HOUSTON, Feb. 16, 2021 /PRNewswire/ -- Summit
Midstream Partners, LP (NYSE: SMLP) ("Summit," "SMLP," or the
"Partnership") announced today preliminary financial and operating
results for the three months ended December
31, 2020 and also provided full year 2021 financial
guidance. The Partnership expects fourth quarter 2020 net
income of $119 million to
$121 million and adjusted EBITDA of
$61 million to $63 million. Net income for the quarter was
primarily driven by approximately $124
million of gain on the early extinguishment of
debt from the Partnership's open market repurchase of its
senior unsecured notes and the consensual debt discharge and
restructuring of a subsidiaries' $155.2
million term loan ("GP Term Loan Restructuring"), partially
offset by an approximate $5 million
asset impairment charge for an $8
million sale of compressor equipment completed in January
2021. Financial guidance for full year 2021 includes
$210 million to $230 million of adjusted EBITDA, and $20 million to $35
million of total capital expenditures.
Heath Deneke, President, Chief
Executive Officer and Chairman of SMLP commented, "We expect our
fourth quarter 2020 financial and operating results to be
moderately ahead of our third quarter financial results and in-line
with the expectations we outlined during our November earnings
call. Fourth quarter results were positively impacted by a
combination of factors during the quarter, including 7 new wells
that were connected behind our Summit Utica system in late
September and 8 new wells connected behind our Williston liquids system in October and
November, together with the return of substantially all of the
temporarily shut-in production behind the Ohio Gathering system,
and continued cost reductions across our back-office and field
operations. Consequently, we expect fourth quarter 2020
adjusted EBITDA in the range of $61
million to $63 million,
natural gas volume throughput on our operated systems of 1.4 to 1.5
Bcf/d and liquids volume throughput of 70 Mbbl/d to 72
Mbbl/d. Total outstanding indebtedness, net of cash on hand,
totaled approximately $1.34 billion
as of December 31, 2020, which will
result in a total leverage ratio of approximately 5.1x, and
reflects a reduction in total outstanding recourse net
indebtedness of more than $132
million since December 31,
2019. Our focus on simplifying our organizational structure,
reducing outstanding net indebtedness and other fixed capital
obligations occurred despite significant cash outflows during the
year, including the $35 million
acquisition of our general partner in 2Q 2020 and our $27 million cash payment to facilitate the GP
Term Loan Restructuring in 4Q 2020. We expect to continue to
focus on maximizing free cash flow in 2021 and re-allocating free
cash towards aggressive debt reduction efforts going forward."
"Our liability management strategy during the fourth quarter of
2020 included a series of transactions which resulted in the
retirement of more than $350 million
face value of fixed capital obligations with recourse to SMLP, and
fully extinguishing our GP's $155.2
million term loan, all at substantial discounts to face
value. We also successfully completed an amendment to our
revolving credit facility during the quarter, including a new
$400 million junior lien debt basket,
which provides us with additional flexibility to address our 2022
bond maturities, and a less restrictive 5.75x total leverage
covenant."
"2020 was a challenging year for the oil and gas industry, both
for our customers and for Summit, with the prolonged global
COVID-19 pandemic, commodity price volatility, wide-spread
temporary production curtailments, an uptick in certain of our
customers filing for bankruptcy protection, and tempered drilling
and completion activity collectively weighing on our financial and
operating metrics. Summit cannot predict the timing or the
extent of a recovery, but we did anticipate that this recovery
would take time, which was a key consideration in aggressively
pursuing our liability management initiatives in 2020. Based
on the latest feedback from our customers, we currently anticipate
45 to 75 new wells will be connected to our systems in 2021, which
compares to 104 new wells in 2020, and 262 new wells in 2019.
We believe that the recent pullback in drilling and
completion activity will have a self-correcting impact on both
commodity prices and increased future drilling and completion
activity. The recent uptick in commodity prices, thawing of
the capital markets, and successful restructuring proceedings of
several key customers, are encouraging developments that should
facilitate a recovery in late 2021 and into 2022."
"Our 2021 adjusted EBITDA guidance range of $210 million to $230
million reflects what we believe is a conservative outlook,
and includes a material amount of risking to customer-provided
plans. The lower end of our guidance represents further
well-completion schedule delays to our already conservative outlook
and the higher end of our guidance represents a scenario where our
customers meet their stated schedules. We expect total 2021
capital expenditures of $20 million
to $35 million, with approximately
$10 million planned for maintenance
capex. While we expect up to approximately $150 million of capital contributions for our 70%
proportionate share of the Double E Pipeline in 2021, we plan to
finance it completely with the previously announced commercial bank
financing at Summit Permian Transmission. We continue to progress
the Double E Pipeline project towards our expected Q4 2021
in-service date and have commenced construction related activities,
including environmental and civil construction surveys."
"We expect that this financial guidance, together with
$8 million of compressor asset sales
completed in January 2021, and
$3.5 million of
customer-reimbursements for certain development projects, will
provide the Partnership with adequate liquidity in 2021 and an
ability to reduce outstanding net indebtedness between $130 million and $150
million in 2021."
Expected Select 4Q 2020 Financial Results
The
following provides a preliminary range of adjusted EBITDA for the
three months ended December 31, 2020
and a reconciliation to net income.
|
Three Months Ended
December 31, 2020
|
|
Low
|
|
High
|
|
($ in
millions)
|
Reconciliation of
net income or loss to adjusted
EBITDA:
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
119
|
|
$
121
|
Add:
|
|
|
|
Interest
expense
|
15
|
|
13
|
Depreciation and
amortization (1)
|
30
|
|
28
|
Proportional adjusted
EBITDA for equity method
investees (2)
|
9
|
|
7
|
Loss (gain) on early
extinguishment of debt
|
(123)
|
|
(125)
|
Other, net
(3)
|
11
|
|
19
|
Adjusted EBITDA
(4)
|
$
61
|
|
$
63
|
|
|
(1)
|
Includes the
amortization expense associated with our favorable gas gathering
contracts as reported in other revenues.
|
(2)
|
Reflects SMLP's
proportionate share of Ohio Gathering adjusted EBITDA, subject to a
one-month lag.
|
(3)
|
Includes various
items such as, but not limited to, income tax benefits and
expenses, adjustments related to MVC shortfall payments that
recognize the earnings from MVC shortfall payments ratably over the
term of the associated MVC, adjustments related to capital
reimbursement activity which represent contributions in aid of
construction revenue recognized in accordance with Accounting
Standards Update No. 2014-09 Revenue from Contracts with Customers
("Topic 606"), unit-based and noncash compensation, net loss or
gain on asset sales, long-lived asset impairment, income or loss
from equity method investees and items of income or loss that we
characterize as unrepresentative of our ongoing operations,
including restructuring expenses.
|
(4)
|
Adjusted EBITDA is a
non-GAAP financial measure. For a definition of adjusted
EBITDA, see "Use of Non-GAAP Financial Measures" at the end of this
release.
|
2021 Financial Guidance
SMLP is providing financial
guidance for 2021, which is summarized in the table below.
These projections are subject to risks and uncertainties as
described in the "Forward-Looking Statements" section at the end of
this press release.
|
2021 Financial
Guidance Range
|
($ in
millions)
|
Low
|
|
High
|
Natural Gas
Throughput (MMcf/d)
|
|
|
|
Core Focus
Areas
|
625
|
–
|
725
|
Legacy
Areas
|
835
|
–
|
855
|
Total
|
1,460
|
–
|
1,580
|
|
|
|
|
Liquids Throughput
(Mbbl/d)
|
67
|
–
|
71
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA
|
|
|
|
Core Focus
Areas
|
$115
|
–
|
$130
|
Legacy
Areas
|
$125
|
–
|
$130
|
Unallocated G&A,
Other
|
($30)
|
–
|
($30)
|
Total
|
$210
|
–
|
$230
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
|
|
Growth Capital
Expenditures
|
$10
|
–
|
$25
|
Maintenance Capital
Expenditures
|
$10
|
–
|
$10
|
Total
|
$20
|
–
|
$35
|
We believe our 2021 financial guidance reflects a conservative,
yet appropriate, level of risking to the most recent drill
schedules and volume forecasts provided by our customers. Our
2021 capital expenditure guidance is presented on a gross basis and
does not include asset sales or capital reimbursements related
to specific development projects with certain customers. The
mid-point of our guidance incorporates an approximate 40% reduction
in new well connects on our systems in 2021, as compared to 2020;
however, approximately 75% of the new wells that are included in
our forecast in 2021 are either drilled or are currently being
drilled. The remaining new wells that are expected in our
2021 forecast either have active permits or have recently been
affirmed by our customers to be included in their 2021 capital
programs. We currently expect limited activity in 2021 behind
our systems in the DJ, Permian and Williston basins, which are basins that will
benefit from a continued increase in oil prices. Our 2021
financial guidance also includes the estimated impact of
approximately $10 million of
contractual MVC shortfall payment step-downs relative to 2020,
primarily from customers in the Piceance and Williston basins.
Capital Expenditures
- Expected growth capital expenditures of $10 million to $25
million, focused primarily on pad connections to accommodate
near-term volume growth in the Utica Shale and Williston Basin segments;
- Growth capital expenditures guidance does not include any
investments in Double E, which is expected to be fully funded by
third-party commercial bank financing (see below in the "Investment
in Double E" section);
- Expected maintenance capital expenditures of approximately
$10 million;
Investment in Double E
- Expect to utilize the previously announced $175 million of senior secured credit facilities,
consisting of a $160 million delayed
draw term loan facility and $15
million working capital facility, to fund all of SMLP's
approximately $150 million of capital
contributions for Double E in 2021
Note Regarding Preliminary Results
The preliminary
financial information included in this release is subject to
completion of the Partnership's year-end close procedures and
further financial review. Actual results may differ from these
estimates as a result of the completion of the Partnership's
year-end closing procedures, review adjustments and other
developments that may arise between now and the time such financial
information for the period is finalized. As a result, these
estimates are preliminary, may change and constitute
forward-looking information and, as a result, are subject to risks
and uncertainties. These preliminary estimates should not be viewed
as a substitute for full interim financial statements prepared in
accordance with United States
generally accepted accounting principles (GAAP), and they should
not be viewed as indicative of our results for any future period.
Neither our independent registered public accounting firm nor any
other independent registered public accounting firm has audited,
reviewed or compiled, examined or performed any procedures with
respect to the preliminary results, nor have they expressed any
opinion or any other form of assurance on the preliminary
results.
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 unconventional resource basins, primarily
shale formations, in the continental United States. SMLP
provides natural gas, crude oil and produced water gathering
services pursuant to primarily long-term and fee-based gathering
and processing 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.
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, 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.
Because adjusted EBITDA may be defined differently by other
entities in our industry, our definition of this non-GAAP financial
measure may not be comparable to similarly titled measures of other
entities, thereby diminishing its utility.
Management uses adjusted EBITDA in making financial, operating
and planning decisions and in evaluating our financial performance.
Furthermore, management believes that adjusted EBITDA 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 is used as a supplemental financial measure 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.
Adjusted EBITDA has limitations as an analytical tool and
investors should not consider it in isolation or as a substitute
for analysis of our results as reported under GAAP. For
example:
- certain items excluded from adjusted EBITDA 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 does not reflect our cash expenditures or
future requirements for capital expenditures or contractual
commitments;
- adjusted EBITDA does 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 does not reflect any
cash requirements for such replacements.
We compensate for the limitations of adjusted EBITDA as an
analytical tool by reviewing the comparable GAAP financial
measures, understanding the differences between the financial
measures and incorporating these data points into our
decision-making process.
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.
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 include, without limitation,
any statement that may project, indicate or imply future results,
events, performance or achievements and may contain the words
"expect," "intend," "plan," "anticipate," "estimate," "believe,"
"will be," "will continue," "will likely result," and similar
expressions, or future conditional verbs such as "may," "will,"
"should," "would," and "could." In addition, any statement
concerning future financial performance (including future revenues,
earnings or growth rates), ongoing business strategies and possible
actions taken by us or our subsidiaries are also forward-looking
statements. Forward-looking statements also 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 (the
"SEC") on March 9, 2020, Quarterly Report on Form 10-Q
for the three months ended March 31,
2020 filed with the SEC on May 8,
2020, Quarterly Report on Form 10-Q for the three months
ended June 30, 2020 filed with the
SEC on August 10, 2020 and Quarterly
Report on Form 10-Q for the three months ended September 30, 2020 filed with the SEC on
November 6, 2020, each as amended and
updated from time to time. Any forward-looking statements in this
press release 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.
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SOURCE Summit Midstream Partners, LP