HOUSTON, Aug. 9, 2023
/PRNewswire/ -- Summit Midstream Partners, LP (NYSE: SMLP)
("Summit", "SMLP" or the "Partnership") announced today its
financial and operating results for the three months ended
June 30, 2023.
Highlights
- Second quarter 2023 net loss of $13.5
million, adjusted EBITDA of $58.6
million, cash flow available for distributions
("Distributable Cash Flow" or "DCF") of $24.4 million and free cash flow ("FCF") of
$9.1 million
- Connected 89 wells during the quarter, bringing total wells
connected during the first half of 2023 to 150 versus original
planned level of approximately 200
- Turned in-line 45 wells after quarter-end and continue to
expect approximately 300 well connects in 2023
- Expect third and fourth quarter Adjusted EBITDA to range from
$65 million to $75 million and $75
million to $85 million,
respectively
- Updating 2023 Adjusted EBITDA guidance to $260 million to $280
million to reflect completion delays trending one to two
quarters behind schedule and lower-than-expected commodity price
impacts
- Customer base remains active with 11 drilling rigs and more
than 180 DUCs behind our systems currently
- Trending towards $300 million of
LTM Adjusted EBITDA during the first half of 2024
Management Commentary
Heath Deneke, President, Chief
Executive Officer, and Chairman, commented, "Summit's second
quarter 2023 financial and operating results were below management
expectations, primarily due to temporary production shut-ins behind
our Barnett system, completion delays in the Williston and Utica, and lower than expected commodity
prices. Despite these headwinds, we had a very active quarter,
connecting 89 wells, including 26 in the Northeast, 4 in the
Barnett, 15 in the Piceance, 38 in the DJ that we expect will reach
peak production in the fourth quarter, and 6 in the Williston. Our Northeast segment experienced
15% volume growth, driving segment adjusted EBITDA growth of
$2.4 million, or 13% for the quarter.
The Rockies segment fell behind quarterly expectations due to 30
wells that were delayed to the second half of the year. NGL prices
and residue gas prices were very challenged in the second quarter,
approximately 25% to 35% lower than our expectations. We believe
this decline incentivized producers to delay completions a few
months, shut-in approximately 25 MMcf/d of Barnett production, and
directly impacted our percent-of-proceeds contracts in the DJ
Basin. We expect the second quarter to be the low point for
commodity prices, with strip NGL and natural gas prices projected
to strengthen in the third and fourth quarter.
Overall, the total number of well connects we expected in 2023
remains relatively consistent at approximately 300 for the year,
however, the delay in completion timing will impact calendar year
results. Subsequent to quarter-end, we connected 45 wells,
including 28 in the Williston and
17 in the Utica, which will serve
as a meaningful volumetric catalyst behind the Rockies and
Northeast segments. We estimate that on average we are trending one
to two quarters behind schedule, which results in a revised 2023
Adjusted EBITDA expectation of $260
million to $280 million. We
expect third quarter and fourth quarter Adjusted EBITDA to range
from $65 million to $75 million and $75
million to $85 million,
respectively. While the impact of well completion timing delays to
calendar year results is disappointing, customer activity levels
remain strong with 195 wells turned in-line to-date, and more than
180 drilled-but-uncompleted wells ("DUCs") and 11 rigs currently
running behind our systems. With our third and fourth quarter
outlook for 2023 and the latest cadence of customer activity
expected in the first half of 2024, we expect to trend towards
$300 million of LTM Adjusted EBITDA
during the first half of 2024."
Business Highlights
SMLP's average daily natural gas throughput for its wholly owned
operated systems increased by 22 MMcf/d to 1,207 MMcf/d, and
liquids volumes decreased by 3 Mbbl/d to 71 Mbbl/d, relative to the
first quarter of 2023. OGC natural gas throughput increased from
636 MMcf/d to 781 MMcf/d, a 23% increase quarter-over-quarter, and
generated $9.5 million of adjusted
EBITDA net to SMLP for the second quarter of 2023. Double E
Pipeline gross volumes transported declined by 21 MMcf/d to 243
MMcf/d and generated $4.6 million of
adjusted EBITDA, net to SMLP, for the second quarter of 2023.
Natural gas-price driven segments:
- Natural gas price-driven segments had combined quarterly
segment adjusted EBITDA of $41.8
million, representing 7.6% sequential growth, and combined
capital expenditures of $1.7 million
in the second quarter of 2023.
- Northeast segment adjusted EBITDA totaled $20.2 million, an increase of $2.3 million from the first quarter 2023,
primarily due to a 6.4% increase in volume on our wholly owned
systems and a 23% increase in volume from our OGC joint venture.
Two new wells were brought online behind our wholly owned
SMU system, seven new wells behind our
Mountaineer system, and 17 new wells were connected behind our OGC
joint venture during the quarter. Segment volumes continued to be
impacted by customers temporarily shutting-in producing wells as
they completed new wells on the pad site ("frac-protect
activities"). We estimate frac-protect activities impacted
quarterly volume by approximately 35 MMcf/d on our wholly owned
systems, and segment adjusted EBITDA by approximately $0.8 million. The approximately 50 MMcf/d of
frac-protect activities behind our Ohio Joint Venture in the first
quarter were largely all back online in the second quarter.
Additionally, after quarter-end, we brought online an additional
nine wells behind our wholly owned SMU
system, including approximately 30 MMcf/d of the frac-protect
activities in the second quarter, as well as eight wells behind our
OGC joint venture, which we expect to lead to continued volume
growth in the third quarter. There are currently three rigs running
and 16 DUCs behind our systems.
- Piceance segment adjusted EBITDA totaled $14.4 million, an increase of $0.4 million from the first quarter of 2023,
primarily due to a 3.5% increase in volume throughput from 15 wells
brought online during the quarter, partially offset by natural
production declines. There is currently one rig running and 24 DUCs
behind the system. We are still expecting approximately 55 total
wells to be connected behind the system in 2023.
- Barnett segment adjusted EBITDA totaled $7.3 million, an increase of $0.2 million relative to the first quarter of
2023, primarily due to approximately $1.8
million in other revenue recognized during the quarter,
partially offset by an 8.5% decrease in volume throughput from
shut-in volumes from our customers. We estimate approximately 25
MMcf/d from shut-ins in response to the decline commodity prices
and approximately 5 MMcf/d from frac-protect activities negatively
impacted segment adjusted EBITDA by approximately $1.8 million for the quarter. There were four
wells connected to the system with one rig running and 24 DUCs
behind the system.
Oil price-driven segments
- Oil price-driven segments generated $22.2 million of combined segment adjusted EBITDA
in the second quarter of 2023 and had combined capital expenditures
of $13.1 million.
- Permian segment adjusted EBITDA totaled $5.4 million, an increase of $0.3 million from the first quarter of 2023,
primarily due to a $0.4 million
increase in proportionate EBITDA from our Double E joint
venture.
- Rockies segment adjusted EBITDA totaled $16.9 million, a decrease of $6.3 million relative to the first quarter of
2023, primarily due to a 4% decline in liquids volume throughput
and an 8% decline in natural gas volume throughput and reduction in
commodity prices. There were 44 new wells connected during the
quarter, including 38 in the DJ Basin, which we expect to generate
peak production in the fourth quarter, and six in the Williston Basin. Subsequent to quarter-end,
we've connected an additional 28 wells in the Williston Basin. There are currently six rigs
running and approximately 120 DUCs behind the systems.
Revised 2023 Guidance
Based on recently updated completion timing from our customers,
we currently expect activity to be approximately one to two
quarters delayed relative to the mid-point of our original
expectations. We believe the unexpected reduction in commodity
prices over the past several months has incentivized customers to
delay completions and in the case of the Barnett segment,
temporarily shut-in production. As a result, we now expect calendar
year 2023 adjusted EBITDA of $260
million to $280 million.
Despite delays, activity levels remain robust behind our systems,
and we continue to expect the business to generate sequential
quarterly adjusted EBITDA growth in third and fourth quarter of
2023. At current strip pricing, we expect third quarter 2023
Adjusted EBITDA to range from $65
million to $75 million and
expect fourth quarter 2023 adjusted EBITDA to range from
$75 million to $85 million. With our third and fourth quarter
outlook for 2023 and the latest cadence of customer activity
expected in the first half of 2024, we expect to trend towards
$300 million of LTM Adjusted EBITDA
during the first half of 2024. We continue to expect to
turn-in-line approximately 300 wells in 2023 and capital
expenditures to trend toward the midpoint of our original
$45 million to $65 million range for the year.
The following are the primary drivers of the shift in
timing:
- Barnett Shale: One of our customers temporarily shut-in
approximately 25 MMcf/d of natural gas in response to significantly
lower natural gas price outlook in 2023 versus future expected
prices in late 2023 and 2024. In addition, our anchor customer
decided to increase the number of wells being drilled on a
particular pad site from five wells to 11 wells. While this is a
positive development, it has extended drilling and completion
timing and delayed turn-in-line until 2024. We now only expect 10
wells to be turned-in-line in calendar year 2023 and expect to end
the year with over 20 DUCs. We estimate the adjusted EBITDA impact
of these revisions to calendar year 2023 results to be
approximately $15 million relative to
the mid-point of our original guidance range.
- Rockies Segment: Customers have been delayed one to two
quarters on completion timing, with approximately 15 wells in the
Williston Basin, including four
wells that Summit provides crude oil and produced water gathering
services, until the end of 2023 or early 2024. These 15 wells, all
of which have been drilled since March
2023, were originally expected to turn-in-line in the second
quarter. Despite the delays, we connected 28 new Williston wells in July that we expect will
increase liquids volumes beginning in the third quarter of 2023.
Crude oil, natural gas and NGL prices have trended well below our
original expectations, which impacted year-to-date DJ Basin margins
by approximately $2.0 million. We
estimate the adjusted EBITDA impact of the timing delays and lower
commodity prices on calendar year 2023 results to be approximately
$15 million relative to the mid-point
of our original guidance range.
- Northeast Segment: We have experienced approximately one
quarter delay in well connects in the Northeast. However, the wells
that have turned-in-line have been outperforming our expectations,
which is mitigating the impact of the delays. We connected 26 wells
behind the system during the second quarter and another 17
subsequent to quarter-end. The incremental wells and continued
better than expected well performance are expected to lead to
further volume and EBITDA growth through the end of 2023. Segment
performance is expected to trend toward the low end of our original
guidance range of $95 million to
$105 million, or approximately
$5 million below the mid-point.
The following table presents average daily throughput by
reportable segment for the periods indicated:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Average daily
throughput (MMcf/d):
|
|
|
|
|
|
|
|
Northeast
(1)
|
629
|
|
632
|
|
610
|
|
687
|
Rockies
|
99
|
|
29
|
|
104
|
|
29
|
Permian
(1)
|
—
|
|
27
|
|
—
|
|
27
|
Piceance
|
297
|
|
312
|
|
292
|
|
312
|
Barnett
|
182
|
|
200
|
|
191
|
|
199
|
Aggregate average
daily throughput
|
1,207
|
|
1,200
|
|
1,197
|
|
1,254
|
|
|
|
|
|
|
|
|
Average daily
throughput (Mbbl/d):
|
|
|
|
|
|
|
|
Rockies
|
71
|
|
54
|
|
73
|
|
60
|
Aggregate average
daily throughput
|
71
|
|
54
|
|
73
|
|
60
|
|
|
|
|
|
|
|
|
Ohio Gathering
average daily throughput
(MMcf/d) (2)
|
781
|
|
562
|
|
709
|
|
580
|
|
|
|
|
|
|
|
|
Double E average
daily throughput (MMcf/d) (3)
|
243
|
|
314
|
|
254
|
|
251
|
_________
|
(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.
|
The following table presents adjusted EBITDA by reportable
segment for the periods indicated:
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
thousands)
|
|
(In
thousands)
|
Reportable segment
adjusted EBITDA (1):
|
|
|
|
|
|
|
|
Northeast
(2)
|
$
20,201
|
|
$
18,568
|
|
$
38,055
|
|
$
38,636
|
Rockies
|
16,858
|
|
13,899
|
|
39,988
|
|
29,729
|
Permian
(3)
|
5,370
|
|
4,817
|
|
10,443
|
|
8,966
|
Piceance
|
14,365
|
|
15,350
|
|
28,348
|
|
31,118
|
Barnett
|
7,269
|
|
7,247
|
|
14,296
|
|
16,533
|
Total
|
$
64,063
|
|
$
59,881
|
|
$
131,130
|
|
$
124,982
|
Less: Corporate
and Other (4)
|
5,460
|
|
9,410
|
|
12,092
|
|
17,762
|
Adjusted
EBITDA
|
$
58,603
|
|
$
50,471
|
|
$
119,038
|
|
$
107,220
|
__________
|
|
(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, subject
to a one-month lag. 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.
|
(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 natural gas and crude oil marketing
services.
|
Capital Expenditures
Capital expenditures totaled $15.7
million in the second quarter of 2023, inclusive of
maintenance capital expenditures of $2.1
million. Capital expenditures in the second quarter of 2023
were primarily related to pad connections and DJ Basin integration
projects in the Rockies segment.
|
|
Six Months Ended
June 30,
|
|
|
2023
|
|
2022
|
|
|
(In
thousands)
|
Cash paid for
capital expenditures (1):
|
|
|
|
|
Northeast
|
|
$
805
|
|
$
5,770
|
Rockies
|
|
26,424
|
|
3,558
|
Permian
|
|
—
|
|
1,323
|
Piceance
|
|
2,560
|
|
2,828
|
Barnett
|
|
81
|
|
552
|
Total reportable
segment capital expenditures
|
|
$
29,870
|
|
$
14,031
|
Corporate and
Other
|
|
2,308
|
|
763
|
Total cash paid for
capital expenditures
|
|
$
32,178
|
|
$
14,794
|
__________
|
(1)
|
Excludes cash paid for
capital expenditures by Ohio Gathering and Double E due to equity
method accounting.
|
Capital & Liquidity
As of June 30, 2023, SMLP had
$13.6 million in unrestricted
cash-on-hand and $328 million drawn
under its $400 million ABL Revolver
and $67.7 million of borrowing
availability, after accounting for $4.3
million of issued, but undrawn, letters of credit. As of
June 30, 2023, SMLP's gross
availability based on the borrowing base calculation in the credit
agreement was $708 million, which is
$308 million greater than the
$400 million of lender commitments to
the ABL Revolver. As of June 30,
2023, SMLP was in compliance with all financial covenants,
including interest coverage of 2.14x relative to a minimum interest
coverage covenant of 2.0x and first lien leverage ratio of 1.4x
relative to a maximum first lien leverage ratio of 2.5x. As of
June 30, 2023, SMLP reported a total
leverage ratio of approximately 5.8x. We expect all leverage
metrics to start trending lower beginning in the third quarter of
2023.
As of June 30, 2023, the Permian
Transmission Credit Facility balance was $150.2 million, a reduction of $2.6 million relative to the March 31, 2023 balance of $152.8 million due to scheduled mandatory
amortization. The Permian Transmission Term Loan remains
non-recourse to SMLP.
MVC Shortfall Payments
SMLP billed its customers $7.2
million in the second quarter of 2023 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 second quarter of 2023,
SMLP recognized $7.2 million of
gathering revenue associated with MVC shortfall payments. SMLP had
no adjustments to MVC shortfall payments in the second quarter of
2023. SMLP's MVC shortfall payment mechanisms contributed
$7.2 million of total adjusted EBITDA
in the second quarter of 2023.
|
Three Months Ended
June 30, 2023
|
|
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
|
$
18
|
|
$
18
|
|
$
—
|
|
$
18
|
Piceance
|
5,524
|
|
5,524
|
|
—
|
|
5,524
|
Northeast
|
1,622
|
|
1,622
|
|
—
|
|
1,622
|
Total MVC shortfall
payment adjustments
|
$
7,164
|
|
$
7,164
|
|
$
—
|
|
$
7,164
|
|
|
|
|
|
|
|
|
Total
(1)
|
$
7,164
|
|
$
7,164
|
|
$
—
|
|
$
7,164
|
__________
|
(1)
|
Exclusive of Ohio
Gathering and Double E due to equity method accounting.
|
|
Six Months Ended
June 30, 2023
|
|
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
|
$
54
|
|
$
54
|
|
$
—
|
|
$
54
|
Piceance
|
10,936
|
|
10,936
|
|
—
|
|
10,936
|
Northeast
|
3,288
|
|
3,288
|
|
—
|
|
3,288
|
Total MVC shortfall
payment adjustments
|
$
14,278
|
|
$
14,278
|
|
$
—
|
|
$ 14,278
|
|
|
|
|
|
|
|
|
Total
(1)
|
$
14,278
|
|
$
14,278
|
|
$
—
|
|
$ 14,278
|
__________
|
(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 June 30, 2023. Unpaid
distributions on the Series A Preferred Units will continue to
accumulate.
Second Quarter 2023 Earnings Call Information
SMLP will host a conference call at 10:00
a.m. Eastern on August 10,
2023, to discuss its quarterly operating and financial
results. The call can be accessed via teleconference at: Q2 2023
Summit Midstream Partners LP Earnings Conference Call
(https://register.vevent.com/register/BI44389e5d1dac4661818d5e27cc079001).
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 2023
Citi One-on-One Midstream / Energy Infrastructure Conference taking
place on August 22–23, 2023. The presentation materials associated
with this event 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.
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 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", including the estimated closing date of the acquisitions,
sources and uses of funding, the benefits of the acquisitions to us
and any related opportunities. In addition, any statement
concerning future financial performance (including future revenues,
earnings or growth rates), 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.
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
June 30,
2023
|
|
December 31,
2022
|
|
(In
thousands)
|
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
13,613
|
|
$
11,808
|
Restricted
cash
|
1,264
|
|
1,723
|
Accounts
receivable
|
60,426
|
|
75,287
|
Other current
assets
|
7,489
|
|
8,724
|
Total
current assets
|
82,792
|
|
97,542
|
Property, plant and
equipment, net
|
1,703,967
|
|
1,718,754
|
Intangible assets,
net
|
188,357
|
|
198,718
|
Investment in equity
method investees
|
498,364
|
|
506,677
|
Other noncurrent
assets
|
39,452
|
|
38,273
|
TOTAL
ASSETS
|
$
2,512,932
|
|
$
2,559,964
|
|
|
|
|
LIABILITIES AND
CAPITAL
|
|
|
|
Trade accounts
payable
|
$
14,964
|
|
$
14,052
|
Accrued
expenses
|
21,820
|
|
20,601
|
Deferred
revenue
|
12,178
|
|
9,054
|
Ad valorem taxes
payable
|
5,998
|
|
10,245
|
Accrued compensation
and employee benefits
|
4,307
|
|
16,319
|
Accrued
interest
|
18,404
|
|
17,355
|
Accrued environmental
remediation
|
1,360
|
|
1,365
|
Accrued settlement
payable
|
6,667
|
|
6,667
|
Current portion of
long-term debt
|
13,008
|
|
10,507
|
Other current
liabilities
|
11,337
|
|
11,724
|
Total
current liabilities
|
110,043
|
|
117,889
|
Long-term debt, net of
issuance costs
|
1,475,248
|
|
1,479,855
|
Noncurrent deferred
revenue
|
32,239
|
|
37,694
|
Noncurrent accrued
environmental remediation
|
1,788
|
|
2,340
|
Other noncurrent
liabilities
|
38,693
|
|
38,784
|
TOTAL
LIABILITIES
|
1,658,011
|
|
1,676,562
|
Commitments and
contingencies
|
|
|
|
|
|
|
|
Mezzanine
Capital
|
|
|
|
Subsidiary Series A
Preferred Units
|
120,570
|
|
118,584
|
|
|
|
|
Partners'
Capital
|
|
|
|
Series A Preferred
Units
|
90,765
|
|
85,327
|
Common limited partner
capital
|
643,586
|
|
679,491
|
Total
partners' capital
|
734,351
|
|
764,818
|
TOTAL
LIABILITIES AND CAPITAL
|
$
2,512,932
|
|
$
2,559,964
|
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In thousands,
except per-unit amounts)
|
Revenues:
|
|
|
|
|
|
|
|
Gathering services and
related fees
|
$ 57,086
|
|
$ 61,631
|
|
$
114,457
|
|
$
125,651
|
Natural gas, NGLs and
condensate sales
|
36,082
|
|
28,278
|
|
85,245
|
|
50,736
|
Other
revenues
|
4,725
|
|
9,154
|
|
10,690
|
|
18,802
|
Total
revenues
|
97,893
|
|
99,063
|
|
210,392
|
|
195,189
|
Costs and
expenses:
|
|
|
|
|
|
|
|
Cost of natural gas and
NGLs
|
19,975
|
|
26,831
|
|
50,857
|
|
49,082
|
Operation and
maintenance
|
25,158
|
|
22,277
|
|
49,130
|
|
39,339
|
General and
administrative
|
10,812
|
|
10,473
|
|
20,799
|
|
23,433
|
Depreciation and
amortization
|
30,132
|
|
30,111
|
|
59,956
|
|
60,556
|
Transaction
costs
|
480
|
|
(13)
|
|
782
|
|
233
|
Acquisition integration
costs
|
723
|
|
—
|
|
2,225
|
|
—
|
Gain on asset sales,
net
|
(75)
|
|
(313)
|
|
(143)
|
|
(310)
|
Long-lived asset
impairments
|
455
|
|
84,614
|
|
455
|
|
84,628
|
Total costs and
expenses
|
87,660
|
|
173,980
|
|
184,061
|
|
256,961
|
Other income (expense),
net
|
1,006
|
|
(4)
|
|
1,062
|
|
(4)
|
Gain on interest rate
swaps
|
3,268
|
|
3,936
|
|
1,995
|
|
10,964
|
Loss on sale of
business
|
(54)
|
|
—
|
|
(36)
|
|
—
|
Interest
expense
|
(35,175)
|
|
(24,887)
|
|
(69,398)
|
|
(49,050)
|
Loss before income
taxes and equity method
investment income
|
(20,722)
|
|
(95,872)
|
|
(40,046)
|
|
(99,862)
|
Income tax benefit
(expense)
|
—
|
|
(325)
|
|
252
|
|
(375)
|
Income from equity
method investees
|
7,182
|
|
4,393
|
|
12,091
|
|
8,428
|
Net loss
|
$
(13,540)
|
|
$
(91,804)
|
|
$
(27,703)
|
|
$
(91,809)
|
|
|
|
|
|
|
|
|
Net loss per limited
partner unit:
|
|
|
|
|
|
|
|
Common unit –
basic
|
$
(1.91)
|
|
$
(9.53)
|
|
$
(3.73)
|
|
$
(8.45)
|
Common unit –
diluted
|
$
(1.91)
|
|
$
(9.53)
|
|
$
(3.73)
|
|
$
(8.45)
|
|
|
|
|
|
|
|
|
Weighted-average
limited partner units outstanding:
|
|
|
|
|
|
|
|
Common units –
basic
|
10,369
|
|
10,166
|
|
10,291
|
|
9,919
|
Common units –
diluted
|
10,369
|
|
10,166
|
|
10,291
|
|
9,919
|
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES UNAUDITED OTHER FINANCIAL
AND OPERATING DATA
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
thousands)
|
Other financial
data:
|
|
|
|
|
|
|
|
Net loss
|
$
(13,540)
|
|
$
(91,804)
|
|
$
(27,703)
|
|
$
(91,809)
|
Net cash provided by
operating activities
|
1,945
|
|
14,113
|
|
51,640
|
|
60,159
|
Capital
expenditures
|
15,740
|
|
6,091
|
|
32,178
|
|
14,794
|
Contributions to equity
method investees
|
—
|
|
—
|
|
3,500
|
|
8,444
|
Adjusted
EBITDA
|
58,603
|
|
50,471
|
|
119,038
|
|
107,220
|
Cash flow available for
distributions (1)
|
24,405
|
|
25,626
|
|
49,308
|
|
57,379
|
Free Cash
Flow
|
9,118
|
|
21,461
|
|
16,684
|
|
38,984
|
Distributions
(2)
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
|
|
|
|
|
|
Operating
data:
|
|
|
|
|
|
|
|
Aggregate average daily
throughput – natural gas (MMcf/d)
|
1,207
|
|
1,200
|
|
1,197
|
|
1,254
|
Aggregate average daily
throughput – liquids (Mbbl/d)
|
71
|
|
54
|
|
73
|
|
60
|
|
|
|
|
|
|
|
|
Ohio Gathering average
daily throughput (MMcf/d) (3)
|
781
|
|
562
|
|
709
|
|
580
|
Double E average daily
throughput (MMcf/d) (4)
|
243
|
|
314
|
|
254
|
|
251
|
__________
|
(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.
|
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES UNAUDITED RECONCILIATIONS
TO NON-GAAP FINANCIAL MEASURES
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
(In
thousands)
|
Reconciliations of
net income to adjusted EBITDA and
Distributable Cash Flow:
|
|
|
|
|
|
|
|
Net loss
|
$
(13,540)
|
|
$
(91,804)
|
|
$
(27,703)
|
|
$
(91,809)
|
Add:
|
|
|
|
|
|
|
|
Interest
expense
|
35,175
|
|
24,887
|
|
69,398
|
|
49,050
|
Income tax expense
(benefit)
|
—
|
|
325
|
|
(252)
|
|
375
|
Depreciation and
amortization (1)
|
30,366
|
|
30,346
|
|
60,425
|
|
61,025
|
Proportional adjusted
EBITDA for equity method
investees (2)
|
14,100
|
|
11,406
|
|
25,738
|
|
21,858
|
Adjustments related to
capital reimbursement activity (3)
|
(2,481)
|
|
(1,578)
|
|
(3,667)
|
|
(3,306)
|
Unit-based and noncash
compensation
|
1,833
|
|
582
|
|
3,762
|
|
2,272
|
Gain on asset sales,
net
|
(75)
|
|
(313)
|
|
(143)
|
|
(310)
|
Long-lived asset
impairment
|
455
|
|
84,614
|
|
455
|
|
84,628
|
Gain on interest rate
swaps
|
(3,268)
|
|
(3,936)
|
|
(1,995)
|
|
(10,964)
|
Other, net
(4)
|
3,220
|
|
335
|
|
5,111
|
|
2,829
|
Less:
|
|
|
|
|
|
|
|
Income from equity
method investees
|
7,182
|
|
4,393
|
|
12,091
|
|
8,428
|
Adjusted
EBITDA
|
$ 58,603
|
|
$ 50,471
|
|
$
119,038
|
|
$
107,220
|
Less:
|
|
|
|
|
|
|
|
Cash interest
paid
|
53,167
|
|
38,565
|
|
62,587
|
|
42,039
|
Cash paid for
taxes
|
15
|
|
149
|
|
15
|
|
149
|
Senior notes interest
adjustment (5)
|
(21,065)
|
|
(15,795)
|
|
818
|
|
2,810
|
Maintenance capital
expenditures
|
2,081
|
|
1,926
|
|
6,310
|
|
4,843
|
Cash flow
available for distributions (6)
|
$ 24,405
|
|
$ 25,626
|
|
$ 49,308
|
|
$ 57,379
|
Less:
|
|
|
|
|
|
|
|
Growth capital
expenditures
|
13,659
|
|
4,165
|
|
25,868
|
|
9,951
|
Investment in equity
method investee
|
—
|
|
—
|
|
3,500
|
|
8,444
|
Distributions on
Subsidiary Series A Preferred Units
|
1,628
|
|
—
|
|
3,256
|
|
—
|
Free Cash
Flow
|
$
9,118
|
|
$ 21,461
|
|
$ 16,684
|
|
$ 38,984
|
__________
|
(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 (subject to a
one-month lag) adjusted EBITDA.
|
(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 six months ended June 30, 2023,
the amount includes $2.2 million of integration costs, $2.1 million
of transaction and other costs and $1.6 million of severance
expense. For the six months ended June 30, 2022, the amount
includes $2.4 million of severance expenses.
|
(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.
|
(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.
|
SUMMIT MIDSTREAM
PARTNERS, LP AND SUBSIDIARIES UNAUDITED RECONCILIATIONS
TO NON-GAAP FINANCIAL MEASURES
|
|
|
Six Months Ended
June 30,
|
|
2023
|
|
2022
|
|
(In
thousands)
|
Reconciliation of
net cash provided by operating activities to
adjusted
EBITDA and distributable cash flow:
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
51,640
|
|
$
60,159
|
Add:
|
|
|
|
Interest expense,
excluding amortization of debt issuance costs
|
63,073
|
|
44,609
|
Income tax expense
(benefit)
|
(252)
|
|
375
|
Changes in operating
assets and liabilities
|
6,512
|
|
962
|
Proportional adjusted
EBITDA for equity method investees (1)
|
25,738
|
|
21,858
|
Adjustments related to
capital reimbursement activity (2)
|
(3,667)
|
|
(3,306)
|
Realized (gain) loss
on swaps
|
(2,418)
|
|
653
|
Other, net
(3)
|
5,143
|
|
2,829
|
Less:
|
|
|
|
Distributions from
equity method investees
|
23,904
|
|
20,451
|
Noncash lease
expense
|
2,827
|
|
468
|
Adjusted
EBITDA
|
$ 119,038
|
|
$ 107,220
|
Less:
|
|
|
|
Cash interest
paid
|
62,587
|
|
42,039
|
Cash paid for
taxes
|
15
|
|
149
|
Senior notes interest
adjustment (4)
|
818
|
|
2,810
|
Maintenance capital
expenditures
|
6,310
|
|
4,843
|
Cash flow
available for distributions (5)
|
$
49,308
|
|
$
57,379
|
Less:
|
|
|
|
Growth capital
expenditures
|
25,868
|
|
9,951
|
Investment in equity
method investee
|
3,500
|
|
8,444
|
Distributions on
Subsidiary Series A Preferred Units
|
3,256
|
|
—
|
Free Cash
Flow
|
$
16,684
|
|
$
38,984
|
__________
|
(1)
|
Reflects our
proportionate share of Double E and Ohio Gathering adjusted EBITDA,
subject to a one-month lag.
|
(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 six months ended June 30, 2023,
the amount includes $2.2 million of integration costs, $2.1 million
of transaction and other costs and $1.6 million of severance
expenses. For the six months ended June 30, 2022, the amount
includes $2.4 million of severance expenses.
|
(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 senior 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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SOURCE Summit Midstream Partners, LP