Sunday, December 22, 2024

Q3 2024 Summit Midstream Corp Earnings Call

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Operator

Hello and welcome to Summit Midstream Corporation third quarter, 2024 earnings conference call.
At this time. All participants are on a listen-only mode. After the speaker’s presentation, there will be a question and answer session to ask the question. During the session. You would need to press star 1,1 on your telephone. You will then hear automated message advising your hand is raised to withdraw your question. Please press star 1,1 again.
I would now like to hand the conference over to Randall Burton. You may begin.

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.com where you’ll find it on the home page of instant presentation section or 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 Malt, 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 volumes operating expenses and capital expenditures. They may also include statements concerning anticipated cash flow liquidity, business strategy and other plans and objectives for future operations.
Although 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 smlp’s 2023 annual report on form 10-K and exhibit 99.1 to the partnership’s current report on form eight K filed with the SEC on June 3rd 2024 as well as smc’s registration statement on form S four as 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 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 Heath.

Thanks Randall and good morning everyone. Someone 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 operations. I wanted to quickly recap the progress we made on the corporate strategy front during the third quarter. We reorganized summit from an mop to AC Corp which simplified our corporate structure made our stock appeal to a broader set of investors and more than double our overall trading liquidity. Thus far, 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.
And finally, on October 1st, we announced the acquisition of tall up midstream in the Acomo Basin. This is a very value, creative 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 shareholders Pro Forma for the TLO transaction summit expects this to be about 3.8 times levered at closing with approximately $250 million of Pro Forma 2024 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.
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. During the third quarter, we connected 38 wells and currently have six rigs running behind our systems. None of the wells connected during the quarter were in the Barnett region which brings total year-to-date Barnett well connects to 27 which exceeds the high end of our original 24 guidance range both volumetrically and from segment Ebida standpoint.
Well, it 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 that are currently scheduled to be completed in 2025. So we wouldn’t be surprised if 25 ends up fairly similar. 24 from a total. Well, connect perspective in the Barnett 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 currently have five rigs running in the region and over 90 ducks accumulated behind our system and we’re expecting another pretty active fourth quarter and first half of 2025.
I would also like to highlight a few operational and engineering accomplishments during the third quarter. As 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.
I’m happy to report that as of 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.
Additionally, during the third quarter, we made a final investment decision and began construction on a $10 million optimization project in the rocky segment that is anticipated to have an approximate one year payback and improve our adjusted ebida margins beginning in the second quarter of 2025 when it’s turned online, I’m moving to the rest of year outlook. As I’ve already mentioned, we continue to see robust activity levels behind our system with six works running and, and over 100 ducks on the system. Thus far, we expect the fourth quarter to be another very active quarter and we expect to generate $45 to $50 million of adjusted EBITDA during the quarter, which would represent about 5% growth at the midpoint from year or quarter over quarter.
So with that, let me hand the call over to bill to provide some additional details on our financial results.

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