管理層發言
Good day, and welcome to the second quarter 2026 Summit Midstream Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question, you will need to press *11 on your touch-tone telephone. Please note this call is being recorded. I would like to turn the call over to Randall Burton. Please go ahead.
Thanks, operator, and good morning, everyone. If you do not already have a copy of our earnings release, please visit our website at summitmidstream.com, where you will find it on the home page, events and presentation section, or quarterly results section. With me today to discuss our second quarter of 2026 financial and operating results is J. Heath Deneke, our President, Chief Executive Officer and Chairman, and William J. Mault, our Chief Financial Officer, along with other members of our senior management team. Before we start, I would 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 12/31/2025, which the company filed with the SEC on 03/16/2026, 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 the most directly comparable GAAP measures in our most recent earnings release. And with that, I will turn the call over to Heath.
All right. Thanks, Randall, and good morning, everyone. Summit announced strong second quarter results today, with adjusted EBITDA of $60.7 million, which is a 12% increase relative to the first quarter. The second quarter increase was driven by growth in both our Rockies and Mid‑Con segments. As we look ahead to the rest of the year, we are very encouraged with the level of activity we are experiencing across our systems and we are seeing our customers accelerate plans to bring on new wells that are expected to be turned in line toward the end of 2026. Additionally, as we will discuss further in the call, we have a lot of continued commercial momentum in the Rockies and the Permian segments as we keep securing new contracts to support very attractive, high-returning expansion projects. Touching on the second quarter a bit more, we turned in line 36 wells: 16 in the DJ and 20 in the Mid‑Con. Right after the quarter closed, we brought on another 17 wells in the Williston. We now have roughly 75 drilled and uncompleted wells across the footprint. It is exciting to see our customers responding to the higher crude price environment as we speculated could occur back in our earnings call in May. We now have a total of 8 rigs running behind our Rockies system, which, by the way, is up from 5 in the previous quarter, and 6 of those rigs are in the Williston. I would tell you that is a level we are excited about; we have not seen this in several years in the basin. Part of that activity pickup in the Williston is existing customers accelerating their programs in a stronger crude environment, but part of it is also our commercial success. As we previously announced, we secured two new gathering agreements in Divide County during the first half of the year. Both of the new customers have a rig running behind the system today. As a result, we now have visibility to approximately 30 new well connections in the Williston that were not contemplated when we set our guidance for the year. These are weighted toward the fourth quarter, so we do expect limited volume contribution in 2026, but they do position us for a very strong start as we look into 2027. In the DJ, we also see our customers ramping up plans that we expect will be a big catalyst for late 2026 and early 2027 as well. We recently signed a new 20‑year extension of a gathering and processing agreement with one of our existing anchor customers in the basin, and we are also working with other customers to potentially dedicate new acreage to our growing DJ footprint. It is really an exciting time to see this level of activity ramping up in the Rocky segment and what that means for the future. On Double E, we executed additional firm transportation agreements during the quarter, bringing total contracted volume on the pipe to just over 1.9 Bcf per day. We continue to see a tremendous amount of customer interest in the mainline expansion open season, and we have extended that open season now through the end of August as we work to finalize additional firm transportation agreements that will support the project. We expect to be in a position to make a final investment decision prior to the open season conclusion, and we will provide updates as they become available. And just to mention the Mid‑Con segment, one of the highlights there is that we are very encouraged with the performance of new wells that have recently been turned in line in an emerging dry gas region within our Arkoma footprint. This, again, is a development that could be a major catalyst for the segment in 2027 and beyond. Finally, before handing the call over to Bill, I would like to hit on guidance real quick. As we said, we have had a solid first half in the books, and we now have a far better line of sight into second half volumes than we did back in May with the activity level now accelerating across the footprint. As a result, we are tightening our full year 2026 adjusted EBITDA guidance to a range of $235 million to $255 million. We are also raising full year capital expenditure guidance to $100 million to $120 million, which is inclusive of the contributions to the Double E JV. The first driver of that capital increase is for the approximate 30 new wells that we talked about earlier in the call, which were not part of our original plan. The second driver would be the incremental capital at Double E, which is tied to the new firm transportation agreements that we executed this year. As a reminder, that Double E capital will be funded through the new term loans that we executed earlier in the year. Both of these increases in expenditures are going to be really high‑returning dollars and tied to activity that is either contracted or committed, and in both cases we see that the earning benefits will start showing up in 2027. So with that, I would like to turn the call over to Bill now to walk through the financials.
Thanks, Heath, and good morning, everyone. Summit reported 2026 adjusted EBITDA of $60.7 million, distributable cash flow of $36.8 million, and free cash flow of $9.4 million. Total capital expenditures were $25 million for the quarter, inclusive of $4.1 million of maintenance CapEx, with the majority of capital directed toward well connections in the Rockies and Mid‑Con segments. With respect to Summit's balance sheet, we ended the quarter with $21 million of unrestricted cash and $79 million drawn on our revolver, with approximately $418 million of available borrowing after accounting for $2.7 million of undrawn letters of credit. Total leverage at the end of the quarter was approximately 4.1x. The Summit Permian Transmission term loan had a balance of $350 million at quarter end and remains non‑recourse to Summit. With all the commercial progress and our expectation to reach FID in the near term, we are also working with our financial partner at Summit Permian Transmission to secure the $50 million uncommitted accordion to support the compression expansion project. During the quarter, we also began executing on the $35 million share repurchase program authorized by the Board, repurchasing approximately 35 thousand shares for $1 million. As of June 30, we had approximately $34 million of remaining capacity under the program. Now on to the segments. The Rockies segment generated adjusted EBITDA of $30.4 million, an increase of $4 million relative to the first quarter of 2026. This was driven by a 6.3% increase in liquids volume throughput and higher realized crude oil and NGL prices, partially offset by a 3% decline in natural gas volume throughput. Liquids volumes averaged 68 thousand barrels per day, and natural gas volumes averaged 162 million cubic feet per day during the quarter. Realized crude oil prices and composite NGL prices were both up approximately 30% quarter over quarter, benefiting both our customers' and Summit's earnings associated with percentage‑of‑proceeds contracts in the DJ Basin. We connected 16 wells in the DJ Basin during the quarter, and subsequent to quarter end we connected an additional 17 wells in the Williston Basin, including 9 wells for which we provide both crude oil and produced water gathering services. As a reminder, the water‑to‑crude ratio in this area of the Williston is approximately 3 barrels to 1, so these wells are extremely impactful to volume throughput. While those 9 wells are still ramping, through August to date they have averaged approximately 15 thousand barrels per day of combined crude oil and produced water throughput. We are excited about the growth trajectory of this segment, not only from the acceleration of activity, but from continued delineation and development of the remaining inventory in both Williams and Divide Counties. Additionally, in the DJ, Peoria Resources, who entered the basin acquiring Verdad earlier this year, announced the acquisition of Fundare Resources last week. Fundare is a key customer behind the Moonrise processing plant, and this transaction offers Peoria additional contiguous acreage to drill longer laterals, drive down breakevens, and fully develop the resource behind Moonrise. There are 8 rigs currently running behind the systems, 6 in the Williston and 2 in the DJ, with approximately 75 DUCs. The Permian segment reported adjusted EBITDA of $9.4 million, an increase of $600 thousand relative to the first quarter, driven by a 6.7% increase in Double E volume throughput, with Double E averaging 859 million cubic feet per day of throughput during the quarter. The Piceance segment reported adjusted EBITDA of $8.7 million, a decrease of $900 thousand relative to the first quarter, primarily due to a 5.7% decline in volume throughput driven by continued temporary shut‑ins from low regional gas prices, natural production declines, and no new well connections during the quarter. However, as of the end of July, all of the previously shut‑in production had begun flowing. Finally, the Mid‑Con segment reported adjusted EBITDA of $21.4 million, an increase of $2 million relative to the first quarter, primarily due to a 9.9% increase in natural gas volume throughput to 23 million cubic feet per day. This was driven by 17 new Barnett wells and 3 new Arkoma well connections during the quarter. These wells are either performing in line or slightly above our expectations, and we are encouraged with how long these wells are holding production before starting their initial declines. And with that, I will turn the call back over to Heath for closing remarks.
All right. Thanks, Bill. So to wrap up, we are very excited about the trajectory of the business for the remainder of 2026 and into 2027 as well. Volumes are growing and customer activity behind our systems is accelerating. As we have laid out in our recent investor presentation, the business is poised to deliver over $100 million of organic growth by 2030, which is driven primarily by the Rockies and Permian segments. All of this you can see materializing in real time when you look at the commercial success that we are having along with the development activity levels that we are experiencing. Our current focus is completing a conclusion to the Double E compression expansion open season in the coming weeks, as well as staying ahead of our customers in the Rocky segment with our well‑connect programs that will enable our customers to potentially further accelerate their development activity. On the corporate front, we continue to make progress toward achieving our 3.5x leverage target and making our goal of resuming a common dividend in the near future a reality. We think the combination of Summit's robust growth outlook, our current and projected high free cash flow yield, our improving balance sheet, and our current valuation all provide a very clear and compelling value proposition for new and existing investors in Summit. So with that, I would like to thank everyone for joining the call and look forward to answering your questions. Operator, please open the call for questions.
分析師問答
Thank you. As a reminder, if you would like to ask a question, please *11. If your question has been answered and you would like to remove yourself from the queue, press *11 again. Our first question comes from Mark Reichman with NOBLE Capital Markets. Your line is open.
Thank you. How much incremental adjusted EBITDA could the 30 new Williston well connections contribute in 2027, and how should we think about the broader growth opportunity in the basin beyond those wells?
Yeah. Good morning, Mark. Thanks for joining. So the 30 incremental wells we are talking about, Mark, I would view that as somewhere around $10 million kind of EBITDA contribution just from that development. Now, obviously, those 30 wells are coming online, call it late Q4, early Q1. We would expect additional activity to transpire for the remainder of 2027 in the Williston. It is a little early relative to producer guidance, but if you just think about that 15 thousand barrel a day increase from the 9 crude and water wells, you know, we are talking about sizable volumetric growth relative to kind of a print this quarter on liquids volume. We have talked about some of that volumetric sense in our investor deck. I think what we are seeing is we are trending toward that higher end of the percent‑kind‑of volumetric growth under this type of cadence.
Then Mark, just one of the thoughts I would add there is, when you think about the producers behind these new wells, we signed, what, 240 thousand acres worth of new dedications to the system in the first half of the year, and a lot of their plans were developed off of a crude strip that was materially below where we are now. So I think, if crude holds kind of in the current range that we are in now, I would actually expect to probably see some additional acceleration, maybe additional rigs being added on the acreage position. We think we have a lot of upside. Given our positioning in Divide and Northern Williams County, I think we have additional targets out there and we may be able to bolt on some additional customers as well. So pretty exciting growth up here in the Williston. Good to see on our system.
That is very helpful. Now what remaining commercial commitments are necessary to reach FID on the Double E compression expansion? I am looking at that slide in your slide deck on page 7 where you step through the volumes and the financial contribution. Maybe you could say a little bit about that and maybe the incremental EBITDA that you expect if the project proceeds.
This is Christopher Tennant. I appreciate the question. We are putting the final touches on two TPA agreements right now that will push us over the FID hurdle here in the next couple of weeks. The FID case will give us right at a sub‑6x build multiple. The asset is in a great position, and we feel very confident about fully contracting it. As we contract the remaining capacity, we expect that build multiple will go to a 3x or lower build multiple.
So we are really excited about that and feel very confident in our contracting and the position around Double E. Mark, to bridge the gap on the page you are looking at in the investor deck, we are showing kind of $70 million of existing contracts and then with compression, $90 plus million of EBITDA. Think about that FID case being somewhere kind of in between those, to get a baseline economics for us to make the decision to FID. Our goal and expectation would be to fully commercialize the remaining capacity by the end of the year.
Okay. That is really helpful. And then with the Piceance MVCs shortfall payments expiring at the end of the third quarter, how should we think about the segment's normalized EBITDA beginning in the fourth quarter and into 2027? I was wondering if the return of the previously shut‑in production and future drilling might offset the loss of the MVC‑related earnings, or should we expect a step down in cash flow?
Yeah, Mark, you should expect a step down in cash flow starting in the fourth quarter. To provide some high‑level numbers, think of that as roughly $4 million of shortfall payments a quarter. So the segment did around $8.5 to $8.6 million this quarter, so you are somewhere around $4 million to $4.5 million of flowing EBITDA, which will give you a good run rate for 2027. Longer term, in our long‑term outlook — the $100 million of EBITDA growth through 2030 — we are really not expecting any development in the Piceance in that forecast. I do think that is conservative. There are things like the data center buildout in that entire Rockies area, as well as Canadian LNG; we really need some gas demand to offset some of the Canadian associated gas that is flooding the market in which these producers sell into. On the residue gas side, there is a lot of upside, but we are not banking on it in our long‑term outlook. We do think we are being a bit conservative long term from that perspective.
And then on the adjusted EBITDA guide — the first half was $115 million, and you narrowed your guidance. The midpoint remains at about $245 million. What could drive results toward the upper end of the range or even the lower end of the range? It is a pretty tight range.
Yeah, Mark, this is Heath. I think we are kind of at the midpoint plus in terms of how things are set up right now. The low end would require a pretty dramatic drop in commodity values. Most of the activity, even third quarter activity, has already been turned online or is about to be turned in line, and the fourth quarter wells are really slanted more toward December than early in the quarter. Activity‑wise, I think we are pretty nailed down here. If we had significant underperformance of wells, that might skew the numbers down a little, but I think we have upside beyond the midpoint that probably more than offsets any downside risk in my view. So lots of good momentum here.
Yeah. I was glad to see the rebound in the Mid‑Con compared to the first quarter of this year. A quick follow up: how do you rank debt reduction, organic growth, buybacks/share repurchases, and potential reinstatement of the common dividend when thinking about allocating incremental free cash flow? I know your longer‑term leverage target is 3.5x; you were at 4.1x at quarter end. What might be your medium‑term leverage target?
Yeah. I think you actually got the order correct. Getting to our leverage target is first. We continue to feel really good about the path; if the momentum picks up or continues like what we are seeing now, I think in 2027 we could potentially get there, and somewhere in the next 12 to 18 months is not an unreasonable assumption. There are a few catalysts that could even accelerate that. We do have a lot of growth opportunity; with Double E there is a ton of growth but that capital is already spoken for in a term loan. So I do not expect to see a big ramp up in our base business or non‑Double E capital — it will probably hang in around the $50 million‑ish mark. We are going to see some continued high free cash flow and continue to pay down debt, and we are eager to get a return of capital program underway. So we are definitely focused on it.
And Mark, if you think about it, we think the stock is undervalued, particularly when you take into context trading multiples relative to our peers. The balancing act here is that scale, getting leverage to our target, and turning on dividend policy are more meaningful ways to bridge that value gap versus just buying back stock out of the market. The buyback program is given some of the float and liquidity more to help support in downside days. For example, when there was volatility in the energy sector related to the Iran conflict resolution a month or so ago, we put that buyback program to work to help support the stock and provide some liquidity to investors.
Mark, just to make sure I was clear — I said 2028 earlier, but what I meant was the next 12 to 18 months. So think about toward mid‑2027 to first half of 2028 as when we expect to get there.
Okay. That is very helpful. Well, thank you very much. I really appreciate it.
Our next question comes from Jason Gabelman with TD Cowen. Your line is open.
Yes. Hey, thanks for taking my questions. First, on the full year EBITDA guide, I am wondering if the second half guide contemplates any of the commodity strength we have seen in the first half of the year?
Good question, Jason. Think about it as roughly the seventies on crude and kind of a normalized NGL. We tend to update with strip, but if we are continuing to see pressure on crude to the upside, that is another example of what could push us toward the higher end of the tightened range.
Got it. And then going back to the Bakken and it is encouraging to see the additional rigs being added to your acreage. Do you have a sense of your producer customers' sensitivity to commodity prices? If oil prices trend back down to $70 to $75, would you expect to sustain the same amount of rig activity?
I do not think $70 to $75 really moves the needle from a development perspective. Our team does a lot of work on half‑cycle returns. We are talking 20% to 30% returns that we think are doable in the mid to high fifties to maybe low sixties for that acreage. A lot of what they are doing up there are three‑mile laterals, so they are getting improved efficiencies on breakevens and D&C costs, which is enabling the acreage and probably the biggest change over the past three to four years.
And then maybe one follow‑up on the M&A landscape. Curious about bolt‑on opportunities, particularly in the Rockies region, the DJ and the Bakken.
A general comment on M&A: we have a lot of organic growth ahead, and we are mindful of achieving our leverage target. We have seen some M&A get a little frothy. We participated in some processes and stayed disciplined, letting some assets go that we would have liked to have. Given our portfolio and how many adjacent systems we touch that are owned by private sponsors who may be looking to divest, I think it is inevitable we will find a good deal opportunistically. But frankly, we are probably more excited about the organic growth profile at Double E and some additional organic opportunities we are developing that provide growth beyond our longer‑term outlook.
You bet. Thank you. Thanks for the questions.
Thank you for your participation. This does conclude the question and answer session, and you may now disconnect. Everyone, have a great day.