Summit Midstream Corporation

Good day, and thank you for standing by. Welcome to the Q3 2022 Summit Midstream Partners LP Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 111 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference call is being recorded. I would like to turn the conference over to your speaker for today. You may go ahead, sir.

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, quarterly results section. With me today to discuss our third 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 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 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 Heath.

Great. All right. Thank you, Randall. Good morning, everyone. Summit reported a third quarter adjusted EBITDA of $54.7 million, representing an 8% quarter-over-quarter growth, which keeps us on track to achieving, you know, maybe even slightly exceeding the high end of our 2022 adjusted EBITDA guidance range of $205 to $220 million. We're very excited about the increased activity we are seeing virtually across all of our operating segments, as well as the progress that we've made on strategic acquisitions and investors over the past couple months. certainly have a lot of positive momentum to discuss in both areas so let me start with the base business updates and then we'll get into a little more detail on the previous previously announced acquisitions and investors we connected about 40 new wells in the third quarter which drove strong volumetric growth quarter over quarter across the portfolio in the northeast we experienced approximately 40 increase in volumes through our odc joint venture which was driven by 12 new wells that produced over $300 billion a day during the quarter. On the SMU system, we connected four new wells that led to approximately 6.5% increase in volumes quarter over quarter. We continue to see new wells that are connected behind our systems in the Utica outperform our internal type curves, which is great. Maybe we need to think about adjusting them, but continue to see some really, really nice wells out there. We're also excited about the potential step up in drilling activities and production of lift from workovers of existing wells by our anchor customer. And this is on the acres that they recently acquired from XTO, which as a reminder is already connected and dedicated to our SMU system. In the Willison, we experienced over 20% growth in liquid volumes, primarily due to nine new wells that were connected during the quarter and also a return of the previously curtailed liquid volumes that resulted from the winter storm that occurred during the second quarter. In the fourth quarter, we're expecting an additional 40 new wells, which will continue to drive volumes on the system, volume growth on the system in the fourth quarter, and also provides a really solid foundation to continue to see volume growth as we head into 2023. In the Barnett, we experienced a moderate increase in volumes from eight new wells that were connected to the system. Four of which, though, occurred at the end of September, which really will kind of have more of an impact on volume growth in the fourth quarter. In total, we added 12 new wells in the Barnett during 2022, and we really remain very excited about our customers' plans to add more than 30 new wells to the system next year. Certainly will result in some pretty significant growth in the Barnett segment. As we look ahead to 2023, we continue to see producer activity levels increasing across virtually all of our operating segments. And if you include the recently announced DJ acquisitions, we would expect to add more than 300 new wells to our systems next year. We're very excited about this opportunity set that we also have in the Permian to further add to the contract portfolio on the EE pipeline. Getting over to the M&A front, in September, we completed the sale of our bison gas gathering system in North Dakota for $40 million in cash. This is similar to the divestiture of our Lane G&P system in June, which is a continuation of our strategy to prune the portfolio of underperforming and or less strategic assets through deleveraging and liquidity-enhancing transactions. All while positioning us to capitalize on more strategic and accretive bolt-on opportunities across our footprint. This certainly was the case. If you take a look at the recently announced DJ acquisitions, it's very much the type of strategic opportunities that we're talking about and that we've been able to capitalize on as a result of those two divestitures. As we discussed on the investor call a couple weeks ago, Summit entered into purchase and sale agreements to acquire the Altberger DJ and Sterling DJ systems for $305 million in cash, which represents a very value and credit accretive transaction multiple of approximately four times our 2023 estimated EBITDA. The transactions represent a reinvestment in an integrated GNP platform that provides us a scalable, reliable, and sustainable solution to enhance both the quality and availability of services that we can offer our combined customer base in the DJ. On a pro forma basis, our footprint will consist of 735 miles of gas gathering pipelines, over 40,000 horsepower of compression, and 185 million a day of processing capacity that has great access to multiple residue gas and NGL outlets. We've also expanded our services to include crude oil and water for our diversified customer base. Our integrated system traverses several highly economic areas in the DJ Basin and is backed by a combination of long-term fixed fee and percent of proceed contracts, which is overpinned by over 500,000 leased mineral acreage within a 1.7 million acre dedicated area. We expect to close both transactions by the year end and are working on transition plans to ensure a smooth integration of the systems in the coming months. We're very excited about the DJ opportunity set, both operationally and commercially, and look forward to hitting the ground running in early 2023. Given our strong momentum in the back half of 2022 and the expected addition of at least 275 wells in 2023, pro forma for the DJ base and acquisitions, we would expect our 2023 adjusted EBDA to exceed 300 million, which would result in more than 125 million in free cash flow, and a meaningful reduction in leverage to approximately 4.25 times at year-end 2023. To the extent that a similar level of that well-connected activity would continue into 2024, we would expect to be in a position to achieve a long-term total leverage target of sub-3.5 times in 2024, which is a major milestone for all of Summit's stakeholders. With that update, I will hand the call over to Bill to provide more details on our financial results. Bill?