Summit Midstream Corporation

Good day, and thank you for standing by. Welcome to the Summit Midstream Partners third quarter 2023 earnings conference call. At this time, all participants are in 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your host. Randall Burton, please go ahead.

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 third quarter of 2023 financial and operating results is Heath Deneke, our president, chief executive officer, and chairman of 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 these 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 a listing of factors that could cause actual results to differ materially from expected results. Please also note that on this call, we used the terms EBITDA, adjusted EBITDA, distributable cash flow, and free 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.

All right. Thanks, Randall, and good morning, everyone. So today, I'll start by discussing our third quarter financial and operating results, and then I'll briefly touch on the strategic alternatives review that we launched in October. So as we previously mentioned, we did have a slower than expected start in the first half of the year. That was primarily driven by a timing shift in WellConnects that were originally slated to come online during the second quarter. We've now regained that momentum in the third quarter with about 74 new wells turned in line behind our systems, which of course drove significant volume in adjusted EBITDA growth at roughly 20% quarter over quarter. We're pleased to report today that our third quarter adjusted EBITDA equaled about $72.8 million, which was above the midpoint of our original guidance range, and certainly demonstrates that we're back on track to achieve $300 million of LTM EBITDA, adjusted EBITDA, during the first half of next year. Drilling down a bit more on our segment results in the Northeast, we've connected 22 new wells during the quarter, 14 behind our wholly-owned SMU system and eight behind our OGC joint venture. This also resulted in quarter-over-quarter segment-adjusted EBITDA growth of over 35%. Since the end of the third quarter, we have connected an additional 11 wells, which we expect will continue to drive volume and EBITDA growth behind our SMU system throughout the fourth quarter and into next year. Despite the time and delays that we had in the first half of the year in this segment, our activity levels are now fully caught up with 76 wells connected year-to-date. And we're also pleased to announce, as we did this morning, that we kicked off a multi-phase project, a centralized compression project, that will provide low-pressure service on parts of our SMU system. The first phase of the project will be in service during the first quarter of 2024 and will result in an incremental compression fee on about $20 million a day of existing production. We anticipate installing additional phases of the centralized compression project over the next couple of years, which again will add additional revenues behind the SMU system, and we believe will have a positive impact on overall production levels. The combined project will take advantage of latent compression units from our mountaineer system in West Virginia, which significantly mitigates our out-of-pocket capital cost on the project. Moving to the rocky segment, we connected 37 wells behind the system during the quarter, including six in the DJ and 31 in the Williston, which drove about 20% volume growth on the liquid system and nearly 50% adjusted EBITDA growth. The total year-to-date well connects in the Rockies to 114 wells. And by the way, we're still expecting an additional 50 wells or so to be connected during the fourth quarter. we continue to focus on integration of the dj basin acquisitions that we made last year and expect to have the majority of the capital projects complete by the end of the year these projects will meaningfully enhance our operating margins in 2024 and beyond as we integrate the systems a few other key highlights in the rockies we recently executed a 15-year contract extension with a key customer in the williston basin which includes over 30,000 largely undeveloped acreage behind our existing system in Southern Williams County. We expect this customer to begin a one-rig development program in mid-2024. And additionally, we had two of our major customers in the Wilson segment merged during the third quarter. And while this combination might create some or dampen some near-term development activity relative to status quo, we're really very excited about the pro forma combination. The contiguous acreage position here will certainly create and enable our anchor customer here to develop more three-mile laterals versus two-mile laterals that they've been able to do historically. So overall, we think it's going to be a very positive development for the segment. Quickly in the Barnett, our anchor customer connected six wells during the quarter, which are performing very well. a bit early to talk too much about 2024, but we will tell you that that customer has also communicated plans to complete 15 to 20 wells in the first half of 2024, which would lead to some really nice volume growth behind the Barnett system next year. Additionally, as we previously announced, one of our customers had elected to shut in production, about 20 million a day of production, really just anticipating much higher gas prices in the future than what we've experienced thus far in the year. We're hopeful that that production will also come back online soon as we see prices continue to strengthen. So, look, with the 224 wells that we've connected through the third quarter and at least 75 new wells that are expected to turn online by year end, you know, we continue to expect fourth quarter adjusted EBITDA to range from 75 to 85 million. Looking further ahead, we're very pleased with the cadence of customer activity. As we said, we have about 220 wells that are slated to turn in line between now and the first half of next year. And we believe this level of activity demonstrates that the momentum in the business will continue next year and really keeps us on track to achieve, again, the $300 million of LTM adjusted EBITDA sometime during the first half of next year. So before handing the call over to Bill, I also wanted to touch on the strategic alternatives review we announced in early October. We're pleased with the level of interest that we've received from multiple parties that involve various transactions ranging from specific asset sales to sell the whole partnership. Gordon and I felt it was prudent to engage external advisors to help evaluate these alternatives, obviously with a goal of maximizing the value of our units for our unit holders. These alternatives include but are not limited to continued execution of the business plan that we're under now, sale of certain assets, refinancing parts or the entirety of the capital structure, sale of the partnership by merger or cash, or really any combination of these and other alternatives are definitely in play. There's no deadline or definitive timetable set for completing the Strategic Alternatives Review, but we are committed to provide further updates on the process as appropriate. I'd like to remind everyone, while the Board conducts its review, the company remains focused on its operational performance and execution of its existing business plan. So with that, let me turn the call over to Bill to give more details on segment results and expectations.