Summit Midstream Corporation

Good day and thank you for standing by. Welcome to the third quarter of 2025 Summit Midstream Corporation 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 1-1 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 speaker today, Randall Burton, Vice President, Finance, and Treasurer. 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 summitmidstream.com. We will find it on the homepage, events and presentation section, or quarterly results section. With me today to discuss our third quarter of 2025 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 SMC's annual report on Form 10-K for the fiscal year ended December 31, 2024, which the company filed with the SEC on March 11, 2025, 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, distributable cash flow, and free cash flow. These are non-GAAP financial measures, and we have provided reconciliations to 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. Thanks, Randall, and good morning, everyone. We had a strong third quarter with continued growth across our operating footprint. Adjusted EBITDA was 65.5 million, which is more than a 7% increase from the second quarter and representing roughly 260 million of run rate EBITDA. We also generated 36.7 million of distributable cash flow and 16.7 million of free cash flow during the quarter. Operationally, we connected 21 new wells during the third quarter, and our customer base remains very active with five drilling rigs and more than 90 drilled but incomplete wells behind our systems. Additionally, volumes on the double-E pipeline continue to grow throughout the quarter, hitting new record averages of $712 million a day for the quarter and $745 million a day for the month of September. As we've disclosed in previous quarters, we continue to expect financial results to trend towards the low end of our guidance, our original 2025 adjusted EBIDA guidance range, primarily as a result of certain well connects being delayed. However, those timing delays have been short-lived as we expect to connect an additional 50 wells to the system during the fourth quarter and end the year around the midpoint of our original WellConnect guidance range of 125 to 185 wells. We expect the makeup and customer activity during the fourth quarter to drive a significant volumetric and EBITDA growth as we look ahead into 2026. And finally, we remain encouraged by the level of customer engagement and visibility in the next year's programs We're currently working with several customers on the 2026 development plans, which include more than 120 new WellConnects in the first half of 2026. As customers continue to develop their budget and development schedules for the full year, that number could increase significantly as customers begin to fill in the back half of 2026 with additional development. And with that, I'd like to turn the call over to Bill to walk through the financial and segment level details.

Thanks, Keith, and good morning, everyone. Summit reported third quarter adjusted EBITDA of $65.5 million and capital expenditures of $22.9 million, with the majority of the capital spent in the Rockies and mid-con segments related to pack connections and compressor relocations. Year-to-date capital expenditures included approximately $14 million of non-recurring integration and optimization projects. We expect these projects to be materially complete by the end of 2025. So far this year, we have successfully redeployed seven latent compressors from the Piance and two from the DJ Basin to the Arcoma and have identified an additional three units that we are actively working to relocate. While we are incurring the capital investment today, we would expect these activities to mitigate compressor lease expense and improve EBITDA margin beginning in 2026. We expect all 12 latent units being relocated to represent over $4 million in annual compressor lease expense. With respect to Summit's balance sheet, we had net debt of approximately $950 million, and our available borrowing capacity at the end of the first quarter totaled $349 million, which included $1 million of undrawn letters of credit. And now onto the segments. The Rocky segment, which is inclusive of our DJ and Williston Basin systems, generated adjusted EBITDA of $29 million, an increase of $3.8 million from the second quarter, driven by an increase in fixed fee revenue and improved product margin. Product margin benefited from increased volume throughput and stronger realized NGL and condensate pricing, partially offset by lower residue gas prices. As a reminder, the Rockies region tends to have seasonally higher residue gas prices in the fourth and first quarters each year. Natural gas volume throughput averaged 158 million cubic feet per day during the quarter, an increase of approximately 7.5% relative to the second quarter, primarily due to first half of 2025 well connections reaching peak production and increased third-party onloads. Liquids volumes averaged 72,000 barrels per day a decrease of 6,000 barrels per day relative to the second quarter, primarily due to natural production declines. We connected nine new wells in the quarter, four in the DJ and five in the Williston, and currently have three rigs running and about 75 docks behind the system. Before moving on to the other segments, Summit is disclosing some incremental information in its 10Q to further break down gathering-related fees between its liquids business and natural gas business. We think this incremental disclosure will help our investors further understand and estimate revenue contribution based on liquids and natural gas volume throughput. Please make sure to reach out to Randall or I if you have any questions. The Permian Basin segment, which includes our 70% interest in the EE pipeline, reported adjusted EBITDA of $8.7 million, an increase of $0.4 million primarily due to higher volume throughput. We continue to expect EE growth as existing take or pay contracts continue to ramp up from approximately 1.069 BCF per day on average in 2025 to 1.115 BCF per day in 2026 with an additional 100 million cubic feet per day contract from the recently announced new contract that we expect to come online in the fourth quarter of 2026. We expect EE contracted volumes to be 1.215 BCF per day in 2027, representing over 13% growth relative to 2025, which would correspond to over 40 million of EBITDA net to summit. The team continues to make good progress commercializing the remaining free flow capacity, and we'll keep you all updated as the contracts materialize. As a reminder, if Summit subscribes the full 1.5 BCF per day of free flow capacity, we would expect EE to generate approximately $50 million of EBITDA met to Summit. During the quarter, EE averaged 712 million cubic feet per day of throughput and averaged 745 million cubic feet per day during September. The peon segment reported adjusted EBITDA of 12.5 million. an increase of $2 million relative to the second quarter, due primarily to realization of previously deferred revenue and lower operating expenses, partially offset by approximately 1.5% decrease in volume throughput. The mid-com segment reported adjusted EBITDA of $23.6 million, a decrease of $1.3 million relative to the second quarter, primarily due to lower product margin, partially offset by an increase in volume throughput. The throughput increase was driven by six new wells in the Arcoma and six in the Barnett, partially offset by natural production declines. Our key customer in the Arcoma is actively running a rig to execute on its 20-well development program, which we expect to drive 5% to 10% volumetric growth in the Arcoma from 2025 to 2026. There is currently one rig running in the Arcoma and one in the Barnett with 18 ducts behind the system all of which 17 are expected to come online in 2026. And with that, I'll turn the call back over to Heath for closing remarks.

Thanks, Bill. In summary, we're pleased with our third quarter performance and the continued momentum we're seeing across the business. Volumes are growing, customers remain active, and our balance sheet is strong. We're also excited about the momentum in the business with strong third quarter results and significant expected activity in the fourth quarter and for the first half of next year. We plan to release full-year 2026 financial guidance during our fourth quarter earnings release, and we'll continue to work with customers to firm up second half of 2026 development plan. And with that, operator, I'd like to open the call for questions.

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. Again, 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. This concludes today's conference call. Thank you for participating. You may now disconnect.