Summit Midstream Corporation 2026 Q2 Earnings Call

Please go ahead. 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 presentations section or quarterly results section. With me today to discuss our second quarter of 2026 financial and operating results is Heath Deneke, our President, Chief Executive Officer, and Chairman, and 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.

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, 2025, which the company filed with the SEC on March 16, 2026, as well as our other SEC filings for a listing of factors that could cause actual results to defer 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.

All right. Thanks, Randall, and good morning, everyone. Well, Summit announced strong second quarter results today with Adjusted EBITDA of $60.7 million, which is a 12% increase relative to the first quarter. The second quarter increase was driven by growth in both our Rockies and MidCon segments. As we look ahead to the rest of the year, we are very encouraged with the level of activity we are experiencing across our systems, and we're seeing our customers accelerate plans to bring on new wells that are expected to be turned in line towards the end of 2026. Additionally, as we'll discuss further in the call, we have a lot of continued commercial momentum in the Rockies and the Permian segments as we keep securing new contracts to support very attractive, high-returning expansion projects.

Touching on the second quarter a bit more, we turned in line 36 wells, 16 in the DJ and 20 in the MidCon. Right after the quarter closed, we brought on another 17 wells in the Williston, and we now have roughly 75 drilled but uncompleted wells across the footprint. It is exciting to see our customers responding to the higher crude price environment, as we speculated could occur back in our earnings call back in May. We now have a total of eight rigs running behind our Rockies system, which by the way, is up from five in the previous quarter. And six of those rigs are in the Williston. And I would tell you that is a level we are excited about. We have not seen in several years in the basin.

Part of that activity pick up in the Williston is existing customers accelerating their programs in a stronger crude environment. But part of it is also our commercial success. As we previously announced, we have secured two new gathering agreements in Divide County during the first half of the year. Both of the new customers have a rig running behind the system today. And as a result, we now have visibility to approximately 30 new well connections in the Williston that were not contemplated when we set our guidance for the year. These are weighted towards the fourth quarter, so we do expect limited volume contribution in 2026, but they do position us for a very strong start as we look into 2027.

In the DJ, we also see our customers ramping up plans that we expect will be a big catalyst for late 2026, early 2027 as well. We recently signed a new 20-year extension of a gathering processing agreement with one of our existing anchor customers in the basin, and we are also working with other customers to potentially dedicate new acres to our growing DJ footprint. It is really an exciting time to see this level of activity ramping up in the Rockies segments and what that means for the future. On Double E, we executed additional firm transportation agreements during the quarter, which brought total contracted volume on the pipe to just over 1.9 Bcf per day.

We continue to see a tremendous amount of customer interest in the mainline compression expansion open season, and we have extended that open season now through the end of August as we work to finalize additional firm transportation agreements that will support the project. We expect to be in a position to make a final investment decision prior to the open season conclusion, and we will provide updates as they become available. Just to mention the MidCon segment, one of the highlights there is that we are very encouraged with the performance of new wells that have recently been turned in line in an emerging dry gas region within our Arkoma footprint. This again is a development that could be a major catalyst for the segment as in 2027 and beyond.

And finally, before handing the call over to Bill, I'd like to hit on guidance real quick. You know, as we said, we've had a solid first half in the books, and we now have a far better line of sight into second half volumes than we did back in March with the activity level now accelerating as well across the footprint. As a result, we are tightening our full year 2026 Adjusted EBITDA guidance to a range of $235 million-$255 million. We are also raising full-year capital expenditure guidance to $100 million-$120 million, which is inclusive of the contributions to the Double E JV. Look, the first driver of that capital increase is the approximate 30 new wells that we talked about earlier in the call, which were not part of our original plan.

As well as the second, I guess, would be the incremental capital at Double E, which is tied to the new firm transportation agreements that we executed this year. As a reminder, that Double E capital will be funded through our new term loans that we executed earlier in the year. Look, both of these increases in expenditures are going to be really high returning dollars and tied to activity that is either contracted or committed. In both cases, we see that the earnings benefits will start showing up in 2027. With that, I'd like to turn the call over to Bill now to walk through the financials.

Thanks, Heath, and good morning, everyone. Summit reported 2026 Adjusted EBITDA of $60.7 million, Distributable Cash Flow of $36.8 million, and Free Cash Flow of $9.4 million. Total capital expenditures were $25 million for the quarter, inclusive of $4.1 million of Maintenance CapEx, with the majority of capital directed toward pad connections in the Rockies and Mid-Con segments. With respect to Summit's balance sheet, we ended the quarter with $21 million of unrestricted cash and $79 million drawn on our revolver, with approximately $418 million of available borrowing capacity after accounting for $2.7 million of undrawn letters of credit. Total leverage at the end of the quarter was approximately 4.1 times, and the Summit Permian Transmission term loan had a balance of $350 million at quarter end and remains non-recourse to Summit.

With all the commercial progress and our expectation to FID compression in the near term, we are also working with our financial partner at Summit Permian Transmission to secure the $50 million uncommitted accordion to support the compression expansion project. During the quarter, we also began executing on the $35 million share repurchase program authorized by the board, repurchasing approximately 35,000 shares for $1 million. As of June 30, we had approximately $34 million of remaining capacity under the program. Now on to the segments. The Rockies segment generated Adjusted EBITDA of $30.4 million, an increase of $4 million relative to the first quarter of 2026, driven by a 6.3% increase in liquids volume throughput and higher realized crude oil and NGL prices, partially offset by a 3% decline in natural gas volume throughput.

Liquids volumes averaged 68,000 barrels per day, and natural gas volumes averaged 162 MMcf per day during the quarter. Realized crude oil prices and composite NGL prices were both up approximately 30% quarter-over-quarter, benefiting both our customers and Summit's earnings associated with percentage of proceeds contracts in the DJ Basin. We connected 16 wells in the DJ Basin during the quarter. Subsequent to quarter end, we connected an additional 17 wells in the Williston Basin, including nine wells for which we provide both crude oil and produced water gathering services. Just as a reminder, the water to crude ratio in this area of the Williston is approximately 3 barrels to 1. So these wells are extremely impactful to volume throughput.