Summit Midstream Corp (SMC, Financial) released its 8-K filing on November 12, 2024, detailing its financial and operational performance for the third quarter of 2024. The company, known for its strategic development and operation of midstream energy infrastructure assets in the U.S., faced a challenging quarter with a reported net loss of $197.5 million. This loss was significantly impacted by a $142.6 million non-cash income tax expense related to its C-Corp conversion.
Company Overview
Summit Midstream Corp is a value-driven corporation focused on developing, owning, and operating midstream energy infrastructure assets. These assets are strategically located in unconventional resource basins, primarily shale formations, across the continental U.S. The company operates natural gas, crude oil, and produced water gathering systems in four key basins: the Williston Basin, Denver-Julesburg Basin, Fort Worth Basin, and Piceance Basin.
Financial Performance and Challenges
Despite the net loss, Summit Midstream Corp reported an adjusted EBITDA of $45.2 million, marking a 9% increase from the previous quarter. The company also generated $22.1 million in Distributable Cash Flow (DCF) and $9.9 million in Free Cash Flow (FCF). These metrics are crucial for assessing the company's ability to generate cash sufficient to support its operations and potential dividends.
However, the company faced challenges with a 6.8% decrease in average daily natural gas throughput and a 6.7% decrease in liquids volumes compared to the second quarter of 2024. These declines were attributed to natural production declines and operational downtime, particularly in the DJ Basin.
Strategic Achievements and Operational Highlights
Summit Midstream Corp made significant strides in its corporate strategy by completing its C-Corp conversion and refinancing transactions, which simplified its corporate structure and extended debt maturities. Additionally, the company announced the acquisition of Tall Oak Midstream III in the Arkoma Basin, a move expected to enhance its growth prospects.
Heath Deneke, President, Chief Executive Officer, and Chairman, stated, "Summit’s third quarter operating and financial results were in line with management expectations, reflecting a very active quarter both corporately and operationally."
Segment Performance and Financial Metrics
The company's oil price-driven segments generated $33.3 million in combined segment adjusted EBITDA, a 9.1% increase from the previous quarter. The Rockies segment, in particular, saw an 8.7% increase in adjusted EBITDA due to improved product margins, despite a decrease in liquids volume throughput.
| Segment | Adjusted EBITDA (Q3 2024) | Adjusted EBITDA (Q2 2024) |
|---|---|---|
| Rockies | $24.9 million | $22.9 million |
| Permian | $8.5 million | $7.7 million |
| Barnett | $7.3 million | $5.4 million |
Capital and Liquidity
As of September 30, 2024, Summit Midstream Corp had $17.8 million in unrestricted cash and $150 million drawn under its $500 million ABL Revolver. The company maintained compliance with all financial covenants, with an interest coverage ratio of 2.4x and a total leverage ratio of approximately 4.58x.
Conclusion
Summit Midstream Corp's third quarter results highlight both the challenges and strategic advancements the company is navigating. While facing operational hurdles, the company's strategic initiatives, including the Tall Oak acquisition and corporate restructuring, position it for potential future growth. Investors will be keen to see how these developments impact the company's performance in the coming quarters.
Explore the complete 8-K earnings release (here) from Summit Midstream Corp for further details.
