Summit Midstream Partners (SMLP) Tops Q1 EPS by 9c, Revenues Beat

May 7, 2021 6:51 AM EDT
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Summit Midstream Partners (NYSE: SMLP) reported Q1 EPS of $0.12, $0.09 better than the analyst estimate of $0.03. Revenue for the quarter came in at $99.32 million versus the consensus estimate of $78.45 million.

Heath Deneke, President, Chief Executive Officer and Chairman, commented, "Summit's financial results exceeded internal expectations for the quarter with $60.4 million of adjusted EBITDA, largely due to our continued focus on reducing operating expenses, together with strong performance from a new Utica pad which came online in March, ahead of schedule, and at initial production rates that exceeded expectations by nearly 20%. While it is still early, these wells continue to materially outperform original expectations underlying our 2021 financial guidance."

"With respect to our expense improvement, towards the end of 2020, we implemented structural and organizational changes across our business, aimed at further streamlining operations and minimizing costs. The first quarter of 2021 is the first period in which the majority of these savings materialized and is evidenced by approximately $4.9 million lower operating expenses than our quarterly average in 2020. I want to thank the entire Summit team for the continuous improvement mindset and commitment to continue to find ways to improve our operating efficiency and effectiveness, without compromising our commitment to safety, compliance, the environment and providing excellent service for our customers."

"We remain focused on executing the second phase of our balance sheet transformation initiatives, which includes addressing our 2022 debt maturities and capturing discounts where available on other fixed capital obligations. During the first quarter, we utilized our internally generated cash flow, together with $8 million of cash received from the sale of surplus compressor equipment, to reduce our revolving credit facility balance by $55 million. This paydown represents nearly 40% of our 2021 debt reduction guidance and we remain on track to generate sufficient cash, after interest expense and capital expenditures, to reduce outstanding indebtedness this year by approximately $130 million to $150 million."

"In March, we launched a Series A preferred equity for SMLP common equity exchange, with the intention of enhancing common equity value by reducing principal at discounts to face value and eliminating accumulated unpaid distributions. This transaction was successful and upon closing in April, we exchanged $18.7 million Series A preferred units, or approximately 11.5% of the outstanding Series A preferred units, for approximately 560,000 SMLP common units with a value of approximately $12.3 million, and we eliminated $2.5 million of accrued unpaid distributions."

"Addressing our 2022 debt maturities is a top priority for Summit today. We are actively working on a holistic solution for our senior unsecured notes and revolving credit facility that mature in 2022 and we have generated strong interest from numerous banks and bond investors regarding our refinancing solution. Our goals are to not only extend our 2022 debt maturities, but also to provide a significant amount of additional financial flexibility over the coming years to continue to improve the balance sheet and transform the overall business. We are very excited about the progress we've made on the refinancing efforts to date and look forward to providing additional details ahead of our next scheduled earnings call."

"We achieved several key milestones on the Double E project during the first quarter, including closing $175 million of non-recourse senior secured credit facilities and commencing construction activities, which were both critical steps towards remaining on schedule. Our wholly owned, unrestricted subsidiary, Summit Permian Transmission, LLC, utilized the credit facilities to fund all of Summit's $4.6 million investment in Double E in the first quarter, and we expect that these credit facilities will fund the vast majority of Summit's remaining Double E capital commitment. All of the pipeline and rights-of-way have been procured and pipeline construction is underway. We continue to expect that Double E will be completed at or below the current $425 million cost estimate (8/8ths), of which, approximately $35 million remains in unidentified project contingency. We continue to expect Double E to be commissioned in the fourth quarter of 2021."

"Overall, Summit is off to a strong start to 2021 and I continue to be encouraged by a number of positive market developments that could be a catalyst for increased customer activity on our systems later in the year. At this point however, we are maintaining our full year 2021 adjusted EBITDA range of $210 million to $230 million for the year."

For earnings history and earnings-related data on Summit Midstream Partners (SMLP) click here.

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