Summit Midstream Partners, LP(SMC) - 2025 Q1 - Quarterly Report

Part I - Financial Information Financial Statements The company presents its unaudited condensed consolidated financial statements for Q1 2025, detailing key financial positions and performance Financial Statements Overview Q1 2025 revenue grew to $132.7 million, but net income fell to $4.6 million due to prior-year asset sale gains Condensed Consolidated Statements of Operations (Q1 2025 vs Q1 2024) | Financial Metric | Q1 2025 (In thousands) | Q1 2024 (In thousands) | | :--- | :--- | :--- | | Total Revenues | $132,697 | $118,871 | | Total Costs and Expenses | $118,118 | $173,566 | | Gain (loss) on sale of business | ($43) | $86,202 | | Gain on sale of equity method investment | — | $126,261 | | Interest Expense | ($22,537) | ($37,846) | | Net Income | $4,634 | $132,927 | | Net Income (Loss) per Share (Diluted) | ($0.16) | $11.47 | Condensed Consolidated Balance Sheets (As of March 31, 2025) | Account | March 31, 2025 (In thousands) | December 31, 2024 (In thousands) | | :--- | :--- | :--- | | Total Current Assets | $119,763 | $118,271 | | Total Assets | $2,434,175 | $2,359,484 | | Total Current Liabilities | $150,607 | $174,801 | | Long-term Debt, net | $1,067,172 | $976,995 | | Total Liabilities | $1,331,305 | $1,261,413 | | Total Equity | $967,961 | $965,125 | Condensed Consolidated Statements of Cash Flows (Q1 2025 vs Q1 2024) | Cash Flow Activity | Q1 2025 (In thousands) | Q1 2024 (In thousands) | | :--- | :--- | :--- | | Net Cash from Operating Activities | $16,030 | $43,616 | | Net Cash from Investing Activities | ($93,091) | $608,629 | | Net Cash from Financing Activities | $81,466 | ($320,846) | | Net Change in Cash | $4,405 | $331,399 | Acquisitions and Divestitures The company actively managed its portfolio through the Moonrise acquisition and the prior-year Utica divestiture - Completed the Moonrise Acquisition on March 10, 2025, for total consideration of approximately $90.0 million, consisting of $70.0 million in cash and 462,265 shares of common stock[33] - Completed the Tall Oak Acquisition on December 2, 2024, for $425.0 million ($155.0 million cash and 7,471,008 shares of Class B Common Stock) plus a potential earn-out of up to $25.0 million[39] - Completed the disposition of Summit Utica on March 22, 2024, for a cash price of $625.0 million, recognizing a total gain of $212.5 million[42][43] - In Q1 2024, an impairment charge of $68.0 million was recognized in connection with the sale of the Mountaineer Midstream system[47] Debt Total debt increased to $1.08 billion following a new note issuance, while the company remained in covenant compliance Debt Composition (March 31, 2025) | Debt Instrument | March 31, 2025 (In thousands) | December 31, 2024 (In thousands) | | :--- | :--- | :--- | | Amended and Restated ABL Facility | $145,000 | $305,000 | | Permian Transmission Term Loan | $125,323 | $129,321 | | 2029 Secured Notes (8.625%) | $825,000 | $575,000 | | Total Debt, net | $1,083,843 | $993,575 | - On January 10, 2025, the company issued an additional $250.0 million of its 8.625% Senior Secured Second Lien Notes due 2029, bringing the total outstanding to $825.0 million[73] - As of March 31, 2025, the company had $354.2 million of available borrowing capacity under its Amended and Restated ABL Facility[68] - The company was in compliance with its financial covenants as of March 31, 2025, with a First Lien Net Leverage Ratio of 0.52:1.00 (covenant is < 2.50:1.00) and an Interest Coverage Ratio of 2.80:1.00 (covenant is > 2.00:1.00)[65][202] Equity and Mezzanine Equity Equity structure was impacted by acquisitions creating a noncontrolling interest and continued accrual of preferred dividends - The Board of Directors declared a quarterly cash dividend on its Series A Preferred Stock, paid on March 15, 2025[104] - As of March 31, 2025, accrued and unpaid dividends on the Series A Preferred Stock totaled $46.9 million, which must be paid before any common stock dividends can be initiated[105][114] - As of March 31, 2025, the noncontrolling interest, resulting from the Tall Oak Acquisition, represents approximately 35% of the net assets of SMLP[111] Segment Information Total segment adjusted EBITDA decreased to $67.4 million, reflecting the Northeast divestiture and acquisition-driven Mid-Con growth Segment Adjusted EBITDA (Q1 2025 vs Q1 2024) | Reportable Segment | Q1 2025 (In thousands) | Q1 2024 (In thousands) | | :--- | :--- | :--- | | Rockies | $24,869 | $22,874 | | Permian | $8,270 | $7,265 | | Piceance | $11,786 | $15,233 | | Mid-Con | $22,457 | $5,100 | | Northeast | $— | $29,021 | | Total Segment Adjusted EBITDA | $67,382 | $79,493 | Total Assets by Segment | Reportable Segment | March 31, 2025 (In thousands) | December 31, 2024 (In thousands) | | :--- | :--- | :--- | | Rockies | $1,013,891 | $917,293 | | Permian | $282,927 | $285,280 | | Piceance | $380,114 | $389,668 | | Mid-Con | $745,477 | $746,549 | | Total Reportable Segment Assets | $2,422,409 | $2,338,790 | - The company divested its Northeast operations during 2024, which previously included assets in the Utica and Marcellus shale plays[128] Management's Discussion and Analysis (MD&A) Management analyzes Q1 2025 performance, focusing on acquisition impacts, segment results, and capital structure optimization Results of Operations Q1 2025 revenue rose on acquisitions, while net income dropped significantly without prior-year asset sale gains - Natural gas throughput volumes decreased by 444 MMcf/d YoY, primarily due to the divestiture of the Northeast segment (712 MMcf/d), partially offset by a 309 MMcf/d increase in the Mid-Con segment from the Tall Oak acquisition[165][171] - Mid-Con segment adjusted EBITDA surged 340% to $22.5 million, driven by increased volume from the Tall Oak Acquisition[190] - Piceance segment adjusted EBITDA fell 23% to $11.8 million, primarily due to natural production declines[185] - Interest expense decreased by $15.3 million YoY to $22.5 million, reflecting the benefits of recent debt refinancing activities which replaced higher-cost debt[170][199] Liquidity and Capital Resources Liquidity remains sufficient, supported by cash from operations and the ABL facility, despite significant acquisition spending - The company believes its current cash, internally generated cash flow, and credit facilities will be adequate to finance operations for the next twelve months[200][212] - As of March 31, 2025, the company had $354.2 million in available borrowing capacity under its Amended and Restated ABL Facility[204] Q1 2025 Key Cash Flow Activities | Activity | Amount (In thousands) | | :--- | :--- | | Net Cash from Operating Activities | $16,030 | | Capital Expenditures | ($20,606) | | Cash for Moonrise Acquisition | ($69,997) | | Issuance of Additional 2029 Secured Notes | $258,438 | | Borrowings on ABL Facility | $90,000 | | Repayments on ABL Facility | ($250,000) | Market Risk Disclosures Market risk exposure from interest rates and commodity prices remains materially unchanged from year-end 2024 - As of March 31, 2025, the company had approximately $825.0 million in fixed-rate debt and $270.3 million in variable-rate debt ($145.0M ABL Facility and $125.3M Permian Term Loan)[228] - A hypothetical 1% change in interest rates would impact interest expense by approximately $0.7 million for the quarter on the company's variable-rate debt[228] - The majority of revenues are from long-term, fee-based agreements, mitigating direct commodity price risk[229] Controls and Procedures Management concluded that disclosure controls and internal controls over financial reporting were effective as of Q1 2025 - The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[230] Part II - Other Information Legal Proceedings The company details ongoing legal matters, including a significant settlement for a past pipeline release - The Global Settlement for the 2015 Blacktail Release resulted in total losses of $36.3 million, of which the company has paid $21.3 million of the principal amount as of March 31, 2025[237] - The company is also involved in a breach of contract lawsuit with Fiberspar Corporation, which is claiming over $5.0 million for unpaid pipeline product orders[232] Risk Factors A new risk factor concerning tariffs and trade measures has been added to the existing company risks - A new risk factor was added regarding the potential adverse effects of tariffs and other trade measures on business operations, costs, and financial position[239] - The company reiterates existing risks, including customer drilling success, commodity price fluctuations, competitive conditions, and capital market access[221][224]