Summit Midstream Corporation

Good day and thank you for standing by. Welcome to the first quarter Summit Midstream Partners LP 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'll 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 hand the conference over to your first speaker today, Randall Byrne, Director of Investor Relations.

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 first quarter of 2024 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 2023 annual report on Form 10-K, which was filed with the SEC on March 15, 2024, 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 gap measures in our most recent earnings release and with that I'll turn the call over to Heath thanks Randall and good morning everyone thank you for joining us today to discuss our first quarter 2024 results we had a very busy first quarter really on really on all fronts starting on the strategic perspective we successfully wrapped up our strategic alternatives review announced the divestiture of our Utica position and as we announced this morning, we've also closed on the sale of our mountaineer gathering system in West Virginia. In the aggregate, we sold our Northeast segment for approximately $700 million, and we're now shifting our focus on several organic and bolt-on acquisition opportunities in and around our Rockies and Permian segments. With our pro forma leverage of around 3.9 times, a completely undrawn $400 million revolver, and a little over $350 million of pro forma unrestricted cash, We are very well positioned to pursue those opportunities while we further deliver the balance sheet and continue to make progress towards achieving our long-term leverage target of sub 3.5 times. Commercial discussions on EE continue to remain extremely productive. Earlier this week, we concluded a successful open season that resulted in the award of $75 million a day of incremental 10-year take-or-pay commitments with a subsidiary of Matador Resources. This commitment was really there to support their 200 million-a-day expansion of the Marlin processing plant in New Mexico. The Marlin plant complex is already connected to the EE pipeline, and their plant expansion is scheduled to come online in the first half of 2025. In addition to the new volume commitment, the amended and restated Matador Firm Service Agreement provided for an approximate two-and-a-half-year extension of their existing agreements and now are extended to a 10-year term, effective May 1 of 2024. Additionally, as part of the open season, we received $150 million a day of nonbinding 10-year take-or-pay bids from other third parties that are looking for new plant connections in 2025. We've also had dialogue with multiple parties that have recently announced plant expansions in and along the EE corridor. Furthermore, we signed a new max rate interruptible agreement in New Mexico for up to $150 million a day of incremental volumes. So, look, both of these contracts, both the Matador contract and this IT contract, processing plants are already connected to our system. So, therefore, they're really extremely value accretive to EE as there's really not much or any capital associated with these connections. We're very excited to see the increasing level of demand for residue gas takeaway capacity out of the Delaware Basin materialize, and we continue to believe that EE is uniquely positioned to meet both the near-term and long-term needs of the market. Operationally, we had a great start to the year, despite some severe weather, primarily in the DJ Basin. We turned in line 71 wells during the first quarter, which pro forma for the Utica and Marcellus transaction represents nearly half of the wells that we're expecting to be turned in line for the full year 2024. This level of activity exceeded our expectations for the quarter and should put us in a good position to continue to execute operationally and achieve our revised pro forma adjusted EBITDA guidance range of 170 to 200 million. So in summary, we're off to a great start for the year about strategically, operationally, and financially, and we look forward to maintaining that momentum through the rest of the year. So with that, I'll hand the call over to Bill to provide some additional details on our financial results.

Thanks, Heath, and good morning, everyone. Summit reported first quarter net income of $132.9 million, adjusted EBITDA of $70.1 million, and capital expenditures of $16.4 million, with the majority of the CapEx spent in the Rockies associated with PAC connections. With respect to SMLP's balance sheet, we had net debt of approximately $700 million with an undrawn $400 million ABL credit facility. Our available borrowing capacity at the end of the first quarter totaled $384 million, which includes $4.3 million of letters of credit and $12 million of commitment reserve for the upcoming 2025 unsecured notes maturity. Now turning to the segments, in the Rocky segment, which is inclusive of our DJ and Williston Basin systems, we generated adjusted EBITDA of $22.9 million, an increase of half a million from the fourth quarter. largely due to increased project margin from our percentage of proceeds contracts from higher commodity prices, which was partially offset by lower liquids and natural gas volumes. Liquid volumes averaged 74,000 barrels a day, a decrease of 7,000 barrels a day relative to the fourth quarter due primarily to natural production declines. Natural gas volumes averaged 124 million a day, a decrease of 2 million a day relative to the fourth quarter primarily due to extreme weather and operational downtime we experienced in the DJ Basin that negatively impacted volumes by approximately 9 million cubic feet per day during the quarter. We connected 39 wells in the DJ and 18 wells in the Williston during the quarter, which we expect will drive liquids and natural gas volume growth in the second quarter. The rocky segment currently has two rigs running behind the systems and more than 50 docks. The Permian Basin segment, which includes our 70% interest in the EE pipeline, reported adjusted EBITDA of $7.3 million, a decrease of $0.7 million relative to the fourth quarter, due primarily to $1 million of other revenue recognized in the fourth quarter. Volume throughput on EE averaged 467 million cubic feet per day, representing an increase of 21% relative to the fourth quarter. As Heath already mentioned, With the significant momentum in contracting, the remaining capacity, we remain extremely excited about the long-term prospects for EE. The peon segment reported adjusted EBITDA of 15.2 million, down 0.9 million relative to the fourth quarter, due primarily to natural production declines and no new well connections to the system during the quarter. Volume throughput averaged 312 million cubic feet a day during the quarter, a 5 million cubic feet a day decline relative to the fourth quarter. The Barnett segment reported adjusted EBITDA of $5.9 million, a decrease of $0.7 million relative to the fourth quarter, primarily due to lower volume throughput, partially offset by four new wells connected to the system. There is currently one rig running and 24 ducts behind the system, and a customer continues to keep approximately $30 million a day of production shut in due to low natural gas prices. We estimate that the 30 million cubic feet a day of shut-ins negatively impacted adjusted EBITDA by $2 million during the quarter. Briefly on the Northeast, the segment averaged 1.56 BCF per day during the quarter, inclusive of 849 million cubic feet a day of 8 HOGC volumes. And segment adjusted EBITDA totaled 29 million, an increase of 0.6 million relative to the fourth quarter. During the quarter, we connected three wells beyond the SMU system and seven wells behind OGC. And as we announced today, as of May 1st, with the sale of the Mountaineer system to Intero Midstream, we have successfully exited the Northeast segment with $700 million in aggregate asset sale proceeds. And with that, I'll turn the call back over to Heath for closing remarks.

Yeah, thanks, Bill. So, look, as I said earlier, very pleased with the first quarter performance, the activity levels behind our system, and certainly the progress, great progress that we made on the balance sheet. We believe we're in an opportunity-rich environment, and we look forward to continue to build on our progress and momentum throughout the year. Before opening 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 9, 2024, at 2 p.m. Central Time. All unit holders should have received proxy materials associated with the meeting. There certainly are a number of important items on the agenda. They're important to the partnership, and we certainly encourage everyone to vote. Additionally, we are making good progress in preparing for the previously announced C-Corp conversion, including a subsequent proxy and special meeting where we will intend to seek approval from Summit's unit holders to convert the partnership to a C-Corp. While the exact timing depends on a number of factors, we are on track to file the C-Corp proxy statement and provide unit holders with the additional information about the rationale and the benefits of the conversion as early as the second quarter and currently expect to hold a special meeting sometime during the third quarter of the year. We continue to strongly believe that converting to a C-Corp positions the company to maximize value for our unit holders and will certainly provide significant long-term tax savings for current and future shareholders going forward. With that, I would like to thank you for your time and continued support. And operator, please open the call for questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster.

Our first question comes from the line of Greg Brody of Bank of America.

Your line is now open.

Good morning, guys, and congrats on all the transactions. Thanks, Greg. Just respect the strategic review. You concluded it. You've sold the Northeast, and it sounds like you're focused on M&A in the Permian and in the Rockies. Can you talk about what the opportunity is there? is the conclusion of the strategic review mean that the company is done pruning assets now and it's all about adding assets? Can you talk a little bit about that?

Yeah, good questions.

Yeah, I think the long and short of it is, you know, we think we are kind of done in terms of pruning assets. I mean, obviously that's you know, they're at the right value, I think would, you know, continue to consider it, but that's not kind of in the base plan. I would think, you know, as you see on the balance sheet, we've got kind of 3.9 times levered now. We think, you know, we've got an ample amount of liquidity with a non-drone revolver and, you know, close to, what, 350-plus of cash on the balance sheet. So that's more than enough liquidity to really support, you know, an M&A strategy around Iraqis and Permian segments. You know, look, I think we're, you know, target goal number one is to kind of maintain leverage and try to achieve our long-term target of three and a half. But we do see quite a bit of opportunity set in and around both the Rockies and the Permian segment to, you know, to do, potentially take advantage of what we think is a good market for buyers right now.

Yeah, and Greg, I would just add to, you know, as you think about Double E, you know, we mentioned we got the $150 million a day of kind of non-binding proposals for additional plan connections. I think there's a really good organic growth strategy out at Double E as well. You know, I think we could finance a lot of that with asset-level debt, but there may be some investment opportunities there. And then as you think about, you know, we keep a pretty exhaustive list of kind of high priority targets from a Bullton acquisition perspective. And I'd tell you they're all primarily highly synergistic to our existing footprint. And we see a number of opportunities in the Williston and to a greater extent in the DJ.

Could you give us a sense of how big that opportunity set is?

Yeah. Greg, if we could get them all done, I feel like we could double the size of Summit. Obviously, that's a pretty ambitious strategy. But I would think about them ranging from as low as $15 million of EBITDA to as high as $50 to $60.

And how many type of opportunities are there out there?

I'd say there's, you know, call it,

10 or so that we keep a close eye on, Greg.

Got it. And then just the asset sale, the last one that you announced yesterday, it looks like you sold that for about three and a half times just based on what I see on Taro's guidance out there. Is there some other valuation there that we're not thinking about?

Yeah, so Greg, on that one, if you do the math in our revised guidance, that put you right at 17 and a half at the midpoint reduction in EBITDA. You got to remember though, Greg, there's about almost $7 million of shortfall payments that expire, you know, in 25 and 26 behind that system. So if you think about it more as like 10 to 11 million of EBITDA flowing EBITDA, I think that'll help bridge kind of the perception on the value gap. Got it.

Then as I think about the use of cash, you've obviously pointed out M&A. How do you think about refinancing the capital structure? And to remind us, are there any mandatory payments associated with these assets that we should be thinking about calling to bondholders?

So the second lien, Greg, does have a 365-day reinvestment period provision. It does have some extensions in certain circumstances. So that would kind of be your back end, Greg, on when you would be required to make an asset sale offer. Obviously, we paid down the revolver, you know, a big chunk of the revolver. And you may have noticed in the release and some of Heath's commentary that You know, we've got a tremendous amount of liquidity. I think this is a balancing act, Greg. So, you know, I think some additional debt pay down, I wouldn't be, you know, shocked if you saw us come out and maybe try to do some additional debt pay down and balance kind of the liquidity profile with continued debt repayment.

And what about just how you think about eventually refinancing the capital structure?

Yeah. Yeah, look, it's a great question. We've always kind of said, you know, Q125 is kind of the back-end date. Obviously, the market, you know, seems to be very open right now, and we're seeing a lot of constructive prints. You know, the harvest deal that got done was an interesting comp for us. But Greg, as you know, you know, we need to kind of sort out an extension of our bank deal. So, you know, I view it more along the lines of, you know, that takes a little bit more time to get everything ironed out. But it's safe to say that we're working on that real time. And when we're in our position to, you know, get that extension done, you know, evaluate the market at the time, I think we're kind of in the window here between now and the end of year of trying to get something done on the refi.

And as you think about the revolver extension, are you anticipating any, just obviously assuming you don't buy anything else, assuming the revolver stays the same size?

You know, I think we'll certainly try to upsize it a bit here, Greg. I think You know, I don't think you're going to see anything crazy, maybe 50, 100 million here or there. I do think, and as we've discussed, there really is a sizable opportunity here to continue to kind of regain scale within our footprint. And, you know, it's a balancing act between prepayable debt, you know, bullet bond, as well as having liquidity to continue to kind of expand the business and take advantage of this opportunity set we see in front of us. So those are the things we're balancing. That's what we're chatting with our banks about and potential new banks to join the bank group. And we'll be kind of all part of the decision making as it relates to the size of any sort of bond deal and the like as we go out to the market here later this year.

And then just terms of operations, obviously some contract wins in the . How should we think about the incremental EBITDA associated with those?

Yeah, the ones that we announced, both the interruptible agreement could start contributing this year. The matador contract would kind of step up next year. I think it's just call it kind of somewhere late in the second quarter, mid to late second quarter is when the incremental tech pay capacity will kind of step up. And then again, as we kind of highlighted, we do see quite a few publicly announced expansions that are up and down the corridor. Many of those are kind of late 25, early 2026 in service dates. So kind of we think we'll see the sizable step up in 25 and a lot of opportunity that we think could materially drive our 26 and beyond EBITDA.

Yeah, and Greg, as you think about between the EOG contract, that ramps up to $40 million a day. You've got the new Matador at $75 million a day. And then if you kind of exclude all the other opportunities that we're working right now, that'll get you another six, seven million bucks of revenue growth once they're fully, you know, fully ramped. And then I would just point you to our investor presentation. We kind of show you where we think Summit kind of, EBITDA at the Summit will be, you know, if you kind of fill up the free flow capacity of the pipe. So... you know, that'll get you somewhere in the mid-40s from EBITDA relative to $30 million today.

And the last one here, I know you've talked about potentially bringing in the JV component here for Double Eagle. Once the leverage is sort of a neutral transaction, based on where things are, you're out with today, when can you think we could possibly see that happen?

Yeah. How we model it out, Greg, I'd tell you it's probably, 26 type timeframe, right? A lot of these contracts are ramping over the next 18 to 24 months. So it's, you know, you kind of need some of that in the rear view mirror. Would we be willing to maybe see some marginal uplift in leverage if it was truly just, you know, contractual ramp issue and you knew that LTM EBITDA was going to kind of roll in? So I'd think about it, you know, 26-ish timeframe, that may be another opportunity, Greg, to kind of go pop off a capital markets deal as well. But I think that's probably about right as it relates to the contract ramp and the LTM EBITDA profile of EE, how we see it today.

Got it. And just one clarification here. I believe your coupon on the 26th has stepped up by another 50 basis points as of April 1st. They did.

It's unfortunate these asset sale proceeds can't circumvent that, Greg, but I think the second lien holders got a nice win here with a major de-levering and a step-up in coupon.

And there's no way that's a permanent step-up until you refinance.

Next year, if we catch up on ECF next year, theoretically, it could go down, Greg, but as I mentioned, I would suspect that you know, we kind of clean all this up with a refi before we get to that point anyway.

Thanks for the time, guys. I appreciate it.

Yeah, thanks for the questions, Greg. Thanks.

Thank you. This concludes the question and answer session. Thank you for your participation in today's conference. This concludes the program. You may now disconnect. Hello. Bye. Thank you. you Good day and thank you for standing by. Welcome to the First Quarter Summit Midstream Partners LP 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'll 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 hand the conference over to your first speaker today, Randall Byrne, Director of Investor Relations.

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 first quarter of 2024 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 2023 annual report on Form 10-K, which was filed with the SEC on March 15, 2024, 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.

Thanks, Randall, and good morning, everyone. Thank you for joining us today to discuss our first quarter 2024 results. We had a very busy first quarter, really, on all fronts. Starting on the strategic perspective, we successfully wrapped up our strategic alternatives review, announced the divestiture of our Utica position, and as we announced this morning, we've also closed on the sale of our mountaineer gathering system in West Virginia. In the aggregate, we sold our northeast segment for approximately $700 million, and we're now shifting our focus on several organic and bolt-on acquisition opportunities in and around our Rockies and Permian segments. With our pro forma leverage of around 3.9 times, a completely undrawn $400 million dollar revolver and a little over $350 million of pro forma unrestricted cash, we are very well positioned to pursue those opportunities while we further deliver the balance sheet and continue to make progress towards achieving our long-term leverage target of sub three and a half times. Commercial discussions on EE continue to remain extremely productive. Earlier this week, we concluded a successful open season. that resulted in the award of $75 million a day of incremental 10-year take-or-pay commitments with a subsidiary of Matador Resources. This commitment was really there to support their $200 million a day expansion of the Marlin processing plant in New Mexico. The Marlin plant complex is already connected to the EE pipeline and their plant expansion is scheduled to come online in the first half of 2025. In addition to the new volume commitment, The amended and restated Matador Firm Service Agreement provided for an approximate two-and-a-half-year extension of their existing agreements and now are extended to a 10-year term, effective May 1 of 2024. Additionally, as part of the open season, we received $150 million a day of nonbinding 10-year take-or-pay bids from other third parties that are looking for new plant connections in 2025. We've also had dialogue with multiple parties that have recently announced plant expansions in and along the EE corridor. Furthermore, we signed a new max rate interruptible agreement in New Mexico for up to $150 million a day of incremental volumes. So, look, both of these contracts, both the Matador contract and this IT contract were TAB, Mark McIntyre, processing plants are already connected to our system, so therefore they're really extremely value created to double he is there's really not much or any capital associated with these connections. TAB, Mark McIntyre, we're very excited to see the increasing level of demand for residue gas take away capacity out of the Delaware basin materialize and will continue to believe that w is uniquely positioned to meet both the near term and long term needs of market. Operationally, we had a great start to the year, despite some severe weather, primarily in the DJ basin. We turned in line 71 wells during the first quarter, which pro forma for the Utica and Marcellus transaction represents nearly half of the wells that we're expecting to be turned in line for the full year 2024. This level of activity exceeded our expectations for the quarter and should put us in a good position to continue to execute operationally and achieve our revised pro forma adjusted EBITDA guidance range of $170 to $200 million. So in summary, we're off to a great start for the year about strategically, operationally, and financially, and we look forward to maintaining that momentum through the rest of the year. So with that, I'll hand the call over to Bill to provide some additional details on our financial results.

Thanks, Heath, and good morning, everyone. Summit reported first quarter net income of $132.9 million, adjusted EBITDA of $70.1 million, and capital expenditures of $16.4 million with the majority of the CapEx spent in the Rockies associated with PAC connections. With respect to SMLP's balance sheet, we had net debt of approximately $700 million with an undrawn $400 million ABL credit facility. Our available borrowing capacity at the end of the first quarter totaled $384 million, which includes $4.3 million of letters of credit and $12 million of commitment reserved for the upcoming 2025 unsecured notes maturity. Now turning to the segments, in the Rocky segment, which is inclusive of our DJ and Williston Basin systems, we generated adjusted EBITDA of $22.9 million, an increase of half a million from the fourth quarter, largely due to increased project margin from our percentage of proceeds contracts from higher commodity prices, which was partially offset by lower liquids and natural gas volumes. Volumes averaged 74,000 barrels a day, a decrease of 7,000 barrels a day relative to the fourth quarter, due primarily to natural production declines. Natural gas volumes averaged 124 million a day, a decrease of 2 million a day relative to the fourth quarter, primarily due to extreme weather and operational downtime we experienced in the DJ Basin that negatively impacted volumes by approximately 9 million cubic feet per day during the quarter. We connected 39 wells in the DJ and 18 wells in the Williston during the quarter, which we expect will drive liquids and natural gas volume growth in the second quarter. The Rocky segment currently has two rigs running behind the systems and more than 50 docks. The Permian Basin segment, which includes our 70% interest in the EE pipeline, reported adjusted EBITDA of $7.3 million, a decrease of $0.7 million relative to the fourth quarter. due primarily to $1 million of other revenue recognized in the fourth quarter. Volume throughput on EE averaged 467 million cubic feet per day, representing an increase of 21% relative to the fourth quarter. As Heath already mentioned, with the significant momentum in contracting the remaining capacity, we remain extremely excited about the long-term prospects for EE. The peon segment reported adjusted EBITDA of 15.2 million, down 0.9 million relative to the fourth quarter, due primarily to natural production declines and no new well connections to the system during the quarter. Volume throughput averaged 312 million cubic feet a day during the quarter, a 5 million cubic feet a day decline relative to the fourth quarter. The Barnett segment reported adjusted EBITDA of 5.9 million, a decrease of 0.7 million relative to the fourth quarter, primarily due to lower volume throughput, partially offset by four new wells connected to the system. There's currently one rig running and 24 ducts behind the system, and a customer continues to keep approximately $30 million a day of production shut-in due to low natural gas prices. We estimate that the $30 million cubic feet a day of shut-ins negatively impacted adjusted EBITDA by $2 million during the quarter. Briefly on the Northeast, The segment averaged 1.56 BCF per day during the quarter, inclusive of 849 million cubic feet a day of 8-8 OGC volumes. And segment adjusted EBITDA totaled 29 million, an increase of 0.6 million relative to the fourth quarter. During the quarter, we connected three wells beyond the SMU system and seven wells behind OGC. And as we announced today, as of May 1st, With the sale of the Mountaineer system to Entero Midstream, we have successfully exited the Northeast segment with $700 million in aggregate asset sale proceeds. And with that, I'll turn the call back over to Heath for closing remarks.

Yeah, thanks, Bill. So, look, as I said earlier, very pleased with the first quarter performance, the activity levels behind our system, and certainly the progress, great progress that we made on the balance sheet. We believe we're in an opportunity-rich environment, and we look forward to continue to build on our progress and momentum throughout the year. Before opening 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 9, 2024, at 2 p.m. Central Time. All unit holders should have received proxy materials associated with the meeting. There certainly are a number of important items on the agenda. They're important to the partnership, and we certainly encourage everyone to vote. Additionally, we are making good progress in preparing for the previously announced C-Corp conversion, including a subsequent proxy and special meeting where we will intend to seek approval from Summit's unit holders to convert the partnership to a C-Corp. While the exact timing depends on the number of factors, we are on track to file the C-Corp proxy statement and provide unit holders with the additional information about the rationale and the benefits of the conversion as early as the second quarter. and currently expect to hold a special meeting sometime during the third quarter of the year. We continue to strongly believe that converting to a C-Corp positions the company to maximize value for our unit holders and will certainly provide significant long-term tax savings for current and future shareholders going forward. With that, I would like to thank you for your time and continued support. And operator, please open the call for questions.

Thank you. At this time, we will conduct the question and answer session. As a reminder to ask a question, you'll need to 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.

Our first question comes from the line of Greg Brody of Bank of America.

Your line is now open.

Good morning, guys. Congrats on all of the transactions. Thanks, Greg. Just respect the strategic review. You concluded it. You've sold the Northeast, and it sounds like you're focused on M&A in the Permian and in the Rockies. Can you talk about what the opportunity is there? Is the conclusion of the strategic review

mean that the company is is is done pruning assets now and it's all about adding assets talk a little bit about that yeah good good questions um yeah i think the long and short of it is uh you know we we think we are kind of done in terms of pruning assets i mean obviously that's you know they're at the right value i think would you know continue to consider it but that's not kind of in the base plan i would think you know as you see on the balance sheet we've got uh kind of 3.9 times levered now. We think, you know, we've got an ample amount of liquidity with a non-drone revolver and, you know, close to, what, 350 plus of cash on the balance sheet. So that's more than enough liquidity to really support, you know, an M&A strategy around our Rockies and Permian segments. You know, look, I think we're, you know, target goal number one is to kind of maintain leverage and try to achieve our long-term target of three and a half. But we do see quite a bit of opportunity set in and around both the Rockies and the Permian segment to, you know, to do, potentially take advantage of what we think is a good market for buyers right now.

Yeah, and Greg, I would just add to, you know, as you think about EE, you know, we mentioned we got the $150 million a day of kind of non-binding proposals for additional plan connections. I think there's a really good organic growth strategy out at EE as well. You know, I think we could finance a lot of that with asset-level debt, but there may be some investment opportunities there. And then as you think about, you know, we keep a pretty exhaustive list of kind of high-priority targets from a bolt-on acquisition perspective, and I'd tell you they're all primarily, you know, highly synergistic to our existing footprint, and we see a number of opportunities in the Williston and to a greater extent in the DJ.

Could you give us a sense of how big that opportunity set is?

Yeah. Greg, if we could get them all done, I feel like we could double the size of Summit. Obviously, that's a pretty ambitious strategy. But I would think about them ranging from as low as $15 million of EBITDA to as high as $50 to $60.

And how many type of opportunities are there out there?

I'd say there's, you know, call it,

10 or so that we keep a close eye on, Greg.

And then just the acid sale, the last one that you announced yesterday, it looks like you sold that for about three and a half times just based on what I see on Taro's guidance out there. Is there some other value creation there that we're not thinking about?

Yeah, so Greg, on that one, if you do the math in our revised guidance, that put you right at 17 and a half at the midpoint reduction in EBITDA. You got to remember though, Greg, there's about almost $7 million of shortfall payments that expire, you know, in 25 and 26 behind that system. So if you think about it more as like 10 to 11 million of EBITDA flowing EBITDA, I think that'll help bridge kind of the perception on the value gap. Got it.

Then as I think about the use of cash, you've obviously pointed out M&A. How do you think about refinancing the capital structure? And to remind us, are there any mandatory payments associated with these assets that we should be thinking about for bondholders?

So the second lien, Greg, does have a 365-day reinvestment period provision. It does have some extensions in certain circumstances. So that would kind of be your back end, Greg, on when you would be required to make an asset sale offer. Obviously, we paid down the revolver, you know, a big chunk of the revolver. And you may have noticed in the release and some of Heath's commentary that You know, we've got a tremendous amount of liquidity. I think this is a balancing act, Greg. So, you know, I think some additional debt pay down, I wouldn't be, you know, shocked if you saw us come out and maybe try to do some additional debt pay down and balance kind of the liquidity profile with continued debt repayment.

And what about just how you think about eventually refinancing the capital structure?

Yeah. Yeah, look, it's a great question. We've always kind of said, you know, Q125 is kind of the back-end date. Obviously, the market, you know, seems to be very open right now, and we're seeing a lot of constructive prints. You know, the harvest deal that got done was an interesting comp for us. But Greg, as you know, you know, we need to kind of sort out an extension of our bank deal. So, you know, I view it more along the lines of, you know, that takes a little bit more time to get everything ironed out. But it's safe to say that we're working on that real time. And when we're in our position to, you know, get that extension done, you know, evaluate the market at the time, I think we're kind of in the window here between now and the end of year of trying to get something done on the refi.

And as you think about the revolver extension, are you anticipating any, just obviously assuming you don't buy anything else, assuming the revolver stays the same size?

You know, I think we'll certainly try to upsize it a bit here, Greg. I think You know, I don't think you're going to see anything crazy, maybe 50, 100 million here or there. I do think, and as we've discussed, there really is a sizable opportunity here to continue to kind of regain scale within our footprint. And, you know, it's a balancing act between prepayable debt, you know, bullet bond, as well as having liquidity to continue to kind of expand the business and take advantage of this opportunity set we see in front of us. So those are the things we're balancing. That's what we're chatting with our banks about and potential new banks to join the bank group. And we'll be kind of all part of the decision making as it relates to, you know, the size of any sort of bond deal and the like as we go out, you know, to the market here later this year.

And then just to turn to operations, obviously some contract wins on the Perlian. How should we think about the incremental EBITDA associated with those?

Yeah, the ones that we announced, both the interruptible agreement could start contributing this year. The matador contract would kind of step up next year. I think it's just call it kind of somewhere late in the second quarter, mid to late second quarter is when the incremental tech pay capacity will kind of step up. And then again, as we kind of highlighted, we do see quite a few publicly announced expansions that are up and down the corridor. Many of those are kind of late 25, early 2026 in service dates. So kind of we think we'll see the sizable step up in 25 and a lot of opportunity that we think could materially drive our 26 and beyond EBITDA.

Yeah, and Greg, as you think about between the EOG contract, that ramps up to $40 million a day. You've got the new Matador at $75 million a day. And then if you kind of exclude all the other opportunities that we're working right now, that'll get you another six, seven million bucks of revenue growth once they're fully, you know, fully ramped. And then I would just point you to our investor presentation. We kind of show you where we think Summit kind of, EBITDA at the Summit will be, you know, if you kind of fill up the free flow capacity of the pipe. So... you know, that'll get you somewhere in the mid-40s from an EBITDA relative to $30 million today.

And just the last one here, I know you've talked about potentially bringing in the JV component here for Double Eagle. Once the leverage is sort of a neutral transaction, based on where things are, you're out with today, when can you think we could possibly see that happen?

Yeah. How we model it out, Greg, I'd tell you it's probably, 26 type timeframe, right? A lot of these contracts are ramping over the next 18 to 24 months. So it's, you know, you kind of need some of that in the rear view mirror. Would we be willing to maybe see some marginal uplift in leverage if it was truly just, you know, contractual ramp issue and you knew that LTM EBITDA was going to kind of roll in? So I'd think about it, you know, 26 is timeframe. That may be another opportunity, Greg, to kind of go pop off a capital markets deal as well. But I think that's probably about right as it relates to the contract ramp and the LTM EBITDA profile of EE, how we see it today.

Got it. And just one clarification here. I believe your coupon on the 26 has stepped up by another 50 basis points as of April 1st. They did.

It's unfortunate these asset sale proceeds can't circumvent that, Greg, but I think the second lien holders got a nice win here with a major delevering and a step up in coupon.

And there's no way that's a permanent step up until you refinance.

Next year, if we catch up on ECF next year, theoretically, it could go down, Greg, but as I mentioned, I would suspect that you know, we kind of clean all this up with a refi before we get to that point anyway.

Thanks for the time, guys. I appreciate it.

Yeah, thanks for the questions, Greg.

Thanks.

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