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Summit Midstream Partners, LP Reports Second Quarter 2020 Financial and Operating Results

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HOUSTON, Aug. 7, 2020 /PRNewswire/ -- Summit Midstream Partners, LP (NYSE:SMLP) announced today its financial and operating results for the three months ended June 30, 2020, including net income of $56.7 million, adjusted EBITDA of $64.6 million and DCF of $42.7 million.  Net income included a $54.2 million gain from early extinguishment of debt as a result of SMLP's open market repurchases of senior unsecured notes at discounts to par value.  Operated natural gas volume throughput averaged 1,391 MMcf/d and liquids volume throughput averaged 76 Mbbl/d for the quarter.  Increased quarterly operated natural gas volume throughput was primarily driven by seven wells that came online in March 2020 in the Utica Shale segment, which included a five-well pad site which generated aggregate production rates in excess of 160 MMcf/d for the majority of the quarter as well as six wells turned-in-line upstream of the TPL-7 Connector pipeline.  Liquids volume throughput was adversely impacted by approximately 14 Mbbl/d of temporary production shut-ins.  Although producers are starting to return previously shut-in wells to service, incremental volumes from previously curtailed production are expected to be moderate in the near-term.

Heath Deneke, President, Chief Executive Officer and Chairman, commented, "Our industry continued to face a number of headwinds in the second quarter of 2020, with oil prices briefly turning negative for the first time in history, the commencement of temporary production shut-ins, deferred drilling and completion activities, upstream bankruptcy filings and impacts from the ongoing COVID-19 pandemic.  With this backdrop, we experienced quarter-over-quarter volume throughput declines across all our segments except for our Utica Shale segment, which increased by approximately 87.4% relative to the first quarter of 2020, mainly due to the outperformance of new wells connected in March.  We began to experience production curtailments from certain customers, predominantly in our liquids-focused basins during the first two months of the quarter; however, with the improvement and relative stabilization of crude oil prices in the $40 per barrel area, some shut-in wells started to come back online late in the quarter.  We also recently amended two gathering contracts with key Williston Basin customers that we expect to become effective in the third quarter of 2020.  Although the specific terms of each customer contract differ, both amendments extended the term of the gathering agreement acreage dedication in exchange for a modest gathering fee concession.    In June, we experienced production shut-ins on certain pads in our Utica Shale segment that we expect will continue through late into the fourth quarter of 2020, when natural gas prices are expected to increase and our customers can capture better margins.  These shut-ins were unexpected and included the five-well pad that had outperformed expectations early in the second quarter.  In light of these actions, on July 23, 2020, we revised our full year 2020 adjusted EBITDA guidance range to $250 million to $260 million, which is down marginally from our previous guidance of the low end of our $260 million to $285 million guidance range that was disclosed in May."

"We remain committed to strengthening the balance sheet, enhancing financial flexibility and focusing on initiatives that are within our control, such as maintaining a lean cost structure, employing capital discipline and operating safely and responsibly.  The GP Buy-In transaction represented a major step forward in our comprehensive liability management strategy, and was an important step in our ongoing initiative to strengthen the balance sheet because it facilitated the reallocation of $76 million per year of cash from equity distributions to de-leveraging initiatives, while providing the flexibility to continue optimizing our capital structure in a manner that is fully aligned with the interests of our public common unitholders.  Immediately after closing the GP Buy-In transaction on May 28, 2020, we began repurchasing our senior notes in the open market.  Our debt repurchase initiative has been successful in a relatively short timeframe, and we have repurchased $137.9 million of face value of aggregate senior notes at a weighted average discount of 42% as of August 6, 2020.  In addition, on June 18, 2020, we launched an offer to exchange our Series A Preferred Units ("Preferred Units") for common units (the "Exchange Offer") because there was an opportunity to structure a transaction that could provide value across SMLP's capital structure.  Upon closing the Exchange Offer, we retired $62.8 million face value of Preferred Units, representing 21% of the initial 300,000 preferred units outstanding, at an 84% discount to face value based on the $0.80 SMLP common unit closing price on July 31, 2020.  We provided value to our common unitholders by retiring Preferred Units below face value and afforded participating Preferred Unit holders enhanced liquidity via our common units, all while preserving cash for other strategic initiatives, since only common units were offered as consideration.  We expect to continue to employ our comprehensive liability management strategy over the coming quarters and will consider the entire gamut of options available to us.  We plan on working with our revolving credit facility lenders to develop the tools and flexibility needed to reposition the balance sheet and we will continue to focus on potential asset divestitures and joint ventures of certain of our Legacy and Core Focus Areas.  I'm proud of the progress our team has made on enhancing our balance sheet to date; however, there are still many remaining opportunities to pursue."

"There have been several positive developments regarding the Double E Pipeline project, which represents a critical infrastructure need for the northern Delaware Basin.  We have been pursuing opportunities to reduce costs without sacrificing quality, safety or timeline of the project, and I'm pleased to announce that we have locked-in approximately 80% of expected development capital expenditures, which includes pipe costs, pipeline construction and substantially all of the privately-owned rights-of-way.  We now expect SMLP's 70% aggregate share of the Double E Pipeline project development capital to be $315 million, which is an approximate 10% reduction relative to the original $350 million expectation that was developed at FID in June 2019.  We continue to progress third party financing options for the majority of SMLP's remaining share of capital expenditures and expect to finalize an agreement in the third quarter of 2020 in connection with the receipt of our FERC 7(c) certificate.  Utilizing third-party capital to finance Double E will allow SMLP to retain cash for other strategic initiatives, including continued debt reduction and repositioning of SMLP's balance sheet."

Reaffirming 2020 Financial Guidance

SMLP is reaffirming its updated 2020 financial guidance provided on July 23, 2020.  Projections associated with this guidance are subject to risks and uncertainties as described in the "Forward-Looking Statements" section at the end of this release.

2020 Financial Guidance

  • 2020 adjusted EBITDA of $250 million to $260 million;
  • 2020 total capital expenditures of $30 million to $50 million, which includes approximately $10 million to $20 million related to our equity investment in Double E.

2020 adjusted EBITDA guidance of $250 million to $260 million incorporates impacts primarily from production shut-ins and two amended gathering contracts with Williston customers that are expected to become effective in the third quarter of 2020 and have moderately lower gathering rates and extended terms.  Customers in our Williston Basin and DJ Basin reportable segments have been slower to bring curtailed production back online than initially anticipated and we are expecting prolonged production shut-ins and a deferral of well completions in these areas for the second half of 2020.  Financial guidance also includes the impacts of well shut-ins in the Utica Shale segment through late into the fourth quarter 2020 and sustained shut-ins of condensate and wet gas volumes on Ohio Gathering, which had approximately 70 MMcf/d of gross volumes curtailed as of the end of the second quarter.

SMLP's total 2020 capital expenditures guidance range of $30 million to $50 million remains unchanged relative to the guidance released on May 3, 2020; however, the range of estimates related to SMLP's equity investment in Double E was increased by $10 million to accommodate additional capital commitments from SMLP to Double E due to a potential delay to receiving the FERC 7(c) certificate and closing of third-party financing to the fourth quarter of 2020.

GP Buy-In Financial Statement Recast

In the second quarter of 2020, SMLP completed its previously announced GP Buy-In transaction with Summit Midstream Partners, LLC ("Summit Investments").  For GAAP purposes, the GP Buy-In was a transaction between entities under common control with a change in reporting entity and as a result, SMLP's historical financial results contained in this press release have been recast for the period the entities were under common control by Summit Investments. Although SMLP is the surviving entity for legal purposes, Summit Investments is the surviving entity for accounting purposes; therefore, the historical financial results of SMLP prior to the GP Buy-In presented in this press release are those of Summit Investments.

Second Quarter 2020 Business Highlights

In the second quarter of 2020, SMLP's average daily natural gas throughput for its operated systems increased 8.6% relative to the first quarter of 2020, to 1,391 MMcf/d, and liquids volumes decreased 22.4% relative to the first quarter of 2020, to 76 Mbbl/d.  SMLP's customers currently have approximately 66 DUCs in inventory and 14 wells that have been completed but not turned-in-line upstream of its systems.

Core Focus Areas:

  • Core Focus Areas generated combined quarterly segment adjusted EBITDA of $37.1 million and had combined capital expenditures of $6.8 million.
  • Utica Shale segment adjusted EBITDA totaled $10.7 million, a $4.8 million increase from the first quarter of 2020, which was driven by an 87.4% increase in volume throughput. Volume throughput was higher in the second quarter of 2020 as a result of seven new wells connected in March 2020, including a five-well pad that averaged more than 160 MMcf/d for the majority of the quarter, as well as six wells that were turned-in-line during the quarter behind the TPL-7 Connector pipeline. Volume throughput was partially offset by two pads that were shut-in in mid-June, which accounted for a decrease in average daily volume throughput of approximately 24 MMcf/d for the quarter. We expect these two pads to remain shut-in until late in the fourth quarter of 2020 based on guidance from our customers. Subsequent to June 30, 2020 we also executed an amendment to a gathering agreement that will incentivize drilling behind our SMU system, resulting in additional expected well activity in 2021 and 2022.
  • Ohio Gathering segment adjusted EBITDA totaled $7.5 million, a 5.4% decrease from the first quarter of 2020. Lower segment adjusted EBITDA was driven by an 11.5% decrease in volume throughput due to production shut-ins, which accounted for an average of approximately 70 MMcf/d of gross volumes for the quarter, and natural production declines, partially offset by six new wells that were connected in the condensate window in May 2020 and lower operating expenses.
  • Williston Basin segment adjusted EBITDA totaled $12.7 million in the second quarter of 2020, a 21.4% decrease from the first quarter of 2020, primarily due to a 22.4% quarter-over-quarter decrease in liquids volume throughput to 76 Mbbl/d and higher than expected non-recurring maintenance expenses. This volume throughput decrease was driven largely by several production shut-ins across multiple customers, which accounted for a loss of approximately 14 Mbbl/d in liquids volume throughput for the quarter, and natural production declines. There are approximately 24 DUCs in inventory and 8 wells that have been completed, but not yet turned to production behind our Williston Basin systems. We expect the cadence of future well connections to be highly dependent on prevailing commodity prices, in-basin differentials and the regulatory environment.
  • DJ Basin segment adjusted EBITDA totaled $4.3 million in the second quarter of 2020, a 26.6% decrease from the first quarter of 2020, due to a 37.5% quarter-over-quarter decrease in total throughput to 20 MMcf/d. The volume throughput decrease was largely a result of production shut-ins representing an average of approximately 9 MMcf/d during the quarter and planned maintenance which took our Hereford Plant offline for four days during the quarter, partially offset by seven new well connections. We expect continued deferrals of well connections in the near-term and our customers currently have 13 wells in DUC inventory and 6 completed wells that have not yet been turned-in-line behind our DJ Basin system. Volume throughput on the DJ Basin system for the month of July averaged 25 MMcf/d, as our customers have consistently reversed well shut-in activities that impacted us in the second quarter of 2020.
  • Permian Basin segment adjusted EBITDA totaled a quarterly record of $1.8 million in the second quarter of 2020, an increase of approximately 15.6% relative to the prior quarter largely driven by margin mix and improvements in natural gas and NGL pricing. Although average second quarter volume throughput of 32 MMcf/d was relatively comparable to the first quarter, volumes steadily improved over the second quarter and average volume throughput for June was approximately 37 MMcf/d. This ramp in volume throughput was a result of a limited number of shut-ins that occurred in the early part of the second quarter and an increase of approximately 9 MMcf/d starting in May, when a contract extension became effective. Overall, our outlook for our Permian Basin segment remains unchanged relative to our original 2020 financial guidance.

Legacy Areas:

  • Legacy Areas generated $35.1 million of combined segment adjusted EBITDA in the second quarter of 2020 and had combined capital expenditures of $0.3 million.
  • Piceance Basin segment adjusted EBITDA of $21.7 million decreased by $1.8 million from the first quarter of 2020 due to lower volume throughput of 4.2%, which was primarily driven by the impact of natural production declines.
  • Barnett Shale segment adjusted EBITDA decreased by $0.2 million from the first quarter of 2020 to $8.5 million, as a result of a decline in volume throughput. Increased volumes from workovers of existing wells behind the DFW Midstream system partially mitigated natural production declines.
  • Marcellus Shale segment adjusted EBITDA of $4.9 million decreased by 8.1% compared to the first quarter of 2020 due to a 7.0% decrease in volume throughput to 339 MMcf/d. Our anchor customer did not connect any new wells and had 18 DUCs in inventory at the end of the second quarter; however, 9 of those wells were connected to our Mountaineer Midstream system in July and spot rate volumes have recently been averaging in excess of 400 MMcf/d.

The following table presents average daily throughput by reportable segment for the periods indicated:


Three months ended June 30,



Six months ended June 30,



2020



2019



2020



2019


Average daily throughput (MMcf/d):
















Utica Shale


416




260




319




273


Williston Basin (1)


14




11




14




13


DJ Basin


20




20




26




21


Permian Basin


32




17




33




16


Piceance Basin (2)


367




462




375




473


Barnett Shale


203




251




218




260


Marcellus Shale


339




347




351




363


Aggregate average daily throughput


1,391




1,368




1,336




1,419


















Average daily throughput (Mbbl/d):
















Williston Basin


76




94




87




99


Aggregate average daily throughput


76




94




87




99


















Ohio Gathering average daily throughput (MMcf/d) (3)


540




713




575




712


__________

(1)

The Williston Basin segment includes the Tioga Midstream system, which was sold in March 2019.

(2)

The Piceance Basin segment includes the RRG West system, which was sold in December 2019.

(3)

Gross basis, represents 100% of volume throughput for Ohio Gathering, subject to a one-month lag.

The following table presents adjusted EBITDA by reportable segment for the periods indicated:


Three months ended June 30,



Six months ended June 30,



2020



2019



2020



2019



(In thousands)


Reportable segment adjusted EBITDA (1):
















Utica Shale

$

10,693



$

6,640



$

16,621



$

12,833


Ohio Gathering (2)


7,514




9,939




15,453




19,149


Williston Basin (3)


12,727




16,650




28,919




35,384


DJ Basin


4,339




2,816




10,250




5,489


Permian Basin


1,828




(656)




3,409




(1,206)


Piceance Basin (4)


21,734




24,584




45,291




50,583


Barnett Shale


8,510




11,208




17,270




22,582


Marcellus Shale


4,888




4,635




10,208




9,777


Total

$

72,233



$

75,816



$

147,421



$

154,591


Less:  Corporate and Other (5)


7,643




8,256




16,927




20,173


Adjusted EBITDA

$

64,590



$

67,560



$

130,494



$

134,418


__________

(1)

We define segment adjusted EBITDA as total revenues less total costs and expenses, plus (i) other income excluding interest income, (ii) our proportional adjusted EBITDA for equity method investees, (iii) depreciation and amortization, (iv) adjustments related to MVC shortfall payments, (v) adjustments related to capital reimbursement activity, (vi) unit-based and noncash compensation, (vii) impairments and (viii) other noncash expenses or losses, less other noncash income or gains.

(2)

Represents our proportional share of adjusted EBITDA for Ohio Gathering, subject to a one-month lag.  We define proportional adjusted EBITDA for our equity method investees as the product of (i) total revenues less total expenses, excluding impairments and other noncash income or expense items and (ii) amortization for deferred contract costs; multiplied by our ownership interest in Ohio Gathering during the respective period.

(3)

The Williston Basin segment includes the Tioga Midstream system, which was sold in March 2019.

(4)

The Piceance Basin segment includes the RRG West system, which was sold in December 2019.

(5)

Corporate and Other represents those results that are not specifically attributable to a reportable segment (such as Double E) or that have not been allocated to our reportable segments, including certain general and administrative expense items  and natural gas and crude oil marketing services.

Capital Expenditures

Capital expenditures totaled $8.8 million in the second quarter of 2020, including maintenance capital expenditures of $2.4 million, a decrease of 52.4% compared to the first quarter of 2020.  Capital expenditures in the second quarter of 2020 were primarily related to growth projects in our Williston Basin, DJ Basin and Permian Basin segments.   



Six months ended June 30,




2020



2019




(In thousands)


Cash paid for capital expenditures (1):









Utica Shale


$

1,482



$

1,065


Williston Basin



7,423




14,230


DJ Basin



8,428




50,373


Permian Basin



4,921




28,163


Piceance Basin



404




1,497


Barnett Shale (2)



869




(37)


Marcellus Shale



430




108


Total reportable segment capital expenditures



23,957




95,399


Corporate and Other (3)



3,469




15,693


Total cash paid for capital expenditures


$

27,426



$

111,092


__________

(1)

Excludes cash paid for capital expenditures by Ohio Gathering and Double E (after June 2019) due to equity method accounting.

(2)

For the six months ended June 30, 2019, the amount includes sales tax reimbursements of $1.1 million. 

(3)

For the six months ended June 30, 2019, and through the formation date of the Double E joint venture in June 2019, reflects 100% of the capital expenditures associated with Double E and excludes capital contributions made by our JV partner.

Capital & Liquidity

As of June 30, 2020, SMLP had $512.9 million of undrawn commitments under its $1.25 billion revolving credit facility.  Subject to covenant limits, and after accounting for a $4.1 million issued but undrawn letter of credit, our available borrowing capacity at June 30, 2020 was approximately $191 million.

Based upon the terms of SMLP's revolving credit facility and total outstanding debt, net of cash, of $1.4 billion (inclusive of $668.0 million of senior unsecured notes), SMLP's total leverage ratio and senior secured leverage ratio (as defined in the credit agreement) as of June 30, 2020, were 4.9 to 1.0 and 2.5 to 1.0, respectively, relative to maximum threshold limits of 5.50 to 1.0 and 3.75 to 1.0.

Double E Update

During the second quarter of 2020, SMLP made cash investments totaling $21.7 million with respect to its 70% equity investment in Double E Pipeline, LLC.  As of June 30, 2020, the full $80 million commitment of the Subsidiary Series A Preferred Units had been issued.  The estimated cost to complete the Double E Pipeline Project has decreased by approximately $50 million to $450 million as a result of locking in privately-owned rights-of-way, pipe costs and construction costs that are lower than the original budgeted amounts set at FID in June 2019.  Accordingly, SMLP's 70% share is now approximately $315 million, of which approximately $114 million, including the Subsidiary Series A Preferred Units, has been funded as of June 30, 2020.  SMLP continues to actively pursue third party financing alternatives to fund the substantial majority of SMLP's remaining Double E capital obligations and expects to have third-party financing secured by the end of the third quarter 2020, concurrently with our receipt of the FERC 7 (c) certificate.  A successful financing would defer to 2021 or potentially eliminate any additional SMLP investment beyond the approximately $10 million to $20 million expected in 2020.  We continue to expect to receive a FERC 7(c) certificate for Double E in the third quarter of 2020.

MVC Shortfall Payments

SMLP billed its customers $12.7 million in the second quarter of 2020 related to MVC shortfalls.  For those customers that do not have MVC shortfall credit banking mechanisms in their gathering agreements, the MVC shortfall payments are accounted for as gathering revenue in the period in which they are earned.  In the second quarter of 2020, SMLP recognized $12.7 million of gathering revenue associated with MVC shortfall payments.  SMLP also recognized $2.3 million of adjustments to MVC shortfall payments in the second quarter of 2020 related to shortfall payment adjustments from customers in the Williston Basin segment and the Piceance Basin segment.  SMLP's MVC shortfall payment mechanisms contributed $15.0 million of total adjusted EBITDA in the second quarter of 2020.


Three months ended June 30, 2020



MVC Billings




Gathering

revenue



Adjustments

to MVC

shortfall

payments



Net impact to

adjusted

EBITDA



(In thousands)


Net change in deferred revenue related to MVC shortfall payments:

















Piceance Basin

$

3,419




$

3,419



$



$

3,419


Total net change

$

3,419




$

3,419



$



$

3,419



















MVC shortfall payment adjustments:

















Williston Basin

$

1,091




$

1,091



$

2,124



$

3,215


Piceance Basin


6,935





6,935




167




7,102


Marcellus Shale


1,258





1,258







1,258


Total MVC shortfall payment adjustments

$

9,284




$

9,284



$

2,291



$

11,575



















Total (1)

$

12,703




$

12,703



$

2,291



$

14,994


__________

(1) Exclusive of Ohio Gathering due to equity method accounting.

 


Six months ended June 30, 2020



MVC Billings




Gathering

revenue



Adjustments

to MVC

shortfall

payments



Net impact to

adjusted

EBITDA



(In thousands)


Net change in deferred revenue related to MVC shortfall payments:

















Piceance Basin

$

7,077




$

7,077



$



$

7,077


Total net change

$

7,077




$

7,077



$



$

7,077



















MVC shortfall payment adjustments:

















Williston Basin

$

2,093




$

9,883



$

(3,541)



$

6,342


Piceance Basin


13,891





13,786




390




14,176


Marcellus Shale


2,544





2,544







2,544


Total MVC shortfall payment adjustments

$

18,528




$

26,213



$

(3,151)



$

23,062



















Total (1)

$

25,605




$

33,290



$

(3,151)



$

30,139


__________

(1) Exclusive of Ohio Gathering due to equity method accounting.

Quarterly Distribution Update

The board of directors of SMLP's general partner suspended cash distributions payable on its common units and on its 9.50% Series A fixed-to-floating rate cumulative redeemable perpetual preferred units for the period ended June 30, 2020.  Unpaid distributions on the preferred units will continue to accrue.

Second Quarter 2020 Earnings Call Information

SMLP will host a conference call at 10:00 a.m. Eastern on Friday, August 7, 2020, to discuss its quarterly operating and financial results.  Interested parties may participate in the call by dialing 847-585-4405 or toll-free 888-771-4371 and entering the passcode 49844223.  The conference call, webcast live and archive of the call can be accessed through the Investors section of SMLP's website at www.summitmidstream.com.

Upcoming Investor Conferences

Members of SMLP's senior management team will attend the for 2020 Citi One-on-One Midstream / Energy Infrastructure Virtual Conference which will take place on August 12-13, 2020.  The presentation materials associated with this event will be accessible through the Investors section of SMLP's website at www.summitmidstream.com prior to the beginning of the conference.

Use of Non-GAAP Financial Measures

We report financial results in accordance with U.S. generally accepted accounting principles ("GAAP").  We also present adjusted EBITDA and distributable cash flow, each a non-GAAP financial measure.  We define adjusted EBITDA as net income or loss, plus interest expense, income tax expense, depreciation and amortization, our proportional adjusted EBITDA for equity method investees, adjustments related to MVC shortfall payments, adjustments related to capital reimbursement activity, unit-based and noncash compensation, impairments, items of income or loss that we characterize as unrepresentative of our ongoing operations and other noncash expenses or losses, less interest income, income tax benefit, income (loss) from equity method investees and other noncash income or gains.  We define distributable cash flow as adjusted EBITDA plus cash interest received and cash taxes received, less cash interest paid, senior notes interest adjustment, adjusted Series A Preferred Units cash distribution, cash taxes paid and maintenance capital expenditures.  Because adjusted EBITDA and distributable cash flow may be defined differently by other entities in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other entities, thereby diminishing their utility.

Management uses these non-GAAP financial measures in making financial, operating and planning decisions and in evaluating our financial performance. Furthermore, management believes that these non-GAAP financial measures may provide external users of our financial statements, such as investors, commercial banks, research analysts and others, with additional meaningful comparisons between current results and results of prior periods as they are expected to be reflective of our core ongoing business.

Adjusted EBITDA and distributable cash flow are used as supplemental financial measures by external users of our financial statements such as investors, commercial banks, research analysts and others.

Adjusted EBITDA is used to assess:

  • the ability of our assets to generate cash sufficient to make future potential cash distributions and support our indebtedness;
  • the financial performance of our assets without regard to financing methods, capital structure or historical cost basis;
  • our operating performance and return on capital as compared to those of other entities in the midstream energy sector, without regard to financing or capital structure;
  • the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities; and
  • the financial performance of our assets without regard to (i) income or loss from equity method investees, (ii) the impact of the timing of minimum volume commitments shortfall payments under our gathering agreements or (iii) the timing of impairments or other income or expense items that we characterize as unrepresentative of our ongoing operations.

Distributable cash flow is used to assess:

  • the ability of our assets to generate cash sufficient to support future potential cash distributions and
  • the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.

Both of these measures have limitations as analytical tools and investors should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP.  For example:

  • certain items excluded from adjusted EBITDA and distributable cash flow are significant components in understanding and assessing an entity's financial performance, such as an entity's cost of capital and tax structure;
  • adjusted EBITDA and distributable cash flow do not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
  • adjusted EBITDA and distributable cash flow do not reflect changes in, or cash requirements for, our working capital needs; and
  • although depreciation and amortization are noncash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA and distributable cash flow do not reflect any cash requirements for such replacements.

We compensate for the limitations of adjusted EBITDA and distributable cash flow as analytical tools by reviewing the comparable GAAP financial measures, understanding the differences between the financial measures and incorporating these data points into our decision-making process.  Reconciliations of GAAP to non-GAAP financial measures are attached to this press release.

We do not provide the GAAP financial measures of net income or loss or net cash provided by operating activities on a forward-looking basis because we are unable to predict, without unreasonable effort, certain components thereof including, but not limited to, (i) income or loss from equity method investees and (ii) asset impairments.  These items are inherently uncertain and depend on various factors, many of which are beyond our control.  As such, any associated estimate and its impact on our GAAP performance and cash flow measures could vary materially based on a variety of acceptable management assumptions.  

About Summit Midstream Partners, LP

SMLP is a value-driven limited partnership focused on developing, owning and operating midstream energy infrastructure assets that are strategically located in the core producing areas of unconventional resource basins, primarily shale formations, in the continental United States.  SMLP provides natural gas, crude oil and produced water gathering, processing and transportation services pursuant to primarily long-term, fee-based agreements with customers and counterparties in six unconventional resource basins: (i) the Appalachian Basin, which includes the Utica and Marcellus shale formations in Ohio and West Virginia; (ii) the Williston Basin, which includes the Bakken and Three Forks shale formations in North Dakota; (iii) the Denver-Julesburg Basin, which includes the Niobrara and Codell shale formations in Colorado and Wyoming; (iv) the Permian Basin, which includes the Bone Spring and Wolfcamp formations in New Mexico; (v) the Fort Worth Basin, which includes the Barnett Shale formation in Texas; and (vi) the Piceance Basin, which includes the Mesaverde formation as well as the Mancos and Niobrara shale formations in Colorado.  SMLP has an equity investment in Double E Pipeline, LLC, which is developing natural gas transmission infrastructure that will provide transportation service from multiple receipt points in the Delaware Basin to various delivery points in and around the Waha Hub in Texas.  SMLP also has an equity investment in Ohio Gathering, which operates extensive natural gas gathering and condensate stabilization infrastructure in the Utica Shale in Ohio.  SMLP is headquartered in Houston, Texas.

Forward-Looking Statements

This press release includes certain statements concerning expectations for the future that are forward-looking within the meaning of the federal securities laws.  Forward-looking statements contain known and unknown risks and uncertainties (many of which are difficult to predict and beyond management's control) that may cause SMLP's actual results in future periods to differ materially from anticipated or projected results.  An extensive list of specific material risks and uncertainties affecting SMLP is contained in its 2019 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 9, 2020, and as amended and updated from time to time. Any forward-looking statements in this press release, including forward-looking statements regarding 2020 financial guidance or financial or operating expectations for 2020, are made as of the date of this press release and SMLP undertakes no obligation to update or revise any forward-looking statements to reflect new information or events.

SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS




June 30,



December 31,




2020



2019




(In thousands)


Assets









Current assets:









Cash and cash equivalents


$

36,571



$

9,530


Restricted cash



5,048




27,392


Accounts receivable



77,199




97,418


Other current assets



4,252




5,521


  Total current assets



123,070




139,861


Property, plant and equipment, net



1,855,889




1,882,489


Intangible assets, net



215,901




232,278


Investment in equity method investees



383,058




309,728


Other noncurrent assets



8,584




9,742


Total assets


$

2,586,502



$

2,574,098











Liabilities and Capital









Current liabilities:









Trade accounts payable


$

18,422



$

24,415


Accrued expenses



11,331




11,339


Deferred revenue



15,354




13,493


Ad valorem taxes payable



6,307




8,477


Accrued interest



11,737




12,346


Accrued environmental remediation



1,795




1,725


Other current liabilities



9,859




12,206


Short-term debt and current portion of long-term debt



38,000




5,546


  Total current liabilities



112,805




89,547


Long-term debt



1,545,133




1,622,279


Noncurrent deferred revenue



42,348




38,709


Noncurrent accrued environmental remediation



2,311




2,926


Other noncurrent liabilities



8,618




7,951


Total liabilities



1,711,215




1,761,412











Mezzanine Capital









Subsidiary Series A Preferred Units



78,563




27,450











Partners' Capital









Series A Preferred Units



307,866




293,616


Common limited partner capital



488,858




305,550


Noncontrolling interest






186,070


Total partners' capital



796,724




785,236


Total liabilities, mezzanine capital and partners' capital


$

2,586,502



$

2,574,098


 

SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS



Three months ended June 30,



Six months ended June 30,



2020



2019



2020



2019



(In thousands, except per-unit amounts)


Revenues:
















Gathering services and related fees

$

73,911



$

75,107



$

157,703



$

162,071


Natural gas, NGLs and condensate sales


10,683




18,291




24,463




56,219


Other revenues


7,413




6,288




14,744




12,804


Total revenues


92,007




99,686




196,910




231,094


Costs and expenses:
















Cost of natural gas and NGLs


6,088




11,571




14,313




43,330


Operation and maintenance


21,152




24,318




42,963




48,540


General and administrative (1)


12,786




10,565




29,347




28,950


Depreciation and amortization


29,630




26,837




59,296




54,601


Transaction costs


1,207




96




1,218




2,433


Gain on asset sales, net


(281)




(287)




(166)




(1,248)


Long-lived asset impairment (2)


654




70




4,475




45,021


Total costs and expenses


71,236




73,170




151,446




221,627


Other income (expense)


276




83




(151)




292


Interest expense


(21,990)




(22,343)




(45,818)




(45,085)


Gain on early extinguishment of debt (3)


54,235







54,235





Income (loss) before income taxes and income (loss) from equity method investees


53,292




4,256




53,730




(35,326)


Income tax benefit (expense)


389




(1,149)




402




(1,406)


Income (loss) from equity method investees


3,040




(79)




6,351




(520)


Net income (loss)

$

56,721



$

3,028



$

60,483



$

(37,252)


















Income (loss) per limited partner unit:
















Common unit – basic

$

1.11



$

(0.06)



$

1.05



$

(0.54)


Common unit – diluted

$

1.06



$

(0.06)



$

1.02



$

(0.54)


















Weighted-average limited partner units outstanding:
















Common units – basic


44,650




45,319




44,985




45,319


Common units – diluted


46,737




45,319




46,323




45,319


__________

(1) For the three and six months ended June 30, 2020, the amount includes $0.6 million and $3.3 million, respectively, of restructuring expenses. 

(2) For the six months ended June 30, 2019, the amount is associated with (i) our decision in March 2019 to idle our existing 20 MMcf/d DJ Basin processing plant in conjunction with the commissioning of our new 60 MMcf/d DJ Basin processing plant resulting in an impairment charge of $34.7 million; and (ii) our decommissioning in March 2019 of an underutilized Barnett Shale compressor station resulting in an impairment charge of $10.2 million.

(3) Subsequent to the GP Buy-In Transaction, the Partnership commenced a debt buyback program to repurchase our Senior Notes, which is ongoing. We repurchased $25.8 million of the outstanding $300 million aggregate principal amount of our 5.50% Senior Notes through June 30, 2020. The gain on early extinguishment of debt for the 5.50% Senior Notes during the three and six months ended June 30, 2020 totaled $9.2 million and is inclusive of a $0.1 million write off of debt issuance costs. We also repurchased $106.2 million of the outstanding $500 million aggregate principal amount of our 5.75% Senior Notes through June 30, 2020. The gain on early extinguishment of debt for the 5.75% Senior Notes during the three and six months ended June 30, 2020 totaled $45.1 million and is inclusive of a $1.0 million write off of debt issuance costs. 

 

SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES

UNAUDITED OTHER FINANCIAL AND OPERATING DATA



Three months ended June 30,



Six months ended June 30,



2020



2019



2020



2019



(Dollars in thousands)


Other financial data:
















Net income (loss)

$

56,721



$

3,028



$

60,483



$

(37,252)


Net cash provided by operating activities

$

35,170



$

39,381



$

105,371



$

84,574


Capital expenditures

$

8,843



$

50,244



$

27,426



$

111,092


Contributions to equity method investees

$

21,695



$

5,921



$

79,728



$

5,921


Adjusted EBITDA

$

64,590



$

67,560



$

130,494



$

134,418


Distributable cash flow

$

42,669



$

35,886



$

73,594



$

69,299


Distributions declared (1)

$



$

23,778



$



$

47,553


Distribution coverage ratio (2)

n/a



1.51x



n/a



1.46x


















Operating data:
















Aggregate average daily throughput – natural gas (MMcf/d)


1,391




1,368




1,336




1,419


Aggregate average daily throughput – liquids (Mbbl/d)


76




94




87




99


















Ohio Gathering average daily throughput (MMcf/d) (3)


540




713




575




712


__________

(1) Represents distributions declared to common unitholders in respect of a given period. On May 3, 2020, the board of directors of SMLP's general partner announced an immediate suspension of the distribution payable on its common units and on its 9.50% Series A fixed-to-floating rate cumulative redeemable perpetual preferred units. For the three months ended June 30, 2019, represents the distributions declared in July 2019 and paid in August 2019. 

(2) Represents the ratio of distributable cash flow to distributions declared. Distribution coverage ratio calculation for the three months ended June 30, 2019 is based on distributions declared to common unitholders in respect of the second quarter of 2019. 

(3) Gross basis, represents 100% of volume throughput for Ohio Gathering, subject to a one-month lag.

 

SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES

UNAUDITED RECONCILIATIONS TO NON-GAAP FINANCIAL MEASURES



Three months ended June 30,



Six months ended June 30,



2020



2019



2020



2019



(In thousands)


Reconciliations of net income or loss to adjusted EBITDA and distributable cash flow:
















Net income (loss)

$

56,721



$

3,028



$

60,483



$

(37,252)


Add:
















Interest expense


21,990




22,343




45,818




45,085


Income tax (benefit) expense


(389)




1,149




(402)




1,406


Depreciation and amortization (1)


29,866




27,200




59,766




55,353


Proportional adjusted EBITDA for equity method investees (2)


7,514




9,939




15,453




19,149


Adjustments related to MVC shortfall payments (3)


2,291




3,533




(3,151)




(666)


Adjustments related to capital reimbursement activity (4)


(237)




(1,046)




(448)




(1,761)


Unit-based and noncash compensation


1,846




1,553




4,569




4,079


Gain on early extinguishment of debt (5)


(54,235)







(54,235)





Gain on asset sales, net


(281)




(287)




(166)




(1,248)


Long-lived asset impairment


654




70




4,475




45,021


Other, net (6)


1,890




(1)




4,683




4,732


Less:
















Income (loss) from equity method investees


3,040




(79)




6,351




(520)


Adjusted EBITDA

$

64,590



$

67,560



$

130,494



$

134,418


Less:
















Cash interest paid


24,413




23,751




44,073




43,683


Cash paid for taxes





150







150


Senior notes interest adjustment (7)


(4,869)




(3,063)




(1,806)





Adjusted Series A Preferred Units cash distribution (8)





7,125




7,125




14,250


Maintenance capital expenditures


2,377




3,711




7,508




7,036


Distributable cash flow

$

42,669



$

35,886



$

73,594



$

69,299


















Distributions declared (9)

$



$

23,778



$



$

47,553


















Distribution coverage ratio (10)

n/a



1.51x



n/a



1.46x


__________

(1) Includes the amortization expense associated with our favorable gas gathering contracts as reported in other revenues.

(2) Reflects our proportionate share of Ohio Gathering adjusted EBITDA, subject to a one-month lag.

(3) Adjustments related to MVC shortfall payments are recognized ratably over the term of the associated MVC.

(4) Adjustments related to capital reimbursement activity represent contributions in aid of construction revenue recognized in accordance with Accounting Standards Update No. 2014-09 Revenue from Contracts with Customers ("Topic 606").

(5) Subsequent to the GP Buy-In Transaction, the Partnership commenced a debt buyback program to repurchase our Senior Notes, which is ongoing. We repurchased $25.8 million of the outstanding $300 million aggregate principal amount of our 5.50% Senior Notes through June 30, 2020. The gain on early extinguishment of debt for the 5.50% Senior Notes during the three and six months ended June 30, 2020 totaled $9.2 million and is inclusive of a $0.1 million write off of debt issuance costs. We also repurchased $106.2 million of the outstanding $500 million aggregate principal amount of our 5.75% Senior Notes through June 30, 2020. The gain on early extinguishment of debt for the 5.75% Senior Notes during the three and six months ended June 30, 2020 totaled $45.1 million and is inclusive of a $1.0 million write off of debt issuance costs.

(6) Represents items of income or loss that we characterize as unrepresentative of our ongoing operations. For the three months ended June 30, 2020, the amount includes $1.4 million of transaction costs associated with the GP Buy-In Transaction and $0.6 million of restructuring expenses. For the six months ended June 30, 2020, the amount includes $3.3 million of restructuring expenses and $1.4 million of transaction costs associated with the GP Buy-In Transaction. For the six months ended June 30, 2019, the amount includes $3.4 million of severance expense associated with our former Chief Executive Officer and $0.9 million of transaction costs associated with the Equity Restructuring.

(7) Senior notes interest adjustment represents the net of interest expense accrued and paid during the period. Interest on the $300.0 million 5.5% senior notes is paid in cash semi-annually in arrears on February 15 and August 15 until maturity in August 2022.  Interest on the $500.0 million 5.75% senior notes is paid in cash semi-annually in arrears on April 15 and October 15 until maturity in April 2025.

(8) Adjusted Series A Preferred Units cash distribution represents the amount of cash distributions paid, or accrued, on the Series A Preferred Units. Distributions on the Series A Preferred Units are due to be paid or accrued semi-annually in arrears on June 15 and December 15 each year, through and including December 15, 2022, and, thereafter, quarterly in arrears on the 15th day of March, June, September and December of each year.  

(9) Represents distributions declared to common unitholders in respect of a given period. On May 3, 2020, the board of directors of SMLP's general partner announced an immediate suspension of the distribution payable on its common units. For the three months ended June 30, 2019, represents the distributions declared in July 2019 and paid in August 2019.

(10) Represents the ratio of distributable cash flow to distributions declared. Distribution coverage ratio calculation for the three months ended June 30, 2019 is based on distributions declared in respect of the second quarter of 2019.  

 

SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES

UNAUDITED RECONCILIATIONS TO NON-GAAP FINANCIAL MEASURES



Six months ended June 30,



2020



2019



(In thousands)


Reconciliation of net cash provided by operating activities to adjusted EBITDA and distributable cash flow:








Net cash provided by operating activities

$

105,371



$

84,574


Add:








Interest expense, excluding amortization of debt issuance costs


42,682




41,964


Income tax (benefit) expense


(402)




1,406


Changes in operating assets and liabilities


(19,388)




4,767


Proportional adjusted EBITDA for equity method investees (1)


15,453




19,149


Adjustments related to MVC shortfall payments (2)


(3,151)




(666)


Adjustments related to capital reimbursement activity (3)


(448)




(1,761)


Other, net (4)


4,683




4,732


Less:








Distributions from equity method investees


12,749




18,217


Noncash lease expense


1,557




1,530


Adjusted EBITDA

$

130,494



$

134,418


Less:








Cash interest paid


44,073




43,683


Cash paid for taxes





150


Senior notes interest adjustment (5)


(1,806)





Adjusted Series A Preferred Units cash distribution (6)


7,125




14,250


Maintenance capital expenditures


7,508




7,036


Distributable cash flow

$

73,594



$

69,299


__________

(1) Reflects our proportionate share of Ohio Gathering adjusted EBITDA, subject to a one-month lag.

(2) Adjustments related to MVC shortfall payments are recognized ratably over the term of the associated MVC.

(3) Adjustments related to capital reimbursement activity represent contributions in aid of construction revenue recognized in accordance with Accounting Standards Update No. 2014-09 Revenue from Contracts with Customers ("Topic 606").

(4) Represents items of income or loss that we characterize as unrepresentative of our ongoing operations. For the three months ended June 30, 2020, the amount includes $1.4 million of transaction costs associated with the GP Buy-In Transaction and $0.5 million of restructuring expenses. For the six months ended June 30, 2020, the amount includes $3.3 million of restructuring expenses and $1.4 million of transaction costs associated with the GP Buy-In Transaction. For the six months ended June 30, 2019, the amount includes $3.4 million of severance expense associated with our former Chief Executive Officer and $0.9 million of transaction costs associated with the Equity Restructuring.

(5) Senior notes interest adjustment represents the net of interest expense accrued and paid during the period. Interest on the $300.0 million 5.5% senior notes is paid in cash semi-annually in arrears on February 15 and August 15 until maturity in August 2022. Interest on the $500.0 million 5.75% senior notes is paid in cash semi-annually in arrears on April 15 and October 15 until maturity in April 2025.

(6) Adjusted Series A Preferred Units cash distribution represents the amount of cash distributions paid, or accrued, on the Series A Preferred Units. Distributions on the Series A Preferred Units are due to be paid or accrued semi-annually in arrears on June 15 and December 15 each year, through and including December 15, 2022, and, thereafter, quarterly in arrears on the 15th day of March, June, September and December of each year.

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/summit-midstream-partners-lp-reports-second-quarter-2020-financial-and-operating-results-301108255.html

SOURCE Summit Midstream Partners, LP

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