Executive Summary / Key Takeaways

• Summit Midstream Corporation has undergone a significant transformation, converting to a C-Corp and executing strategic divestitures and accretive acquisitions to simplify its structure, strengthen its balance balance sheet, and position for growth.
• The company's portfolio is increasingly balanced between crude and natural gas assets, with recent acquisitions like Tall Oak and Moonrise adding scale and high-growth potential in the Mid-Con and DJ Basins, respectively.
• Despite a Q1 2025 net income decline driven by non-recurring gains in the prior year, operational performance, particularly in the Mid-Con and Permian segments, shows positive momentum from increased volumes and strategic asset contributions.
• Summit maintains strong liquidity and is focused on generating significant free cash flow in 2025 (>$100M at midpoint guidance) to reduce leverage towards its 3.5x target, a key step towards potential future common dividends.
• While exposure to crude price volatility in the Rockies and integration risks from recent M&A remain factors to monitor, management's reiterated 2025 guidance reflects confidence in current customer activity levels and operational execution.

A Transformed Midstream Player

Summit Midstream Corporation operates as a value-oriented company focused on developing, owning, and operating midstream energy infrastructure across key unconventional resource basins in the continental United States. Its business centers on providing essential services like natural gas gathering, compression, treating, and processing, alongside crude oil and produced water gathering, primarily underpinned by long-term, fee-based agreements. This model aims to provide a stable revenue stream, mitigating direct exposure to volatile commodity prices, though indirect exposure remains as prices influence producer activity.

The company's journey has seen significant strategic shifts, particularly throughout 2024. What began as Summit Midstream Partners, LP (SMLP), a master limited partnership formed in 2012, culminated in a Corporate Reorganization on August 1, 2024, transforming into a Delaware C-corporation, Summit Midstream Corporation (SMC). This structural change was designed to broaden the investor base and enhance trading liquidity, simplifying the equity ownership structure.

Concurrent with this, Summit actively reshaped its asset portfolio. The strategic divestiture of the Northeast segment in 2024, including the $625 million sale of Summit Utica and the $70 million sale of the Mountaineer Midstream system, provided substantial cash proceeds. These funds were instrumental in reducing debt and increasing financial flexibility, setting the stage for future strategic maneuvers.

Building Scale Through Targeted Acquisitions

Following the divestitures and corporate conversion, Summit pivoted to a growth-through-acquisition strategy. The $425 million acquisition of Tall Oak Midstream in the Arkoma Basin, completed in December 2024, was a pivotal move. This transaction significantly increased Summit's scale and diversified its portfolio by adding a high-growth, gas-weighted asset. It also established an UpC tax structure, aligning with the new C-Corp status.

Building on this momentum, Summit completed the approximately $90 million bolt-on acquisition of Moonrise Midstream in the DJ Basin on March 10, 2025. This acquisition further expanded Summit's footprint in a core operating area, adding crucial processing capacity and offering potential for operational synergies by integrating with existing DJ assets. These acquisitions are central to Summit's strategy to rebuild scale and enhance its value proposition in key basins.

Operational Footprint and Performance Dynamics

Summit's operations are segmented across four key regions: Rockies (DJ and Williston Basins), Permian (Double E Pipeline equity investment), Piceance, and Mid-Con (Barnett and Arkoma Basins). Each segment contributes uniquely to the overall performance, influenced by regional drilling activity, commodity mix, and contractual structures.

The Mid-Con segment has emerged as a significant growth driver, particularly following the Tall Oak acquisition. Q1 2025 saw a dramatic increase in Segment Adjusted EBITDA to $22.5 million, up 340% from $5.1 million in Q1 2024. This surge was primarily fueled by the full quarter contribution of the Tall Oak assets and a substantial 48% sequential increase in volume throughput, driven by new well connections and the resumption of previously curtailed production. Management remains optimistic about the Mid-Con, citing favorable natural gas strip prices and significant dedicated inventory positioned to serve growing Gulf Coast demand.

In the Rockies segment, Q1 2025 Segment Adjusted EBITDA increased 9% year-over-year to $24.9 million. This growth was supported by higher product margins and the initial contribution from the Moonrise acquisition, which added processing capacity and liquids volume throughput. While natural gas volumes saw a slight sequential decrease due to natural declines, new well connections and the Moonrise acquisition helped offset this. The segment commissioned a significant optimization project in March 2025, expected to improve adjusted EBITDA margins starting in Q2 2025 with an anticipated one-year payback.

The Permian segment, centered around the Double E Pipeline equity investment, reported Q1 2025 Segment Adjusted EBITDA of $8.3 million, a 14% increase from Q1 2024. This improvement was primarily driven by higher volume throughput on the pipeline, which saw an 8% sequential increase and is currently averaging close to 700 MMcfd. Management is bullish on the Double E's prospects, noting the expected tremendous growth in Delaware Basin residue gas and the increasing utilization of existing in-basin takeaway capacity, positioning Double E for further commercialization.

Conversely, the Piceance segment experienced a 23% year-over-year decline in Segment Adjusted EBITDA in Q1 2025, falling to $11.8 million. This was mainly attributable to a decrease in volume throughput resulting from natural production declines and no new well connections expected in 2025, which will likely lead to a further decline in volume and EBITDA for the year compared to 2024.

Overall consolidated revenues saw an 11.6% increase in Q1 2025 to $132.7 million compared to $118.9 million in Q1 2024, driven by higher commodity sales and gathering fees, largely reflecting the impact of the Tall Oak acquisition offsetting the Northeast divestiture. However, net income declined significantly from $132.9 million in Q1 2024 to $4.6 million in Q1 2025. The prior year's figure included substantial non-recurring gains from the Utica midstream business sale ($86.2 million) and the Ohio Gathering disposition ($126.3 million), making the year-over-year comparison less indicative of underlying operational trends. Excluding these one-time items, the operational performance in Q1 2025 was solid, supported by steady rig activity and infrastructure expansion.

Financial Strength and Deleveraging Focus

Summit has significantly improved its financial posture through its recent strategic actions. The divestitures and refinancing transactions in 2024, including the issuance of the 2029 Secured Notes and the Amended and Restated ABL Facility, extended debt maturities and reduced overall interest expense, although the issuance of additional 2029 Secured Notes in January 2025 increased borrowing costs relative to the prior year's lower debt levels. As of March 31, 2025, total long-term debt stood at $1.07 billion.

The company maintains robust liquidity, with $354.2 million available under its $500 million Amended and Restated ABL Facility as of March 31, 2025. Leverage ratios are healthy, with a First Lien Net Leverage Ratio of 0.52x and an Interest Coverage Ratio of 2.80x, well within covenant requirements.

A core focus for Summit in 2025 is deleveraging. Management expects to generate significant free cash flow, projecting over $100 million at the midpoint of their guidance range. This cash flow is earmarked for debt reduction, with a stated target leverage ratio of 3.5 times. Achieving this target is positioned as a key step towards potentially resuming a common dividend in the future, following the reinstatement of the Series A Preferred Stock cash dividend on March 15, 2025.

Capital expenditures for Q1 2025 totaled $20.6 million, including $2.5 million of maintenance capital and a $2.5 million investment in Double E. The full-year 2025 capital guidance is set at $65 million to $75 million, which includes $15 million to $20 million for maintenance and approximately $20 million characterized as one-time integration costs from recent acquisitions. This suggests a potentially lower capital requirement in the $45 million to $55 million range in 2026 and beyond to support current EBITDA levels, enhancing future free cash flow generation potential.

Competitive Landscape and Strategic Positioning

Summit operates within a competitive midstream energy landscape populated by larger, more diversified players like Kinder Morgan (KMI), Williams Companies (WMB), Enbridge (ENB), and ONEOK (OKE), as well as smaller regional operators. These competitors offer similar services across overlapping basins, vying for producer volumes and long-term contracts.

Compared to its larger rivals, Summit operates at a smaller scale, which can translate to higher per-unit operating costs in some areas compared to the economies of scale enjoyed by KMI or WMB. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Summit holds an estimated 2-5% aggregate market share in its primary markets, trailing the significant shares held by companies like KMI (20-25%) or WMB (15-20%).

However, Summit leverages its focused operations and strategic asset positioning as competitive advantages. Its targeted presence in specific basins, enhanced by recent acquisitions, allows for potentially lower operating costs and faster project deployment in niche areas. The equity investment in the Double E Pipeline provides unique access to the high-growth Delaware Basin, offering transportation efficiency and enhancing pricing power, differentiating Summit from competitors focused solely on other regions or service types.

While Summit may lag larger peers in overall profitability margins (e.g., TTM Gross Profit Margin of 25.35% vs. KMI's 56% or WMB's 80%) and innovation speed, its strategic focus on value-accretive bolt-on acquisitions and disciplined capital allocation aims to improve its financial standing and competitive posture over time. The increasing balance towards natural gas assets also provides some insulation from crude price volatility compared to more crude-weighted competitors.

Indirect competition from renewable energy and emerging technologies like hydrogen infrastructure poses a longer-term challenge to the traditional fossil fuel midstream sector. While these technologies are not yet directly comparable in scale or functionality for current hydrocarbon volumes, their potential growth could impact demand for traditional midstream services over time. Larger, more diversified players like ENB, with investments in renewables, may be better positioned to adapt to these trends, potentially requiring Summit to consider future diversification or technological investments to remain competitive.

Outlook, Risks, and the Path Forward

Summit reiterated its full-year 2025 guidance, projecting Adjusted EBITDA between $245 million and $280 million and total capital expenditures of $65 million to $75 million. This outlook is based on expected well connections (125 to 185 total), incorporating real-time feedback from customers. The high end assumes producers meet their current schedules, while the low end factors in potential delays, particularly for wells slated for the second half of the year in the Rockies segment, reflecting a possible 2- to 3-month deferral if crude prices weaken significantly.

The commodity price environment, especially for crude oil, remains a key risk. A significant reduction in crude prices since early March 2025 has the potential to dampen activity levels in the crude-oriented Rockies segment. While customers currently expect second-half schedules to largely remain intact, further price weakness could lead to slippage, impacting volumes and potentially pushing results towards the lower end of the guidance range.

Other risks include customer concentration and the potential for non-performance under minimum volume commitment (MVC) contracts, although management notes exposure is limited to the current year-to-date period. Integration challenges from the recent Tall Oak and Moonrise acquisitions could also weigh on margins and free cash flow if not managed efficiently. Near-term infrastructure constraints in certain areas of the DJ Basin could cap upside, though the Moonrise acquisition is intended to help alleviate these in the future. Litigation and environmental liabilities, such as those related to the 2015 Blacktail Release Global Settlement, also represent ongoing commitments.

Despite these risks, management expresses confidence in the company's position. The strategic transformation has resulted in a stronger balance sheet and enhanced financial flexibility. The diversified portfolio, with increasing exposure to natural gas, provides a degree of resilience. The focus on free cash flow generation and deleveraging is a clear priority aimed at creating long-term shareholder value and potentially enabling future capital returns.

Conclusion

Summit Midstream Corporation has successfully executed a significant transformation, shedding non-core assets, strengthening its balance sheet, and simplifying its corporate structure. The strategic acquisitions of Tall Oak and Moonrise have added meaningful scale and positioned the company for growth in key basins, particularly on the natural gas side, which benefits from favorable market dynamics and increasing demand. While the company operates in a competitive environment with larger, more established players and faces risks from commodity price volatility and integration challenges, its focused strategy, improving financial health, and commitment to deleveraging present a compelling narrative for investors. The path forward centers on operational execution, realizing synergies from recent acquisitions, and utilizing strong free cash flow generation to achieve its leverage target, potentially paving the way for enhanced shareholder returns in the future.