Summit Midstream Partners Q3 2025 Earnings Call Transcript

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November 11, 2025

Key Takeaways

  • Positive Sentiment: Strong third-quarter results with $65.5 million adjusted EBITDA (up >7% sequentially), roughly $260 million run-rate EBITDA, $36.7 million of distributable cash flow and $16.7 million of free cash flow.
  • Positive Sentiment: Operational momentum — the company connected 21 wells in Q3, expects ~50 additional connects in Q4 and to finish 2025 near the midpoint of the original 125–185 well guidance, while customers currently plan for >120 well connects in H1 2026.
  • Positive Sentiment: Double E Pipeline throughput hit record averages (712 mmcfd in Q3, 745 mmcfd in September); management expects contracted volumes to ramp to 1.115 Bcf/d in 2026 and 1.215 Bcf/d in 2027, which management says could drive >$40 million of Summit EBITDA (up to ~$50M if fully commercialized).
  • Positive Sentiment: Capital redeployment and cost savings — $22.9 million of Q3 capex included relocating latent compressors (7 from Piceance, 2 from DJ, 3 more targeted), actions expected to reduce >$4 million of annual compressor lease expense and improve EBITDA margins beginning in 2026; ~$14 million of non‑recurring integration work to be largely complete by year-end.
  • Negative Sentiment: Balance sheet and near-term guidance risk — net debt of approximately $950 million with $349 million of available borrowing capacity, and management cautioned 2025 results trended toward the low end of original guidance due to well-connect timing delays.
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Earnings Conference Call
Summit Midstream Partners Q3 2025
00:00 / 00:00

Transcript Sections

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Operator

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 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 speaker today, Randall Burton, Vice President, Finance and Treasurer. Please go ahead.

Randall Burton
Director of Finance, Treasurer and Investor Relations at Summit Midstream Corporation

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, where you'll 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 Mault, 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.

Randall Burton
Director of Finance, Treasurer and Investor Relations at Summit Midstream Corporation

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 the most directly comparable GAAP measures in our most recent earnings release. With that, I'll turn the call over to Heath.

Heath Deneke
President, CEO and Chairman at Summit Midstream Corporation

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 uncompleted 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.

Heath Deneke
President, CEO and Chairman at Summit Midstream Corporation

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 EBITDA 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 well connect guidance range of 125-185 wells. We expect the makeup in customer activity during the fourth quarter to drive a significant volume metric in EBITDA growth as we look ahead into 2026. Finally, we remain encouraged by the level of customer engagement and visibility into next year's programs. We're currently working with several customers on their 2026 development plans, which include more than 120 new well connects in the first half of 2026.

Heath Deneke
President, CEO and Chairman at Summit Midstream Corporation

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. With that, I'd like to turn the call over to Bill to walk through the financial and segment-level details.

Bill Mault
EVP and CFO at Summit Midstream Corporation

Thanks, Heath, 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 Midtown segments related to pad 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 Piceance and two from the DJ (Denver-Julesburg Basin to the Arkoma, 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.

Bill Mault
EVP and CFO at Summit Midstream Corporation

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. Now on to the segments. The Rockies 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.

Bill Mault
EVP and CFO at Summit Midstream Corporation

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 10-Q 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.

Bill Mault
EVP and CFO at Summit Midstream Corporation

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 Double E Pipeline, reported adjusted EBITDA of $8.7 million, an increase of $0.4 million, primarily due to higher volume throughput. We continue to expect Double E 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 Double E 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.

Bill Mault
EVP and CFO at Summit Midstream Corporation

The team continues to make good progress commercializing the remaining free flow capacity, and we will keep you all updated as the contracts materialize. As a reminder, if Summit subscribes to the full 1.5 BCF per day of free flow capacity, we would expect Double E to generate approximately $50 million of EBITDA net to Summit. During the quarter, Double E averaged 712 million cubic feet per day of throughput and averaged 745 million cubic feet per day during September. The Piceance 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.

Bill Mault
EVP and CFO at Summit Midstream Corporation

The Midtown 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 Arkoma and six in the Barnett, partially offset by natural production declines. Our key customer in the Arkoma is actively running a rig to execute on its 20-well development program, which we expect to drive 5-10% volumetric growth in the Arkoma from 2025 to 2026. There is currently one rig running in the Arkoma and one in the Barnett, with 18 docks behind the system, of which 17 are expected to come online in 2026. With that, I'll turn the call back over to Heath for closing remarks.

Heath Deneke
President, CEO and Chairman at Summit Midstream Corporation

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 the second half of 2026 development plan. With that, operator, I'd like to open the call for questions.

Operator

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.

Analysts
    • Heath Deneke
      President, CEO and Chairman at Summit Midstream Corporation
    • Randall Burton
      Director of Finance, Treasurer and Investor Relations at Summit Midstream Corporation
    • Bill Mault
      EVP and CFO at Summit Midstream Corporation
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