HOUSTON, March 22, 2024 /PRNewswire/ — Summit Midstream Partners, LP (NYSE: SMLP) (“Summit”, “SMLP” or the “Partnership”) announced today the sale of Summit Midstream Utica, LLC, which includes its approximately 36% interest in Ohio Gathering Company, LLC (“OGC”), approximately 38% interest in Ohio Condensate Company, LLC (“OCC”, collectively with OGC, “Ohio Gathering”) and wholly owned Utica assets (collectively, “Utica Position”) to a subsidiary of MPLX LP (“MPLX”) for $625 million in cash (the “Utica Divestiture”).
This transaction is the culmination of the comprehensive strategic review process undertaken by the Summit Board of Directors (the “Board”), in consultation with external advisors, that was publicly announced on October 3, 2023. As part of this process, the Board considered a wide range of opportunities to maximize value for unitholders, including an outright sale of Summit and other divestiture and partnership-level transactions. The Utica Divestiture and conclusion of the strategic review were unanimously approved by the Board. The Board and management team have completed their active process, but will remain open to all potential value-enhancing transactions.
In connection with the Company’s strategic review, the Board also evaluated various corporate structures to determine how to drive the greatest long-term value for unitholders. The Board believes converting to a C-Corp positions the Company to maximize value by enhancing trading liquidity, greatly expanding the universe of potential investors and optimizing the long-term tax consequences to unitholders. The Board and management plan to seek approval from Summit unitholders to convert the Partnership to a C-Corp at a Special Meeting later this year. Summit expects to file a proxy statement to provide unitholders with additional information about the rationale and benefits of the C-Corp conversion in advance of the Special Meeting.
Transaction Highlights
- Delivers significant value and dramatically improves credit profile and financial flexibility
- Reduces Summit’s current net leverage by 1.5x to sub-4.0x, furthering progress toward achieving 3.5x net leverage target
- Increases liquidity with undrawn $400 million credit facility and more than $325 million of unrestricted cash
- Shifts Summit’s portfolio to approximately 55% crude oil-oriented basins
- Accelerates timing of potential preferred equity and common equity distributions
- Positions Summit to continue to fund and execute on organic growth projects including further commercialization of Double E and potential synergistic bolt-on acquisitions, primarily in its Rockies segment
- Enables Summit to further reduce cost of capital in elevated interest rate environment
- Revised pro forma 2024 Adjusted EBITDA guidance of $185 million to $220 million1
Management Commentary
Heath Deneke, President, Chief Executive Officer, and Chairman, commented, “We are pleased to announce this compelling transaction with MPLX, which is the result of a thorough strategic review, and generates substantial value creation opportunities for our unitholders. MPLX has been a great joint venture partner and operator of the OGC and OCC assets since Summit entered the Utica Shale in 2014 and we thank both MPLX and our valued Summit employees for their hard work and dedication to the partnership and producer customers in the region.
As we evaluate the strategic and commercial opportunities for our existing assets, we believe there are several value optimizing strategies to pursue to further build scale, particularly in our Permian and Rockies segments. We continue to believe in the sizeable growth potential of the Delaware Basin and expect to further commercialize Double E’s available pipeline capacity. We are confident there are additional commercial opportunities, similar to the recently announced Janus Processing Plant connection, that will continue to drive incremental free cash flow and the value of the pipeline. Further, we believe the DJ Basin and Williston Basin remain fragmented with a sizeable opportunity to pursue value-accretive and synergistic bolt-on acquisitions and organic growth opportunities. With a more focused portfolio and improved credit profile following completion of the transaction, we will be even better positioned to pursue those opportunities, expanding our footprint and service offerings in those regions. We also believe the transaction accelerates our ability to potentially resume preferred and common equity distributions in the near future as we rebuild scale and achieve our longer-term net leverage targets.”
Utica Position Overview
Summit Utica: The Summit Utica system is a natural gas gathering system located in Belmont and Monroe counties in southeastern Ohio and serves producers targeting the dry-gas reserves of the Utica and Point Pleasant shale formations. The Summit Utica system gathers and delivers natural gas, primarily under long-term, fee-based gathering agreements, which include acreage dedications.
Ohio Gathering: Ohio Gathering comprises a natural gas gathering system and condensate stabilization facility located in the Utica Shale in southeastern Ohio. The gathering system spans the condensate, liquids-rich and dry-gas windows of the Utica Shale for multiple producers that are targeting production from the Utica and Point Pleasant shale formations across Belmont, Monroe, Guernsey, Harrison and Noble counties in southeastern Ohio. Substantially all gathering services on the Ohio Gathering system are provided pursuant to long-term, fee-based gathering agreements.
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