Summit Midstream (NYSE:SMC) held its first-quarter earnings conference call on Tuesday. Below is the complete transcript from the call.

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The full earnings call is available at https://edge.media-server.com/mmc/p/429v6ix7

Summary

Summit Midstream reported first quarter 2026 adjusted EBITDA of $54.2 million, with overall performance aligning with expectations despite some segment variances.

The company remains optimistic about achieving the midpoint of its 2026 adjusted EBITDA guidance of $225 million to $265 million, driven by a more favorable crude oil environment.

Operationally, 37 wells were connected during the quarter, with particularly strong performance in the Rockies segment.

Summit Midstream executed a 10-year agreement for 100 million cubic feet per day of firm capacity for the Double E gas pipeline, reflecting strong demand and potential for future expansions.

Financially, the company made strides in simplifying its balance sheet, including the repayment of $45 million in preferred stock dividends and a $42 million common stock placement.

Management expressed confidence in continued growth and a potential reinstatement of common dividends, alongside strategic M&A evaluations.

Full Transcript

OPERATOR

Thank you for standing by and welcome to The Summit Midstream First Quarter 2026 Earnings Conference Call at this time, all participants are in listen only mode. After the Speaker's presentation, there will be a question and answer session. To ask a question this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host of today's program, Randall Burton, Treasurer and Investor Relations. Please go ahead, sir.

Randall Burton (Treasurer and Investor Relations)

Thanks Operator and good morning everyone. If you don't already have a copy of our earnings release, please visit our websitesummitmidstream.com where you'll find it on the home page Events and Presentations section or Quarterly Results section. With me today to discuss our first quarter 2026 financial and operating results is Heath Deneke, our President, Chief Executive Officer and Chairman, Bill Malt, our Chief Financial Officer and Chris Tennant, our Chief Commercial 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 10K 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 differ 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 provided reconciliations to the most directly comparable GAAP measures in our most recent earnings release. And with that, I'll turn the call over to Heath.

Heath Deneke (President, Chief Executive Officer and Chairman)

Thanks Randall and good morning everyone. Summit reported first quarter 2026 adjusted EBITDA of 54.2 million, which was generally in line with expectations despite lower volumes and realized residue gas prices in the Arkoma. The underperformance in the Midcontinent segment was partially offset by gains in the Rockies segment driven by higher than budgeted crude oil pricing. So, based on the current activity levels. The recent well performance and our visibility in the second half of the year volumes reflect we continue to expect results to trend towards the midpoint of our original 2026 adjusted EBITDA guidance of $225 million to $265 million. Before I get into the operational highlights, I wanted to spend a moment on the macro picture which we see becoming increasingly constructive for Summit Crude oil prices are obviously much higher than the lows we saw earlier this year and for a business like ours were roughly 80% of our well connects in 2026 are expected in crude oil oriented basins. A more constructive crude environment translates directly into improved producer economics and an incentive to accelerate and increase activity levels. Some of our Rockies customers have communicated that they are actively working on plans to attempt to accelerate activity into 2026 and increase overall activity levels in 27. We're also seeing benefits from higher crude oil pricing on our field condensate sales and our optimization activities in the Rockies segment. At the same time, the natural gas outlook remains favorable as well. Henry Hub has remained constructive. LNG export demand continues to grow rapidly and the long term demand outlook from data center growth and electrification is increasingly supportive of the natural gas infrastructure we operate in our midcon and Permian segments. For our midcon segment that is a great backdrop to see activity levels pick up in the coming years in both the Arcoma and the Barnett as these assets are very well positioned on the natural gas pipeline grid to feed LNG and power markets along the Gulf Coast. The macro outlook is also very supportive of increasing demand for our Double E pipeline gas pipeline in the Permian that transports residue gas from multiple processing facilities throughout the core of the Delaware Basin to the Waha hub which then connects to more than 20 bcf a day of eastern bound gas infrastructure that serves the East Texas and Louisiana Gulf coast markets. Turning to operations, we connected 37 wells during the quarter including the first four Williston wells under the new 10 year crude gathering agreement that we announced last quarter in Divide County. Early production results from those wells have been encouraging. In the Aracoma, while we did experience lower than expected well performance from two pads during the quarter which was a primary driver of the volume underperformance in that segment. But both of these pads were drilled in the outer edges of our dedicated acreage footprint in an attempt to further extend the boundaries of proven but undeveloped locations in the Caney and Woodford formations. Recently though, we have brought on a new three well pad in the dry gas area of our coma system and we're seeing These wells significantly outperform our internal expectations. These three wells continue to ramp up but have already averaged approximately 50 million a day combined over the past couple of days since being turned in line, which is a very encouraging early read and it really gets us excited about future growth in the midcon segment. We currently have five rigs running behind the system with approximately 80 drill but uncomplete wells and we expect approximately 40 new well connects in the second quarter, including 20 in the Midcon segment. That second quarter activity and well results from some of the wells already connected in the second quarter sets up a very meaningful volume increase as we move into the back half of the year on the EE front. Subsequent to the quarter end we executed another 10 year take or pay proceeding agreement for 100 million a day of firm capacity which is slated to start in 1H27. That brings our total contracted volumes on EE to just over 1.7 BCF a day and we continue to build momentum in our ongoing open season to secure additional commitments to support the previously announced 800 million a day midpoint compressor expansion project. Given the market interest that we've seen thus far, we remain very optimistic about securing additional contracts that are necessary to help us make a final investment decision on the project this summer. We also made meaningful progress to further simplify and improve the balance sheet this quarter we repaid all 45 million of accrued series A preferred stock dividends which clears a key milestone on the path to reinstate a common dividend. We completed a 42 million private placement of common stock to an affiliate of Tailwater Capital, our largest shareholder, which will help us fund high return organic growth projects across our operating footprint. And finally we closed the Summit Permian Transmission Term Loan Refinancing which provides the financial flexibility to fund double E capital growth while we continue to delever Summit's corporate balance sheet. So with that update let me turn it over to Bill to walk through the details on the financials.

Bill Malt (Chief Financial Officer)

Thanks east and good morning everyone. Summit reported first quarter 2026 adjusted EBITDA 54.2 million, distributable cash flow of 26.9 million and free cash flow of 11.4 million. Total capital expenditures were 19.3 million for the quarter inclusive of 3.7 million of maintenance capital, with the majority of the growth capital directed towards PAD connections in the Rockies and midcon segments. With respect to Summit's balance sheet, we ended the quarter with 43.4 million of unrestricted cash and 116 million drawn on our revolving credit facility with approximately 381 million of available borrowing capacity after accounting for 2.7 million of on drawn letters of credit. Now moving on to the segments, the Rockies segment generated adjusted EBITDA of 26.4 million, a decrease of 1.5 million relative to the fourth quarter of 2025, primarily due to a $1.2 million non cash imbalance, a 3% reduction in liquids volumes lower realized residue gas prices on our percentage of proceeds contracts lower freshwater sales. This was partially offset by a 4.4% increase in natural gas volume throughput and improving crude oil and NGL prices that really started in March of 26. We connected 18 wells in the DJ basin and 13 in the Williston including the first four 3 mile lateral wells under the new crude gathering agreement that we announced last quarter. Five rigs are currently running with approximately 60 DUCs behind the systems and several customers are working to try to accelerate their programs given the improved crude oil price environment. The Permian segment reported adjusted EBITDA of 8.7 million flat relative to the fourth quarter of 2025 and double E volumes averaged 805 million cubic feet per day during the quarter. The PICE segment reported adjusted EBITDA of 9.6 million down 0.4 million from the fourth quarter, primarily driven by volume throughput declines of approximately 7.3% which included 8 million cubic feet per day of temporary shut ins as well as natural production declines with no new wells connected during the quarter. Customers currently have approximately 20 million cubic feet per day of volume shut in as a result of low regional gas prices primarily in the White river hub, and based on current forward prices in the region, we would expect that production to resume beginning in the third quarter of 2026. Finally, the Midcontinent segment reported adjusted EBITDA of 19.3 million, a decrease of 2.1 million from the fourth quarter primarily driven by natural production decline, partially offset by six new Arkoma well connections during the quarter. Three additional Arkoma wells were connected subsequent to quarter end and we have 17 Barnett DUCs expected to come online in the second quarter. We expect second quarter activity and recently connected wells to drive an increase in Midtown volumes as we move throughout the remainder of the year and with that I'll turn the call back over to Heath for closing remarks.

Heath Deneke (President, Chief Executive Officer and Chairman)

Thanks Bill. So to summarize, we're still tracking towards the 245 million midpoint of our adjusted EBITDA guidance for 26 and we continue to see a lot of momentum building across the portfolio in response to the improving commodity price outlook we remain excited about the growth outlook for the business and believe the current macro outlook supports more than 100 million of organic EBITDA growth from our existing portfolio by 2030. We continue to be active on the M&A front, evaluating opportunities that could further scale up the business in a value and credit accretive manner. We've also taken meaningful steps to further simplify and improve the balance sheet by cleaning up the accrued preferred dividends, completing the Tailwater common stock placement and closing the Permian Transmission refinancing to support Double E growth. And finally, as we execute the business plan, we continue to have a line of sight on achieving Our long term 3.5 times leverage target and being in a position to reinstate a common dividend in the near future. We believe there's a pretty simple and achievable path forward to drive a lot of shareholder value in the coming years. And we're excited to get out on the road in the coming weeks as a management team to continue to tell the Summit's story and continue to build momentum with investors. So with that I'd like to thank everyone again for joining the call today and supporting the business and operator. I think we can open up the call for questions now.

OPERATOR

Certainly. And as a reminder, if you do have a question at this time, please press star 11 on your telephone. Our first question comes from the line of Mark Reachman from Noble Capital Markets. Your question please.

Mark Reachman (Equity Analyst)

Would you please discuss the competitive positioning of the Double E pipeline? Are you seeing increasing demand for incremental takeaway capacity tied to LNG's export growth and, and could Double E ultimately require additional expansion phases beyond what's currently contemplated?

Heath Deneke (President, Chief Executive Officer and Chairman)

Yeah, yeah, you bet. Mark, this is heath. Look, as far as the competitive position, I think, you know, Double E pipeline is in a pretty good, pretty good shape on that front. Honestly. We, if you look at what's occurred with the build out of the Delaware in terms of rig activity and where we've really seen volumes growth, it kind of started in Texas and kind of migrated their way up to New Mexico and a lot of the, in fact I'd say the vast majority if not all of the other pipelines that we compete with have really kind of filled up their existing takeaway capacity. In many cases they've kind of gotten past the cheap, you know, easy to expand compression type projects and now for them to materially expand capacity they're looking at laying brand new greenfield or big loops if you will, to their system to get existing capacity. So I think we're well positioned having the recently just filled up our Layton, our free flow capacity. I think this expansion that we're in the midst of on an open season, adding another, call it to 900 million a day of capacity. I think we're really one of the only options in town, frankly that we think can be available by the end of 2028 to meet a lot of this increment residue gas growth that we see in the Permian basin. So we feel strongly about that. But I will say just looking at our rates relative to other tariffs and the like, we're certainly at market rates with what we, you know, what we sell our capacity for on Double E. But I think what really kind of gives us the advantage is the low cost expendability that we still have remaining on the pipe and the ability to bring that to market in fairly short order. Go ahead. No, go ahead. Yeah, well, I was going to the second part of your question. I think you were asking about LNG growth and look, there's no doubt if you look at, you know, the amount of infrastructure that has been built out and is in the process of being built out to move gas from Waha over to East Texas to kind of feed the LNG facilities in Texas and frankly across into Louisiana as well, definitely been the primary catalyst of new infrastructure development. I think there's upwards of over 20bcf a day of capacity that originates frankly from that Waha area that has access to those growing markets. So clearly has been kind of a near term catalyst. I will say what's been interesting to watch particularly develop on EE is that that market is kind of getting maybe a little bit saturated in that. There's been a lot of projects pointing in that direction. There's going to be a lot of LNG growth. But I think we're starting to see additional markets attract interest from, you know, from our shippers. So as an example, Energy Transfer's Desert Southwest project is all about getting gas west into Phoenix to serve some incremental power generators, generation, demand growth. We've also seen, you know, additional markets pointed towards the mid con or up into the Midwest on the north end of our system really start to attract interest from shippers to kind of diversify the access that they have to market. So thematically I think what we're seeing is this massive, call it 6, 7 BCF a day of incremental supply growth over the next three to five years. And we're finding a lot of new projects, if you will, that are, that are, you know, getting that gas distributed to the right points in the market. So absolutely. What's fueling the, you know, the current compression project, open season. You know, to your other point about, you know, do we think we're, we're done after that? And I think the short answer to that is no. I think there, you know, as those markets develop kind of on the northern end of our system, we'll have a lot of, you know, backhaul capacity, if you will, to move gas potentially from Waha or other process plants located south of that. It really wouldn't require much additional build out. It would just be effectively maybe making that compressor station that we're trying to get Final Investment Decision (FID) bidirectional to be able to push gas north or south, depending on in the aggregate which direction flows want to occur. And there's also some markets developing around our pipe. We're in discussions with multiple data center power generation customers that are looking to take advantage of, of the low gas price in the Permian Basin that are in close proximity to our pipe. So that's an area that I think the majority of our customers to date are more supply push, getting supply out to the marketplace, predominantly producers or gathering and processing companies that control residue. But we could start to see some actually demand side guys come in and pay to have us expand our system to reach, you know, multiple processing plants to be able to get to buy gas directly from hubs. So I really like how this asset's positioned. I think what we've kind of articulated the market, you know, we see our EBITDA growing, you know, from roughly 35 up to the mid-60s here, just with what we have contracted to date. And then if you look at, you know, with the expansion that we've announced, we think that could grow up to 90 million. And I think, you know, beyond that, I think there's ample room to see that EBITDA continue to grow. And over the next several years,

Mark Reachman (Equity Analyst)

that's very helpful. Now, how sustainable is Rocky's throughput growth over the next several quarters? And what level of producer activity are you seeing in the D.J. and Williston basins? And on that you might discuss the commodity mix and margin profile of the Rockies.

Heath Deneke (President, Chief Executive Officer and Chairman)

Yeah, I'll let Bill kind of handle the, you know, the details. Definitely a lot of momentum in both segments, as you can imagine, with, you know, the improving crude strip. We've seen producers in some case look to pick up additional rigs and we've seen, you know, additional wells even kind of finding their way into the back half of 2026. So I think we got a lot of Momentum. And Bill, why don't you kind of fill them in on some of the details here?

Bill Malt (Chief Financial Officer)

Yeah. Good morning, Mark. And so a couple things going on and I'll start in the DJ Basin. Mark. So there's a large integrated kind of public shipper in the DJ that's a customer of ours. We've actually got 16 wells expected to come online from them here in the second quarter. That is really just the start of a broader program, call it over the next two to three years that they intend to execute on. That's one that we've been around, have probably talked to you about in the past that we're starting to see actually come to fruition here, you know, starting here in Q2. So excited about that one. There's also a lot large private in the DJ Basin. They've been drilling behind our Hereford Ranch processing plant. You know, we've seen outlooks from them that could fill up that processing plant. We'll see how active they get. But they are picking up a second rig in the basin which again, I think is just dovetailing off kind of this supportive commodity price environment and trying to take advantage of that. The only other one I'd add in the DJ Basin, PDC Energy acquired verdad a few months ago. I think we mentioned this during our Q4 earnings, but that did create a little bit of a stall in activity for them in 26. But you know, we're excited just given the environment we're in and what they're doing that, you know, I'd expect them to kind of pick back up activity here late 26 into 27, which we're really not getting the benefit of here in 26. Up in North Dakota, Mark, you know, we had several customers. They're trying to figure out how to accelerate development. Obviously that takes coordination of completion crews and being able to actually execute on it. But there is a push from several customers up there to try to accelerate timing. One thing that and really in the third quarter we've had a customer that has been somewhat inactive behind our acreage up in North Dakota past couple years. They're actually bringing on kind of a pad focused in the crude oil and produce water gathering area, the services we provide them. The first set of wells is coming on in the third quarter. We've had conversations with them about additional activity in 27. And Mark, as you know, with the crude and water cuts up there, those pads are meaningful for volumetric growth behind the system. So excited to kind of see that upcoming as it relates to kind of margin profile. You should think about the Rockies segment is roughly 35% commodity price exposed. That's primarily our pop contracts and the DJ as well as we retain all the condensate drip that falls off of our system and our compressor stations. And when you break that down a little further, Mark, I would think about it is, you know, between NGLs and crude, that represents roughly 75% and then residue represents the remaining 25% of that kind of product margin breakdown.

Heath Deneke (President, Chief Executive Officer and Chairman)

Mark, just one thing to just add to what Bill was talking about with the Rocky segment. I mean, clearly it and the Permian are going to be the two largest drivers of growth for us in the out years. And as we've kind of talked about and provided in some of our investor materials, we see roughly upwards of 100 million of EBITDA growth organically from 25 into the 2030 time frame. And so if you think about that, what does that mean for Merakis? Well, the things that Bill has kind of articulated that we're seeing early signs and maybe even accelerating from what we thought when we actually published that you could see the Rockies growing from roughly around 85 million of contribution today to upwards of 160 million through 2030. So substantial amount of growth there and like I said, we're probably seeing signs that potentially that growth may even get further accelerated from what we thought the ramp up would be between now and 2030. Jumping on the end of that. Heath, this is Chris Tenantmark. We're having conversations with all of our major customers in that area, really thinking about the next cycle of growth and infrastructure needed to really plan accordingly. So it gives us a lot of confidence when we look forward in those areas.

Mark Reachman (Equity Analyst)

Now are there any bolt on acquisition opportunities in your operating regions, particularly the Rockies and Permian, where you're seeing the stronger operational momentum?

Heath Deneke (President, Chief Executive Officer and Chairman)

Yeah, certainly, I'd say the Rockies is probably where we see the most near term opportunities. There's still a fair amount of privately owned, privately backed systems that need to find a liquidity or an exit point here fairly soon. So we're pretty active identifying and working, having conversations around some of those assets. And you know, you should think of those kind of fitting that historical profile that we've executed over the past three years. I mean, these are going to be, you know, roughly kind of in that, you know, it's called six, you know, somewhere between five to seven times type purchase multiples on an LTM basis that are synergistic that we think we can kind of drive down to, you know, a very, you know, accretive levels or that we would be able to capture a lot of accretion from, from a value perspective and from a leverage perspective in the out years. I think the Permian is a little different. I do think there are some larger opportunities that, that we're kind of looking at. You know, I think that's one of the differentiators between you know, there's probably more actionable items that we see in the Rockies that are kind of fit more that call it 30 to upwards of 100 million to be. But when you start getting into the Permian, the type opportunities that we are seeing are probably, you know, north of that, maybe closer to the 150 to 200. They're not completely out of reach but obviously they're, they're ones that take are going to be more complex, you know, to execute on and something that you know, I wouldn't, I wouldn't rule out in the out years but I think near term I think we're more focus on the Rockies opportunities at this point.

Mark Reachman (Equity Analyst)

And then my last question is just what are the remaining plans and objectives in your broader capital structure optimization strategy and how do you prioritize the capital allocation between debt reduction, organic growth, acquisitions and return of capital to shareholders? Go ahead Bill.

Bill Malt (Chief Financial Officer)

Yeah, Mark. So I'd say over the next couple of years, Mark, one thing that we've talked about, particularly when we did the refinancing of the double E refinancing here last quarter, we set that up whereby and call it that 2028 time frame, we've got the flexibility to kind of clean that up, bring it up on balance sheet in the recourse borrower group. That's probably the next kind of item on the list. I don't think as we sit here today, Mark, we've been prioritizing post growth capital, the remaining free cash flow, prioritizing debt repayment to get to our long term leverage target of three and a half times. So I think you'll see us prioritize that Mark, till we get to that long term leverage target. And it's a balancing act as it relates to M and A and organic growth. You know, we, I tell you a lot of our organic growth projects, you know, are commanding very, you know, call it 20, 30 plus percent unlevered rates of return which are obviously very attractive. And you know, we'd make the long term decision, you know, to focus on reinvesting in growth, you know, to the extent additional opportunities arise on the organic side.

Mark Reachman (Equity Analyst)

That's great, that's very helpful. Thank you very much.

OPERATOR

As a reminder, ladies and gentlemen, if you do have a question at this time, please on your telephone. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation.

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