Summit Midstream Corporation ((SMC)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Summit Midstream Corporation’s recent earnings call revealed a mixed sentiment among stakeholders. The company celebrated significant achievements, such as the extension of gathering agreements and inclusion in major indices, which were overshadowed by challenges including below-expectation adjusted EBITDA and deferred development by customers. Despite these setbacks, the financial outlook remains cautiously optimistic.
10-Year Extension of Gathering Agreements
Summit Midstream Corporation announced a new 10-year extension of certain gathering agreements with a key customer in the Williston Basin. This strategic move increased the weighted average contract life from four to eight years, providing greater stability and predictability for the company’s future operations.
Addition to Russell Indices
The company’s inclusion in the Russell 3000, Russell 2000, and Russell Microcap indices marks a significant milestone. This achievement enhances Summit’s visibility among institutional investors and broadens its shareholder base, potentially leading to increased market interest and investment.
New 10-Year Precedent Agreement in Permian
Summit has signed a new 10-year precedent agreement for 100 million a day of firm capacity on Double E, contingent on the customer’s final investment decision to build a new plant. This agreement underscores Summit’s commitment to expanding its footprint in the Permian Basin and securing long-term growth.
Volume Growth in Rockies Segment
Following the acquisition of Moonrise Midstream, the Rockies segment experienced a 5.4% increase in liquids volume throughput and a 14% increase in natural gas volume throughput. This growth highlights the successful integration of the acquisition and the potential for further expansion in the region.
Incremental Development in Arkoma
An anchor customer is preparing a 20-well development program in the Arkoma, set to begin in the fourth quarter and continue through mid-2026. This development is expected to drive significant growth and enhance Summit’s operational capabilities in the region.
Adjusted EBITDA Below Expectations
Summit reported a second-quarter adjusted EBITDA of $61 million, falling short of expectations. This shortfall was attributed to the underperformance of some wells in the DJ Basin, delays in well completions, and lower realized commodity prices, highlighting the challenges faced in the current market environment.
Deferral of Development by Customers
The deferral of development by some customers, due to a drop in crude prices earlier this year, has impacted Summit’s financial outlook for the year. This deferral underscores the volatility and unpredictability of the energy market.
Higher Operating and G&A Expenses in Rockies
Operating and general and administrative expenses in the Rockies segment increased by approximately $4.5 million. This rise was partly due to the Moonrise Midstream acquisition and onetime costs, reflecting the financial implications of strategic acquisitions.
Decrease in Piceance Segment EBITDA
The Piceance segment recorded a decrease in adjusted EBITDA of $1.3 million relative to the first quarter. This decline was primarily due to higher operating expenses and a 1.1% decrease in volume throughput, indicating operational challenges in the segment.
Forward-Looking Guidance
Summit Midstream Corporation remains optimistic about future volume recovery and development opportunities in 2026. The company is particularly focused on a significant program in the Arkoma and new agreements in the Permian, which are expected to drive growth and enhance operational performance.
In summary, Summit Midstream Corporation’s earnings call highlighted a mixed sentiment with both achievements and challenges. While the company celebrated strategic extensions and index inclusions, it faced hurdles with adjusted EBITDA and customer development deferrals. Looking ahead, Summit remains cautiously optimistic about future growth opportunities and operational improvements.