Gain on sale of business | 86,202 | 18 | |||||||||
| Gain on sale of equity method investment | 126,261 | — | |||||||||
| Interest expense | (37,846) | (34,223) | |||||||||
| Income (loss) before income taxes and equity method investment income | 122,499 | (19,324) | |||||||||
| Income tax benefit (expense) | (210) | 252 | |||||||||
| Income from equity method investees | 10,638 | 4,909 | |||||||||
| Net income (loss) | $ | 132,927 | $ | (14,163) | |||||||
| Net income (loss) per limited partner unit: | |||||||||||
| Common unit – basic | $ | 12.05 | $ | (1.82) | |||||||
| Common unit – diluted | $ | 11.47 | $ | (1.82) | |||||||
| Weighted-average limited partner units outstanding: | |||||||||||
| Common units – basic | 10,449 | 10,213 | |||||||||
| Common units – diluted | 10,980 | 10,213 | |||||||||
__________
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SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
UNAUDITED OTHER FINANCIAL AND OPERATING DATA
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
| Other financial data: | |||||||||||
| Net income (loss) | $ | 132,927 | $ | (14,163) | |||||||
| Net cash provided by operating activities | 43,616 | 49,695 | |||||||||
| Capital expenditures | 16,398 | 16,438 | |||||||||
| Contributions to equity method investees | — | 3,500 | |||||||||
| Adjusted EBITDA | 70,059 | 60,435 | |||||||||
Cash flow available for distributions (1) | 32,534 | 24,903 | |||||||||
| Free Cash Flow | 17,178 | 7,566 | |||||||||
Distributions (2) | n/a | n/a | |||||||||
| Operating data: | |||||||||||
Aggregate average daily throughput – natural gas (MMcf/d) | 1,327 | 1,185 | |||||||||
| Aggregate average daily throughput – liquids (Mbbl/d) | 74 | 74 | |||||||||
Ohio Gathering average daily throughput (MMcf/d) (3) | 849 | 636 | |||||||||
Double E average daily throughput (MMcf/d) (4) | 467 | 264 | |||||||||
__________
(1)Cash flow available for distributions is also referred to as Distributable Cash Flow, or DCF.
(2)Represents distributions declared and ultimately paid or expected to be paid to preferred and common unitholders in respect of a given period. On May 3, 2020, the board of directors of SMLP’s general partner announced an immediate suspension of the cash distributions payable on its preferred and common units. Excludes distributions paid on the Subsidiary Series A Preferred Units issued at Summit Permian Transmission Holdco, LLC.
(3)Gross basis, represents 100% of volume throughput for Ohio Gathering, subject to a one-month lag.
(4)Gross basis, represents 100% of volume throughput for Double E.
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SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
UNAUDITED RECONCILIATIONS TO NON-GAAP FINANCIAL MEASURES
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
Reconciliations of net income to adjusted EBITDA and Distributable Cash Flow: | |||||||||||
| Net income (loss) | $ | 132,927 | $ | (14,163) | |||||||
| Add: | |||||||||||
| Interest expense | 37,846 | 34,223 | |||||||||
| Income tax expense (benefit) | 210 | (252) | |||||||||
Depreciation and amortization (1) | 28,102 | 30,059 | |||||||||
Proportional adjusted EBITDA for equity method investees (2) | 20,675 | 11,638 | |||||||||
Adjustments related to capital reimbursement activity (3) | (2,923) | (1,186) | |||||||||
| Unit-based and noncash compensation | 2,772 | 1,929 | |||||||||
| Gain on asset sales, net | (27) | (68) | |||||||||
| Long-lived asset impairment | 67,916 | — | |||||||||
| (Gain) loss on interest rate swaps | (2,590) | 1,273 | |||||||||
| Gain on sale of business | (86,202) | — | |||||||||
| Gain on sale of equity method investment | (126,261) | — | |||||||||
Other, net (4) | 8,252 | 1,891 | |||||||||
| Less: | |||||||||||
| Income from equity method investees | 10,638 | 4,909 | |||||||||
| Adjusted EBITDA | $ | 70,059 | $ | 60,435 | |||||||
| Less: | |||||||||||
| Cash interest paid | 9,210 | 9,420 | |||||||||
Senior notes interest adjustment (5) | 25,645 | 21,883 | |||||||||
| Maintenance capital expenditures | 2,670 | 4,229 | |||||||||
Cash flow available for distributions (6) | $ | 32,534 | $ | 24,903 | |||||||
| Less: | |||||||||||
| Growth capital expenditures | 13,728 | 12,209 | |||||||||
| Investment in equity method investee | — | 3,500 | |||||||||
| Distributions on Subsidiary Series A Preferred Units | 1,628 | 1,628 | |||||||||
| Free Cash Flow | $ | 17,178 | $ | 7,566 | |||||||
__________
(1)Includes the amortization expense associated with our favorable gas gathering contracts as reported in other revenues.
(2)Reflects our proportionate share of Double E and Ohio Gathering adjusted EBITDA. The Partnership records financial results of its investment in Ohio Gathering on a one-month lag and is based on the financial information available to us during the reporting period. With the divestiture of Ohio Gathering in March 2024, proportional adjusted EBITDA includes financial results from December 1, 2023 through March 22, 2024.
(3)Adjustments related to capital reimbursement activity represent contributions in aid of construction revenue recognized in accordance with Accounting Standards Update No. 2014-09 Revenue from Contracts with Customers (“Topic 606”).
(4)Represents items of income or loss that we characterize as unrepresentative of our ongoing operations. For the three months ended March 31, 2024, the amount includes $8.0 million of transaction and other costs. For the three months ended March 31, 2023, the amount includes $1.5 million of integration costs.
(5)Senior notes interest adjustment represents the net of interest expense accrued and paid during the period. Interest on the 2025 senior notes is paid in cash semi-annually in arrears on April 15 and October 15 until maturity in April 2025. Interest on the 2026 senior notes is paid in cash semi-annually in arrears on April 15 and October 15 until maturity in October 2026.
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(6)Represents cash flow available for distribution to preferred and common unitholders. Common distributions cannot be paid unless all accrued preferred distributions are paid. Cash flow available for distributions is also referred to as Distributable Cash Flow, or DCF.
12
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
UNAUDITED RECONCILIATIONS TO NON-GAAP FINANCIAL MEASURES
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
Reconciliation of net cash provided by operating activities to adjusted EBITDA and distributable cash flow: | |||||||||||
| Net cash provided by operating activities | $ | 43,616 | $ | 49,695 | |||||||
| Add: | |||||||||||
| Interest expense, excluding amortization of debt issuance costs | 34,341 | 31,062 | |||||||||
| Income tax expense (benefit) | 210 | (252) | |||||||||
| Changes in operating assets and liabilities | (14,656) | (20,114) | |||||||||
Proportional adjusted EBITDA for equity method investees (1) | 20,675 | 11,638 | |||||||||
Adjustments related to capital reimbursement activity (2) | (2,923) | (1,186) | |||||||||
| Realized (gain) loss on swaps | (1,346) | 379 | |||||||||
Other, net (3) | 8,233 | 400 | |||||||||
| Less: | |||||||||||
| Distributions from equity method investees | 17,082 | 10,403 | |||||||||
| Noncash lease expense | 1,009 | 784 | |||||||||
| Adjusted EBITDA | $ | 70,059 | $ | 60,435 | |||||||
| Less: | |||||||||||
| Cash interest paid | 9,210 | 9,420 | |||||||||
Senior notes interest adjustment (4) | 25,645 | 21,883 | |||||||||
| Maintenance capital expenditures | 2,670 | 4,229 | |||||||||
Cash flow available for distributions (5) | $ | 32,534 | $ | 24,903 | |||||||
| Less: | |||||||||||
| Growth capital expenditures | 13,728 | 12,209 | |||||||||
| Investment in equity method investee | — | 3,500 | |||||||||
| Distributions on Subsidiary Series A Preferred Units | 1,628 | 1,628 | |||||||||
| Free Cash Flow | $ | 17,178 | $ | 7,566 | |||||||
__________
(1)Reflects our proportionate share of Double E and Ohio Gathering adjusted EBITDA. The Partnership records financial results of its investment in Ohio Gathering on a one-month lag and is based on the financial information available to us during the reporting period. With the divestiture of Ohio Gathering in March 2024, proportional adjusted EBITDA includes financial results from December 1, 2023 through March 22, 2024.
(2)Adjustments related to capital reimbursement activity represent contributions in aid of construction revenue recognized in accordance with Accounting Standards Update No. 2014-09 Revenue from Contracts with Customers (“Topic 606”).
(3)Represents items of income or loss that we characterize as unrepresentative of our ongoing operations. For the three months ended March 31, 2024, the amount includes $8.0 million of transaction and other costs. For the three months ended March 31, 2023, the amount includes $1.5 million of integration costs and $1.1 million of realized gains on interest rate swaps.
(4)Senior notes interest adjustment represents the net of interest expense accrued and paid during the period. Interest on the 2025 senior notes is paid in cash semi-annually in arrears on April 15 and October 15 until maturity in April 2025. Interest on the 2026 secured and unsecured notes is paid in cash semi-annually in arrears on April 15 and October 15 until maturity in October 2026.
(5)Represents cash flow available for distribution to preferred and common unitholders. Common distributions cannot be paid unless all accrued preferred distributions are paid. Cash flow available for distributions is also referred to as Distributable Cash Flow, or DCF.
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Contact: 832-413-4770, ir@summitmidstream.com
SOURCE: Summit Midstream Partners, LP
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