Riding High on Strategic Moves
Summit Midstream Partners, LP shares are experiencing a meteoric rise today. The catalyst behind this surge is the company’s recent announcement of the sale of Summit Midstream Utica to a subsidiary of MPLX LP for a staggering $625 million in cash.
This transaction is not merely a financial windfall; it strategically positions Summit by reducing its net leverage significantly. The move brings Summit further towards its target net leverage of 3.5x by cutting down 1.5x to sub-4.0x.
A Strategic Shift Towards Crude Oil
Summit Midstream Utica holds crucial interests in various assets, including a 36% stake in Ohio Gathering Company, 38% stake in Ohio Condensate Company, and complete ownership of Utica assets. The sale of these holdings marks the culmination of an in-depth strategic review initiated by the Summit board of directors back in October 3, 2023.
The selling off of these assets represents a strategic move that reorients Summit’s portfolio towards basins rich in crude oil, now constituting approximately 55% of its focus.
Future Outlook and Approval from the Top
Heath Deneke, President and Chief Executive Officer of Summit, expressed optimism about the company’s future. “We continue to believe in the significant growth potential of the Delaware Basin and anticipate leveraging Double E’s pipeline capacity,” he stated.
The unanimous approval of the Utica Divestiture and the strategic review’s conclusion by Summit’s Board of Directors underscores the confidence in this strategic shift. While the company has completed its evaluation phase, it remains open to additional transactions that could enhance shareholder value.
Enhanced Liquidity and Revised Projections
The sale has boosted Summit’s liquidity, with access to an undrawn $400 million credit facility and over $325 million in unrestricted cash. Additionally, the company has revised its 2024 Adjusted EBITDA guidance to a range of $185 million to $220 million following this transformative transaction.
Looking ahead, Deneke emphasized the potential for value-accretive acquisitions and organic growth opportunities in the DJ Basin and Williston Basin, highlighting the company’s intention to capitalize on the fragmented nature of these markets.
Market Reaction
Price Action: Summit Midstream Partners’ stock is surging by a remarkable 35.87%, reaching $26.40 at the time of the latest market check on Friday.