Summit Midstream Corporation

Welcome to the second quarter 2022 Summit Midstream Partners LP earnings conference call. My name is Hilda and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press 01 on your touchstone phone. I will now turn the call over to Randall Burton, Director of Finance, Treasurer, and Investor Relations. Sir, 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.summitmidstream.com, where you'll find it on the homepage, events and presentation section, or quarterly results section. With me today to discuss our second quarter of 2022 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 our 2021 Annual Report on Form 10-K, which was filed with the SEC on February 28, 2022, as well as our other SEC filings 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, and distributable cash flow. These are non-GAAP financial measures, and we have 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 Keith.

All right, great. Thanks, Randall, and good morning, everyone. So Summit reported second quarter adjusted EBITDA of $50.5 million, which exceeded our internal expectations despite over 3.6 million of unexpected weather, maintenance, and deal expenses incurred during the quarter. North Dakota experienced a severe winter storm that started in late April and impacted SMLP's operations for just over a month. The North Dakota team did a great job getting things back online quickly and safely, despite those very challenging conditions. I'll let Bill get more into the details, but we estimate the North Dakota storm and as well as some of the frac protect and related maintenance activities in the northeast, were the primary drivers of the quarterly decline in liquids and natural gas volumes. During the quarter, we successfully closed our lane GNP asset sale for $75 million, which materially improved our leverage outlook and significantly increased our liquidity to $255 million as of June 30th. We also had 14 wells that were connected during the second quarter, which beat our expectations as well. And as of now, we currently have eight rigs running across our systems, and generally have about 60 wells that are either drilled but incomplete or are in the process of being drilled as we speak. So look, as a result of our year-to-day outperformance, performance from several new wells connected to the system in July, We believe that we are going to trend towards the higher end of our 2022 adjusted EBIDA guidance range of 205 to 220 million. As we look ahead into 2023, we're very encouraged by the increasing level of activity from our customers. Our latest producer development plans are now projecting over 200 well connections behind our systems. We're obviously very excited and encouraged by this level of activity as it generally represents about 80% growth in new well connect activity relative to 2021 and 2022 average well connects. It's also a very significant step forward towards the historical level of activity that we've experienced over the few years prior to the pandemic, which is roughly 250 to 300 wells per year. In addition, we've continued to benefit from consolidation in the upstream sector, most recently with Ascent's latest bolt-on acquisition of approximately 27,000 net acres in the Utica, which is already dedicated to our SMU system. Ascent was the optimal buyer, certainly given that the acreage is contiguous to their existing acreage position, and they also owned a material working interest in the production. We expect this transaction will drive a significant amount of free cash flow for Summit going forward as Ascent develops the substantial inventory of identified drilling locations, which are mostly behind pads that are already connected to the SMU system. In the peons, we continue to make progress on the 200-well development program, which is expected to result in 15 to 20 well connects starting in the second quarter of 2023 and continually thereafter. As a reminder, development in this region includes directional wells that have initial IP rates of, you know, call it a million, a million and a half MMCF per day. Based on these well characteristics and the cadence of development, we do think that this level of activity will result in flat to modest volume growth in our overall peon segment over the longer term. Within the Barnett, we continue to see strong performance from the 15 wells that have been connected and turned online to the system over the past nine months, with the latest four wells starting to flow in late July. We have an active rig running behind our system, and our customers have recently informed us of plans for more than 30 new wells in 2023. So, we believe that gas prices, the overall improvement in well performance, as well as the Barnett's proximity to the Gulf Coast LNG markets, really positions this segment for continued growth over the next several years. While wells and volumes were significantly impacted by the North Dakota storm this quarter, the volumes did normalize in June, and we continue to be encouraged by the well performance in Central Williams County as well. We currently have four rigs running in the Williston today, and our customers are planning for approximately 60 wells in 2023, which would include seven wells from a customer that will involve both crude and produce water gathering services. With nearly 50 wells expected in the second half of 2022 and approximately 60 wells there on the plans thus far for 2023, we definitely expect to see meaningful volume growth behind the systems over the next several quarters. Well, obviously, it's still early to make a call on official guidance for 2023, but if you assume that the customers execute on the development plans that are in front of us today, we anticipate that Summit will experience double-digit EBITDA growth in 2023. This level of growth would significantly improve SMLP's balance sheet and further position the business for success going forward. As we have discussed, growth in the base business is only one aspect of our overall story. We are pursuing and continue to pursue leverage and value-accreted bolt-on acquisitions and divestitures, and we're also making great progress on commercializing and potentially expanding the EE pipeline into Permian. And we also expect that that would drive tremendous growth for Summit, not only as we kind of look into next year and the contractual step-ups, but certainly in the out years as we bring new contracts to the table. With that, I'll hand the call over to Bill Malt to provide some additional details on the financial results.