Summit Midstream's Q3 2025: Contradictions Emerge on Well Connections, Drilling Activity, EBITDA Growth, and Capex

Guidance:

• Expect to connect an additional 50 wells in Q4 and end 2025 around the midpoint of the original 125–185 well guidance range.
• Anticipate significant volumetric and EBITDA growth into 2026; full-year 2026 financial guidance to be released with the Q4 earnings release.
• Working with customers on >120 new well connects in H1 2026; that figure could rise as customers finalize 2026 plans.
• Double E contracted volumes expected to ramp from ~1.069 Bcf/d (2025) to 1.115 Bcf/d (2026) and 1.215 Bcf/d (2027), implying ~ $40M EBITDA net to Summit in 2027 (up to ~$50M if fully subscribed).
• Relocating 12 compressors to mitigate ~ $4M of annual lease expense and improve margins beginning in 2026.

Business Commentary:

• Strong Financial Performance and Volume Growth:
• Summit Midstream Corporation reported adjusted EBITDA of $65.5 million for Q3 2025, a 7% increase from the second quarter, representing a $260 million run rate.

• The growth was driven by continued customer activity, new well connections, and increased volume throughput on the Double E Pipeline.

• Well Connects and Customer Activity:

• The company connected 21 new wells during the third quarter and expects to connect an additional 50 wells in the fourth quarter, aiming to end the year around the midpoint of the original well connect guidance range of 125 to 185 wells.

• Customer engagement and visibility into next year's programs have led to more than 120 new well connects in the first half of 2026, indicating strong customer activity.

• Segment Performance and Pipeline Growth:

• The Rockies segment reported adjusted EBITDA of $29 million, driven by increased fixed fee revenue and improved product margin due to increased volume throughput and stronger realized NGL and condensate pricing.

• The Permian Basin segment's Double E Pipeline achieved record averages of 712 million cubic feet per day, with expected volumes to reach 1.215 Bcf per day in 2027, representing over 13% growth relative to 2025.

• Operational Efficiency and Capital Expenditures:

• Capital expenditures totaled $22.9 million in Q3, with a significant portion spent on pad connections and compressor relocations, including $14 million of nonrecurring integration and optimization projects.
• The company redeployed and relocated latent compressors to optimize compressor lease expenses, expected to improve EBITDA margin beginning in 2026.

Sentiment Analysis:

Overall Tone: Positive

• Management: "Adjusted EBITDA was $65.5 million, more than a 7% increase from the second quarter." They reported record Double E throughput (712 MMcf/d quarter, 745 MMcf/d in September), expect +50 well connects in Q4, and cite customer plans for >120 well connects in H1 2026, indicating confidence in growth and improving margins (compressor relocations to reduce ~$4M lease expense).

Contradiction Point 1

Well Connections and Drilling Activity

It highlights changes in the reported number of new well connections and drilling rig activity, which are crucial for understanding the company's development and growth strategy.

None stated - None stated

20251111-2025 Q3: We achieved 21 new well connections during the quarter. - J. Deneke(CEO)

Can you provide guidance on your current cash burn rate? - None stated

2025Q2: We were able to connect 47 new wells during the quarter. - J. Heath Deneke(CEO)

Contradiction Point 2

Drilling Rig Activity

It involves a discrepancy in the reported number of active drilling rigs, which is an important indicator of the company's operational activity and potential growth.

None stated - None stated

20251111-2025 Q3: We ended the quarter with 5 drilling rigs and over 90 drilled but uncompleted wells behind our systems. - J. Deneke(CEO)

None stated. - None stated

2025Q2: We also ended the quarter with 3 active drilling rigs. - J. Heath Deneke(CEO)

Contradiction Point 3

Adjusted EBITDA Growth

It involves a contradiction in the reported growth rates of adjusted EBITDA, which is a key financial metric for investors and stakeholders.

How did sequential changes in service revenue impact Q2 results and FY revenue growth? - None (Opening remarks)

20251111-2025 Q3: Adjusted EBITDA was $65.5 million, an increase of over 7% from the second quarter. - J. Deneke(CEO)

None - None (Opening remarks)

2025Q1: First quarter adjusted EBITDA of $57.5 million increased 4% year-over-year. - Heath Deneke(CEO)

Contradiction Point 4

Total Capital Expenditures for 2025

It involves a contradiction in the guidance provided for total capital expenditures for the year 2025, which is crucial for understanding the company's financial planning and allocation of resources.

Please provide the specific question text from the earnings call Q&A for me to simplify and format according to your requirements. - None (Closing remarks)

20251111-2025 Q3: For the full year 2025, our capital expenditures are expected to be in the range of $65 million to $75 million. - William Mault(CFO)

None - None (Opening remarks)

2025Q1: We reiterated our full-year 2025 financial guidance range of $245 million to $280 million in adjusted EBITDA and total capital expenditures of $65 million to $75 million. - Heath Deneke(CEO)