Q3 2026 Summit Midstream Corporation Earnings Conference Call - SUMMIT MIDSTREAM CORP

Explicit Guidance:

• FY 2026 Adjusted EBITDA: Raised to $250–$260 million (previously $235–$255 million).
• FY 2026 Capital Expenditures: Expected to remain $100–$120 million (including maintenance and EE).
• FY 2026 Leverage Ratio: Projected to end at approximately 3.6x net leverage.
• 2027 Well Connectivity: Expectation to connect 200–250 wells.
• Dividend Restart: Anticipated to begin consideration in early 2027 upon reaching mid-3.5x leverage target; payout to be conservative with growth room.
• Permian Segment EBITDA: Projected to grow from ~$40 million in 2026 to >$100 million in 2029 (driven by Mainline Compression expansion).
• Rockies Segment EBITDA: Potential to reach $30 million incremental adjusted EBITDA over the next two years.
• Company-Wide Growth: Mid-to-high teen compound annual growth rate (CAGR) in adjusted EBITDA expected over the next several years.

Business-Segment Outlook:

• Rockies (Williston & DJ):
  • Williston: Activity migration from McKenzie County to Williams and Divide Counties expected to drive volume; 30k b/d incremental EBITDA potential over two years.
  • DJ: Existing processing plants expected to fill by end of 2027; brownfield expansion of Jackson Lake processing complex under evaluation for 2028 growth (targeting FID in coming months).
  • Volume: Liquids volumes grew 40% QoQ in Q3 2026; 140 wells "ducked" (waiting for connection).
• Permian:
  • Infrastructure: Mainline compression expansion expected online by end of 2028, increasing delivery capacity to Waha Hub by 50% and adding bi-directional capability.
  • Capacity: Phase 2 expansion planning initiated to add >1 BCF/day bidirectional capacity in the 2030 timeframe.
  • Egress: New pipeline projects (Desert Southwest, Solitude, Permian Link) deemed adequate through 2030; in-basin transmission constraints driving double E reliance.
  • Capacity Fill: Remaining forward haul capacity to Waha expected to sell out in coming months; new open season for bidirectional capability launching soon.
• Mid-Con:
  • Acoma: Emerging dry gas window identified near system; initial pads producing ~50 MMcf/d; potential for meaningful growth.
  • Barnett: Steady activity with one rig running.
• Pion: Minimum volume commitment mechanisms expired Q3 2026; segment outlook steady but reliant on volume pickup rather than shortfall payments.

Market and Competitive Outlook:

• Commodity Prices: Outlook remains resilient provided crude prices stay above ~$60/bbl; customers have hedged or locked in 12–24 months of activity.
• Drilling Economics: Shift from 2-mile to 3–4 mile laterals becoming the new standard, improving breakeven economics and reducing required well count for equivalent volumes.
• Basin Consolidation: Significant consolidation in DJ (2 core customers) and Williston (2–3 core customers) driving improved development execution compared to prior depressed periods.
• M&A Environment: Company expects to slow M&A activity; current transaction multiples (north of 8x EBITDA) are unattractive relative to the company's sub-8x trading multiple and internal build multiples (sub-5x).
• Organic Growth Priority: ~100% of anticipated growth is organic, driven by customers developing acreage already dedicated and under contract.

Macro / Industry Outlook:

• Customer Activity: Producers are accelerating development plans through 2028 and beyond due to supportive commodity price environments.
• Supply Chain: Supply chain and infrastructure constraints (specifically in-basin Permian pipelines) are driving demand for additional midstream capacity.
• Regulatory/Compliance: No specific regulatory changes mentioned, but focus remains on "dedicated acreage" and long-term contract security.

Strategic Initiatives:

• Jackson Lake Expansion (Rockies): Evaluating brownfield expansion to enable 2028 growth; contingent on securing incremental commercial contracts prior to FID.
• Permian Mainline Compression Expansion: Project to be online end of 2028; capital cost estimated at $130–$140 million net to Summit; expected to generate ~$60 million in incremental contracted EBITDA.
• Permian Phase 2: Early planning stage for additional capacity in 2030 timeframe.
• Dividend Policy: Conservative restart strategy planned for early 2027 to preserve flexibility for high-return organic projects.
• Balance Sheet: Targeting net leverage of ~3.6x by year-end 2026; free cash flow generation expected to increase significantly post-2028 as capital intensity decreases.

Risks and Headwinds to Outlook:

• Commodity Price Sensitivity: Crude oil prices falling below $60/bbl could necessitate customer adjustments to development plans.
• Project Execution: Delays in FID for Jackson Lake or other brownfield expansions could impact 2027 capital ramp-up.
• Regulatory/Permitting: Implicit risk in acquiring permits and securing drilling contracts if market conditions deteriorate.
• Contract Expiration: Expiration of MVC (Minimum Volume Commitment) mechanisms in Pion segment removes a prior revenue support layer.
• M&A Market: High acquisition multiples may deter asset purchases, limiting inorganic growth options.

Management Tone on the Future:

• Confidence Level: High; described as "industry-leading" and "very bullish" outlook for 2027–2029.
• Trend: Significant momentum from Q2 to Q3 2026 with "meaningful year-over-year growth" expected.
• Differentiation: Emphasis on 100% organic growth visibility vs. historical M&A reliance; pride in achieving leverage targets after years of discipline.
• Valuation: Management notes the stock trades at a "steep discount" to peers and expresses frustration with market pricing relative to asset-level deal multiples.

Miscellaneous:

• Well Performance: Preliminary results from new wells in Divide County encouraging; Williams County wells outperforming internal expectations.
• Water Handling: Water-to-crude ratio in Williston approximately 3:1, making produced water gathering a meaningful volume driver.
• Rig Count: Seven rigs currently running behind the system (4 in Williston, 2 in DJ); 1 rig in Barnett.