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spk00: Good day and thank you for standing by. Welcome to the first quarter 2023 Summit Midstream Partners LP earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Randall Burton, Director of Investor Relations. Please go ahead.
spk04: 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 presentations section, or quarterly results section. With me today to discuss our first quarter of 2023 financial and operating results, is Heath Denneke, 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 2022 Annual Report on Form 10-K, which was filed with the SEC on March 1, 2023, as well as our other SEC filings for listing the factors that could cause actual results to differ materially from expected results. Please also note that on this call we used terms EBITDA, adjusted EBITDA, distributable cash flow, and free cash flow. These are non-GAAP financial measures, and we have provided reconciliation to the most directly comparable GAAP measures in our most recent earnings release. And with that, I'll turn the call over to Heath.
spk01: Great. Hey, thanks. Thanks, Randall. Good morning, everyone. So Summit this morning reported first quarter adjusted EBITDA of $60.4 million, which was in line with our internal expectations. As expected, we had a very active quarter operationally with over 60 new wells added to our systems, over half of which were in the Rockies region. Despite experiencing some timing slippage and longer than anticipated Fract Protect shut-ins during the quarter, these new well additions resulted in 17% liquids volume growth quarter over quarter and 14% gas volumes growth in the DJ basin relative to December of 2022. Shifting to the full-year picture, customer activity levels remain healthy across most of our operating segments. There are currently nine rigs running behind our systems and over 225 drilled but uncompleted wells that we expect will continue to drive significant volume and EBITDA growth throughout the remainder of the year. Based on recent discussions with our customers in the Barnett and Pionts, we do expect that continued downward pressure on near-term gas prices likely result in some delays and pullbacks of plant activity in 2023 versus beginning of the year expectations however we believe those changes are largely accounted for in the lower end of our original segment guidance range in those particular regions in the williston dj and and utica shell basins we continue to see resiliency in our original customer plans for the year which we believe keeps us on track overall to achieve strong sequential quarterly growth in 2023 and deliver on our adjusted EBITDA guidance range of 290 to 320 million for the year. Our focus this year is on operational execution, given the significant number of wells that we're connecting behind our system this year. Over the last five months, we have successfully integrated and continued to optimize our recently acquired DJ basin assets, Our capital program in the Williston and DJ basins continues to progress on time and on budget. And additionally, in the Delaware basin, we achieved an important milestone on EE during the quarter by receiving FERC authorization to construct a new lateral to the Red Hills processing facility in Eddy County, New Mexico. At over 1.25 BCF per day of processing capacity, the Red Hills plant is the largest processing complex in the state of New Mexico. We will be ramping up marketing activities this summer to solicit interest from new and existing customers to hopefully provide firm transportation services from the Red Hills complex and other plants in the area across the whole EE pipeline system to downstream delivery points in the Waha, Texas area. So in summary, we're off to a good start with our Q1 financial and operating results. We're excited about the cadence and level of customer activity we continue to see across our systems. and we remain on track to achieve the significant year-over-year EBITDA growth that we guided towards at the beginning of the year. So with that, let me hand the call over to Bill to provide additional detail on our segment financial results.
spk03: Thanks, Heath, and good morning, everyone. In the Northeast, which is inclusive of our SMU system, proportionate share of our Ohio Gathering joint venture, and our Marcellus system, the segment averaged 1.3 BCF per day during the quarter, inclusive of 598 million cubic feet a day of 8-8 OGC volumes, and segment-adjusted EBITDA totaled 17.9 million, a decrease of 1.2 million from the fourth quarter of 2022, primarily due to a decline in volumes from Fract Protect activities Heath mentioned earlier on the call. We estimate those Fract Protect activities negatively impacted volumes by approximately 50 million cubic feet a day at OGC, and 20 million cubic feet a day at SMU and gross margin net to SMLP by approximately 1 million during the quarter. We expect these impacts to moderate in the second quarter of 2023 as these new and existing wells are brought back online. Five new wells were brought online behind our wholly owned SMU system and 12 new wells were connected behind our OGC joint venture during the quarter. There are currently four rigs running behind the systems including three rigs behind our wholly-owned SMU system, with more than 55 ducts behind the systems. Our customers are well-hedged, and while some are expecting significant growth behind its systems, we estimate our customers' overall basin activity to remain relatively flat to 2022 production levels. The Rocky segment, which is inclusive of our DJ and Williston Basin systems, generated adjusted EBITDA of $23.2 million, an increase of 9.4 million from the fourth quarter of 2022, due primarily to the DJ Basin acquisitions made in December. Liquids volume throughput averaged 74,000 barrels per day during the quarter, a 17% increase relative to the fourth quarter of 2022, and natural gas volume throughput averaged 108 million cubic feet a day, representing approximately 14% growth relative to volume throughput in December of 2022. There were 36 new wells connected during the quarter. There are three rigs running and more than 150 docks behind the systems. The Permian segment, which includes our 70% interest in the EE pipeline, reported adjusted EBITDA of $5.1 million, an increase of $0.9 million relative to the fourth quarter of 2022, primarily due to contractual step-ups and take-or-pay contracts at our EE joint venture. The peon segment recorded adjusted EBITDA of $14.1 million, a decrease of $0.7 million relative to the fourth quarter. Volumes averaged 287 million cubic feet a day, a decrease of 2.7% relative to the fourth quarter, primarily due to natural production declines partially offset by volume from eight wells that were turned in line in March. There are nine more wells on that same pad site that have been drilled, completed, and expected to be turned in line this month. As Heath mentioned earlier, we are seeing some modest delay in development by our customers, but still expect to achieve our segment-adjusted EBITDA guidance in the peons. The Barnett segment reported adjusted EBITDA of $7 million, a decrease of $0.2 million relative to the fourth quarter, primarily due to natural production declines and frac protect activities impacting quarterly volumes by an estimated 6 million cubic feet a day and segment-adjusted EBITDA by an estimated $0.3 million. There is still one rig running behind the system, and one of our customers has decided to hold wells and duct inventory until natural gas prices improve. We now expect 15 wells to turn in line this year, which we expect to result in segment-adjusted EBITDA to trend toward or slightly below the low end of our segment-adjusted EBITDA guidance range of $35 to $40 million. Quickly on the partnership, SMLP recorded a first quarter net loss of $14.2 million, and adjusted EBITDA of $60.4 million. Capital expenditures totaled approximately $16 million for the quarter, in line with expectations, and included $4 million of maintenance capex. The majority of growth capex during the quarter was in the Rockies and associated with pad connections and DJ Basin integration projects. With respect to SMLP's balance sheet, we had net debt of approximately $1.34 billion, a decrease of approximately $25 million relative to year-end 2022, and total liquidity at the end of the first quarter totaled approximately $100 million, which included $4 million of letters of credit. And with that, I'll turn the call back over to Heath for closing remarks.
spk01: Great. All right. Thanks, Bill. As I said earlier, we are pleased with the first quarter performance, and while there have been a few gives and takes across the portfolio, we continue to expect to achieve our 2023 adjusted EBITDA guidance range of $290 to $320 million for the year. We look forward to continuing to provide operational updates throughout the year. And before I open up the call for questions, I wanted to remind everyone of the upcoming annual meeting of limited partners, which will be held virtually on May 10, 2023, at 2 p.m. Central Time. All unit holders should have received proxy materials associated with the meeting. There are a number of items on the agenda that are important to the partnership, and we encourage all unit holders to vote. Thank you for your time and continued support. And with that, operator, I would like to open up the call for questions.
spk00: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again Please stand by while we compile the Q&A roster. We have a question from Greg Brody from Bank of America. Your line is open.
spk02: Hey, good morning, guys. It looks like you have, just based on the corridor and your maintenance, you're maintaining the guidance that you need to ramp EBITDA throughout the year to hit those numbers. Does it seem like you're turning towards the lower end of guidance? And can you help us think through sort of what are some of the risks to maintaining guidance today?
spk01: Yeah, I'll kind of start us off on that. This is Heath, and we'll add some commentary as well. I mean, as we said, we You know, this quarter is really in line with our expectations and the cadence of activity that we expected throughout the year. You know, if you recall, we had, you know, within our guidance range, I think the midpoint of WellConnects was north of 300, close to maybe 330 or so. And, you know, 60 of those got completed in the first quarter, which was, again, kind of, you know, as we expected. So definitely, you know, when we kind of have looked at the year, it's definitely kind of you know, late first half to early second half of the year is when the majority of those new wells and then the volumes off those wells will kind of come into play. So I think at this point, you know, while we, we definitely in the peons and the, you know, in the Barnett, we kind of suggested that, you know, based on the recent discussions with customers and some of them, you know, some pullback there that we probably expect to kind of come close to the lower end in those particular segments. However, you know, all the, you know, the timing of all the, you know, the Utica and the Rocky segments, you know, the timing of those and cadence of well connects and level of well connects are still in line with the producer original plans. So, and we've risked those quite a bit in the mid. So we kind of think that, you know, as long as everything kind of stays on track as it looks right now, you know, we still think kind of coming, you know, within the guidance range. And at this point, I'd probably say we're just as likely to end up at the midpoint. than we would be the low point.
spk03: Yeah, Greg, I'd just add a couple more points, right? We highlighted in the Northeast, right, we had about 70 million a day down for Fract Protect, while certainly that impacted quarterly results by about 1.3 million when you include the Barnett Fract Protect. But those are great signals, right? That means that, you know, they're completing wells that are about to come online. So just I think that further gives you a couple more data points on just the cadence. And we wouldn't expect those to be shut in for Fract Protect more than three or four months as they're completing wells on existing pad sites. So I think that's a good leading indicator. And then I think, again, as we see kind of construction timeline, we had while CapEx was in line with our expectations, you know, a decent CapEx this quarter. I think that's all indicating that we're getting PagConnect connected and should tee up for a nice summer.
spk02: I appreciate the color there. And just the last one for you. So, you know, you've talked in the past about strategic opportunities potentially to leverage in the balance sheet and just improving the asset base. What's your sense of the opportunities today? Is it something that we're likely to see this year or has that changed?
spk01: I think our focus right now is really just on organic execution around our base business. We're seeing a lot of new WellConnects, a lot of new activity. We continue to look at opportunities. As you well know, I mean, we, you know, we completed the big DJ acquisitions and we're seeing, you know, a lot of good stuff kind of happening in the DJ overall. But this is a year that we're kind of focused on, you know, getting all the well connects and getting everything we can to move to market and, you know, rebuilding up liquidity under our credit facility that we, you know, that we utilize to help finance that DJ transaction. So I think, you know, certainly lots of opportunity and we always, you know, look into things, but, you know, I don't think there's anything right now that I would say is imminent or, you know, something that we're frankly not, we're just not really all that focused on right now.
spk02: Got it. Thank you for your time, guys. You bet.
spk00: Thank you. And that's all the questions we have. This concludes today's conference call. Thank you for participating and you may now disconnect.
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