5740 (SMC) Q3 Earnings call transcript Nov 12, 2024
2min read Summit Midstream Corporation held its third quarter earnings call for 2024, highlighting a strong quarter with $45.2 million in adjusted EBITDA, representing a 9% quarter-over-quarter growth. The call, led by CEO Heath Deneke, CFO William Mault, and other members of the senior management team, provided insights into the company's financial and operational performance, as well as strategic initiatives that are expected to drive continued growth and value creation for shareholders.
Strategic Transactions and Corporate Strategy
Summit's strategic moves in the third quarter were pivotal, with the company reorganizing from a Master Limited Partnership (MLP) to a C Corporation, simplifying its corporate structure and enhancing trading liquidity. Additionally, several refinancing transactions significantly reduced the total quantum of debt outstanding, lowering the overall cost of capital and extending the nearest debt maturity to 2029. The acquisition of Tulip Midstream in the Arkoma Basin, announced on October 1, is a value-accretive and balance sheet-enhancing move, increasing Summit's scale, diversifying its portfolio, and accelerating a potential return of capital program for shareholders. These strategic transactions position Summit for continued growth and substantial value creation in the future.
Operational Highlights and Outlook
Operationally, Summit reported encouraging levels of activity behind its systems, expecting continued adjusted EBITDA growth in the fourth quarter. In the Barnett region, 38 wells were connected, exceeding the high end of original guidance, both volumetrically and from a segment EBITDA standpoint. The Rocky segment, which includes the DJ and Williston Basin systems, saw adjusted EBITDA of $24.9 million, a 9% increase relative to the second quarter, primarily due to increased product margin. The company currently has 6 rigs running behind its systems and over 100 DUCs on the system, with expectations of another active fourth quarter and first half of 2025.
Financial Results and Outlook
Summit reported a second quarter net loss of $197 million, primarily due to non-cash income tax expense associated with the C-corp conversion. However, adjusted EBITDA of $45.2 million showed solid quarter-over-quarter growth, with capital expenditures of $10.9 million. Net debt stood at approximately $728 million, with available borrowing capacity at approximately $350 million. The Rockies segment, which includes the DJ and Williston Basin systems, reported adjusted EBITDA of $24.9 million, a 9% increase relative to the second quarter. The Permian Basin segment, including the Double E pipeline, reported adjusted EBITDA of $8.4 million, an increase of $0.8 million relative to the second quarter. The Barnett segment reported adjusted EBITDA of $7.3 million, an increase of $1.9 million relative to the second quarter, primarily due to a 26% increase in volume throughput from the second quarter.
Upcoming Shareholder Meeting and Conclusion
Summit also announced an upcoming special meeting of shareholders scheduled for November 29, 2024, related to the Tulip Midstream acquisition. The company encourages all shareholders to vote in favor of this transaction, which is expected to be value-enhancing.
In conclusion, Summit Midstream Corporation's third quarter earnings call highlighted a strong performance, strategic moves to enhance its corporate structure and portfolio, and a positive outlook for future growth and value creation. The company's operational and financial performance, along with its strategic initiatives, position Summit for continued success and value generation for its shareholders.
