The Strategic Shift Unfolding
Summit Midstream Partners, LP SMLP shines brightly on Friday as its shares soar to new heights.
A Transformational Transaction
In a groundbreaking move, the company has declared the sale of Summit Midstream Utica to a subsidiary of MPLX LP for a significant sum of $625 million in cash.
Steadying the Financial Ship
This strategic transaction has the immediate effect of reducing Summit’s current net leverage by 1.5x to below 4.0x, further bolstering its strides towards the coveted 3.5x net leverage target.
Reshaping the Portfolio Landscape
With 36% interest in Ohio Gathering Company, 38% interest in Ohio Condensate Company, and the sole ownership of Utica assets, Summit Midstream Utica has now changed hands, marking a significant shift in Summit’s portfolio towards approximately 55% crude oil-oriented basins.
Forward-Looking Statements
Visionary words from the company’s President and CEO, Heath Deneke, signify a strong belief in the immense growth potential of the Delaware Basin and expectations to capitalize further on Double E’s pipeline capacity.
Closing the Chapter on Strategic Review
The unanimous approval from Summit’s Board of Directors underscores the completion of the meticulous strategic review process announced on October 3, 2023.
Remaining Open to Opportunities
While the evaluation phase has been completed, Summit’s Board and management signal receptivity to potential value-enhancing deals in the future, keeping the door open for lucrative transactions.
Enhanced Liquidity and Projections
Noteworthy gains in liquidity come into play, with an undrawn $400 million credit facility and over $325 million in unrestricted cash following the transaction. The company has revised its pro forma 2024 Adjusted EBITDA guidance in the range of $185 million to $220 million.
An Optimistic Outlook
CEO Deneke expresses confidence in the potential of the DJ Basin and Williston Basin, highlighting the fragmented nature of these regions as a gateway to value-accretive acquisitions and organic growth prospects.
Market Response
Price Action: SMLP shares are currently on the rise by a staggering 35.87%, reaching $26.40 at the time of the latest check on Friday.