Thank you for standing by, and welcome to the Summit Midstream first quarter 2026 earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one-one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one-one again. As a reminder, today's program is being recorded. Now I'd like to introduce your host of today's program, Randall Burton, Treasurer and Investor Relations. Please go ahead, sir.
Thanks, operator. Good morning, everyone. If you don't already have a copy of our earnings release, please visit our website at summitmidstream.com where you'll find it on the homepage, Events and Presentation section or Quarterly Results section. With me today to discuss our first quarter 2026 financial and operating results is Heath Deneke, our President, Chief Executive Officer, and Chairman, Bill Mault, our Chief Financial Officer, and Chris Tennant, our Chief Commercial Officer, along with other members of our senior management team. Before we start, I'd like to remind you that our discussion today may contain forward-looking statements. These statements may include, but are not limited to, our estimates of future volumes, operating expenses, and capital expenditures. They may also include statements concerning anticipated cash flow, liquidity, business strategy, and other plans and objectives for future operations.
Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can provide no assurance that such expectations will prove to be correct. Please see SMC's annual report on Form 10-K for the fiscal year ended December 31st, 2025, which the company filed with the SEC on March 16th, 2026, as well as our other SEC filings for a listing of factors that could cause actual results to differ materially from expected results. Please also note that on this call we use the terms EBITDA, Adjusted EBITDA, Distributable Cash Flow, and Free Cash Flow. These are non-GAAP financial measures, and we provided reconciliations to the most directly comparable GAAP measures in our most recent earnings release. With that, I'll turn the call over to Heath.
Thanks, Randall, and good morning, everyone. Summit reported first quarter 2026 Adjusted EBITDA of $54.2 million, which was generally in line with expectations despite lower volumes and realized residue gas prices in the Arkoma. The underperformance in the MidCon segment was partially offset by gains in the Rockies segment, driven by higher than budgeted crude oil pricing. Based on the current activity levels, the recent well performance, and our visibility in the second half of the year volumes, we continue to expect results to trend towards the midpoint of our original 2026 Adjusted EBITDA guidance of $225 million-$265 million. Before I get into the operational highlights, I wanted to spend a moment on the macro picture, which we see becoming increasingly constructive for Summit.
Crude oil prices are obviously much higher than the lows we saw earlier this year. For a business like ours, where roughly 80% of our well connects in 2026 are expected in crude oil-oriented basins, a more constructive crude environment translates directly into improved producer economics and an incentive to accelerate and increase activity levels. Several of our Rockies customers have communicated that they are actively working on plans to attempt to accelerate activity into 2026 and increase overall activity levels in 2027. We're also seeing benefits from higher crude oil pricing on our field condensate sales and our optimization activities in the Rockies segment. At the same time, the natural gas outlook remains favorable as well. Henry Hub has remained constructive.
LNG export demand continues to grow rapidly, and the long-term demand outlook from data center growth and electrification is increasingly supportive of the natural gas infrastructure we operate in our MidCon and Permian segments. For our MidCon segment, that is a great backdrop to see activity levels pick up in the coming years in both the Arkoma and the Barnett, as these assets are very well positioned on the natural gas pipeline grid to feed LNG and power markets along the Gulf Coast. The macro outlook is also very supportive of increasing demand for our Double E gas Pipeline in the Permian that transports residue gas from multiple processing facilities throughout the core of the Delaware Basin to the Waha Hub, which then connects to more than 20 Bcf a day of eastern-bound gas infrastructure that serves the East Texas and Louisiana Gulf Coast markets.
Turning to operations, we connected 37 wells during the quarter, including the first four Williston wells under the new 10-year crude gathering agreement that we announced last quarter in Divide County. Early production results from those wells have been encouraging. In the Arkoma, while we did experience lower than expected well performance from two pads during the quarter, which was a primary driver of the volume underperformance in that segment. Both of these pads were drilled in the outer edges of our dedicated acreage footprint in an attempt to further extend the boundaries of proven but undeveloped locations in the Caney and Woodford formations. Recently, though, we have brought on a new three-well pad in the dry gas area of our Arkoma system, and we're seeing these wells significantly outperform our internal expectations.
These three wells continue to ramp up but have already averaged approximately 50 million a day combined over the past couple of days since being turned in line, which is a very encouraging early read, and it really gets us excited about future growth in the MidCon segment. We currently have five rigs running behind the system with approximately 80 drilled but uncompleted wells, and we expect approximately 40 new well connects in the second quarter, including 20 in the MidCon segment.
That second quarter activity and well results from some of the wells already connected in the second quarter sets up a very meaningful volume increase as we move into the back half of the year. On the Double E front, subsequent to the quarter end, we executed another 10-year take-or-pay precedent agreement for $100 million a day of firm capacity, which is slated to start in the first half of 2027. That brings our total contracted volumes on Double E to just over 1.7 Bcf/d . We continue to build momentum in our ongoing open season to secure additional commitments to support the previously announced $800 million a day midpoint compressor expansion project.
Given the market interest that we've seen thus far, we remain very optimistic about securing additional contracts that are necessary to help us make a final investment decision on the project this summer. We also made meaningful progress to further simplify and improve the balance sheet this quarter. We repaid all $45 million of accrued Series A preferred stock dividends, which clears a key milestone on the path to reinstate a common dividend. We completed a $42 million private placement of common stock to an affiliate of Tailwater Capital LLC, our largest shareholder, which will help us fund high return organic growth projects across our operating footprint. Finally, we closed the Summit Permian Transmission, LLC term loan refinancing, which provides the financial flexibility to fund Double E Pipeline capital growth while we continue to de-lever Summit's corporate balance sheet.
With that update, let me turn it over to Bill to walk through the details on the financials.
Thanks, Heath, good morning, everyone. Summit reported first quarter 2026 Adjusted EBITDA of $54.2 million, Distributable Cash Flow of $26.9 million, and Free Cash Flow of $11.4 million. Total capital expenditures were $19.3 million for the quarter, inclusive of $3.7 million of maintenance capital, with the majority of the growth capital directed towards pad connections in the Rockies and MidCon segments. With respect to Summit's balance sheet, we ended the quarter with $43.4 million of unrestricted cash and $116 million drawn on our revolving credit facility, with approximately $381 million of available borrowing capacity after accounting for $2.7 million of undrawn letters of credit. Now moving on to the segments.
The Rockies segment generated Adjusted EBITDA of $26.4 million, a decrease of $1.5 million relative to the fourth quarter of 2025, primarily due to a $1.2 million non-cash imbalance, a 3% reduction in liquids volumes, a lower realized residue gas prices on our percentage of proceeds contracts, and lower freshwater sales. This was partially offset by a 4.4% increase in natural gas volume throughput and improving crude oil and NGL prices that really started in March of 2026. We connected 18 wells in the DJ Basin and 13 in the Williston, including the first four, three-mile lateral wells under the new crude gathering agreement that we announced last quarter.
Five rigs are currently running with approximately 60 DUCs behind the systems. Several customers are working to try to accelerate their programs given the improved crude oil price environment. The Permian segment reported Adjusted EBITDA of $8.7 million, flat relative to the fourth quarter of 2025. Double E volumes averaged 805 million cu f t per day during the quarter. The Piceance segment reported Adjusted EBITDA of $9.6 million, down $0.4 million from the fourth quarter, primarily driven by volume throughput declines of approximately 7.3%, which included 8 million cu ft per day of temporary shut-ins as well as natural production declines, with no new wells connected during the quarter.
Customers currently have approximately 20 million cu ft per day of volume shut in as a result of low regional gas prices, primarily in the White River Hub. Based on current forward prices in the region, we would expect that production to resume beginning in the third quarter of 2026. Finally, the MidCon segment reported Adjusted EBITDA of $19.3 million, a decrease of $2.1 million from the fourth quarter, primarily driven by natural production declines, partially offset by six new Arkoma well connections during the quarter. Three additional Arkoma wells were connected subsequent to quarter end, and we have 17 Barnett DUCs expected to come online in the second quarter. We expect second quarter activity and recently connected wells to drive an increase in MidCon volumes as we move throughout the remainder of the year.
With that, I'll turn the call back over to Heath for closing remarks.
Thanks, Bill. To summarize, you know, we're still tracking towards the $245 million midpoint of our Adjusted EBITDA guidance for 2026, and we continue to see a lot of momentum building across the portfolio in response to the improving commodity price outlook. We remain excited about the growth outlook for the business and believe the current macro outlook supports more than $100 million of organic EBITDA growth from our existing portfolio by 2030. We continue to be active on the M&A front, evaluating opportunities that could further scale up the business in a value and credit-accretive manner. We've also taken meaningful steps to further simplify and improve the balance sheet by cleaning up the accrued preferred dividends, completing the Tailwater common stock placement, and closing the Permian transmission refinancing to support Double E growth.
Finally, as we execute the business plan, we continue to have a line of sight on achieving our long-term 3.5x leverage target and being in a position to reinstate a common dividend in the near future. We believe there's a pretty simple and achievable path forward to drive a lot of shareholder value in the coming years, and we're excited to get out on the road in the coming weeks as a management team to continue to tell the Summit story and continue to build momentum with investors. With that, I'd like to thank everyone again for joining the call today and supporting the business. Operator, I think we can open up the call for questions now.
Certainly. As a reminder, if you do have a question at this time, please press star one one on your telephone. Our first question comes from the line of Mark Reichman from Noble Capital Markets. Your question please.
Thanks. Would you please discuss the competitive positioning of the Double E Pipeline? Are you seeing increasing demand for incremental takeaway capacity tied to LNG's export growth? Could Double E ultimately require additional expansion phases beyond what's currently contemplated?
Yeah. Yeah, you bet, Mark. Hey, this is Heath. Look, as far as the competitive position, I think, you know, Double E is in a pretty good, pretty good shape on that front, honestly. We, if you look at what's occurred with the build-out of the Delaware, in terms of rig activity and where we've really seen volumes grow, they kind of started in Texas and have kind of migrated their way up to New Mexico. A lot of the, in fact, I'd say the vast majority, if not all, of the other pipelines that we compete with have really kind of filled up their existing takeaway capacity.
In many cases, they've kind of gotten past the cheap, you know, easy to expand compression type projects and have now for them to materially expand capacity, they're looking at, you know, laying brand new greenfield or big loops, if you will, to their system to get existing capacity. I think we're well positioned, having, you know, recently just filled up our latent, our free flow capacity. I think this expansion that we're in the midst of, on an open season, adding another call it 800 million-900 million a day of capacity.
I think, you know, we're really one of the only options in town, frankly, that we think can be available by the end of 2028 to meet a lot of this incremental residue gas growth that we see in the Permian Basin. We feel strongly about that. I will say, just looking at our rates relative to, you know, other tariffs and the like, we're certainly at market rates with what we, you know, what we sell our capacity for on Double E Pipeline. I think what really kind of gives us the advantage is the low cost expandability that we still have remaining on the pipe and the ability to bring that to market in fairly short order.
And then how's the- [crosstalk]
Yeah, sorry.
Oh, go ahead.
Go ahead.
No, go ahead.
Well, the second part of your question, I think you were asking about LNG growth. Look, there's no doubt if you look at, you know, the amount of infrastructure that has been built out and is in the process of being built out to move gas from Waha over to East Texas to kind of feed the LNG facilities in Texas and frankly across into Louisiana as well, it's definitely been the primary catalyst of new infrastructure development. You know, I think there's upwards of over 20 Bcf/d of capacity that, you know, originates frankly from that Waha area that has access to those growing markets. Clearly, it has been kind of a near-term catalyst.
I will say what's been interesting to watch, particularly develop on Double E Pipeline is that, you know, that market is kind of getting, maybe a little bit saturated in that, you know, there's been a lot of projects pointing that direction. There's gonna be a lot of LNG growth. I think we're starting to see additional markets attract interest from, you know, from our shippers. As an example, Energy Transfer's Desert Southwest project is all about getting gas west into Phoenix to serve some incremental power generation demand growth. We've also seen, you know, additional markets pointed towards the MidCon and or up into the Midwest on the north end of our system, really start to attract interest from shippers to kind of diversify the access that they have to market.
Thematically, I think what we're seeing is this massive, call it 6 Bcf/d , 7 Bcf/d of incremental supply growth over the next three to five years. And we're finding a lot of new projects, if you will, that are, you know, getting that gas distributed to the right points in the market. Absolutely what's fueling the, you know, the current compression project open season. You know, to your other point about, you know, do we think we're done after that? I think the short answer to that is no. I think there You know, as those markets develop kind of on the northern end of our system, we'll have a lot of, you know, backhaul capacity, if you will, to move gas potentially from Waha or other processing plants located south of that.
That really wouldn't require much additional build out. It would just be effectively maybe making that compressor station that we're trying to get FID bi-directional to be able to push gas north or south, depending on in the aggregate which directions flows want to occur. There's also some markets developing around our pipe. You know, we're in discussions with multiple data center/power gen customers that are looking to take advantage of the low gas price in the Permian Basin, you know, that are in close proximity to our pipe. You know, that's an area that, you know, I would say the majority of our customers to date are more supply push, getting supply out to the marketplace, predominantly producers or gathering and processing companies that control residue.
We, you know, we could start to see some actually demand side guys come in and, you know, pay to have us expand our system to reach, you know, multiple processing plants to be able to get to buy gas directly from hubs. We really like how this asset's positioned. I think what we've kind of articulated to the market, you know, we see our EBITDA growing, you know, from roughly $35 up to the mid-$60s here, just with what we have contracted to date. If you look at, you know, with the expansion that we've announced, we think that could grow up to $90 million. I think, you know, beyond that, I think there's ample room to see that EBITDA continue to grow over the next several years.
Well, that's very helpful. Now, how sustainable is Rockies throughput growth over the next several quarters? You know, what level of producer activity are you seeing in the DJ and Williston basins? On that, you might, you know, discuss the commodity mix and margin profile of the Rockies.
Yeah. Yeah.
Yeah.
I'll let Bill kind of handle the, you know, the details. Definitely a lot of momentum in both segments, as you can imagine, with, you know, the improving crude strip. We've seen producers in some case look to pick up additional rigs, and we've seen, you know, additional wells even kind of finding their way into the back half of 2026. I think we got a lot of momentum. Bill, why don't you kind of fill them in on some of the details here?
Good morning, Mark. A couple things going on, and I'll start in the DJ, Mark. So there's a large integrated kind of public shipper in the DJ that's a customer of ours. We've actually got 16 wells expected to come online from them here in the second quarter. That is really just the start of a broader program, call it over the next two to three that they intend to execute on. That's one that we've been around and probably talked to you about in the past that we're starting to see actually come to fruition here, you know, starting here in Q2. Excited about that one. There's also a large private in the DJ. They've been drilling behind our Hereford Ranch processing plant.
You know, we've seen outlooks from them that could fill up that processing plant. We'll see how active they get, but they are picking up a second rig in the basin, which again, I think is just dovetailing off kind of this, you know, supportive commodity price environment and trying to take advantage of that. The only other one I'd add in the DJ, you know, Peoria Resources acquired Verdad a few months ago. I think we mentioned this during our Q4 earnings, but that did create a little bit of a stall in activity for them in 2026.
You know, we're excited just given the environment we're in and what they're doing that, you know, I'd expect them to kind of pick back up activity here late 2026 into 2027, which we're really not getting the benefit of here in 2026. Up in North Dakota, Mark, you know, we've had several customers. They're trying to figure out how to accelerate development. Obviously, you know, that takes coordination of completion crews and being able to actually execute on it. There is a push from several customers up there to try to accelerate timing. One thing that, and really in the third quarter, we've had a customer that has been somewhat inactive behind our acreage up in North Dakota the past two years.
They're actually bringing on kind of a pad, focused in the crude oil and produced water gathering area, the services we provide them. The first set of wells is coming on in the third quarter. We've had conversations with them about additional activity in 2027. Mark, as you know, with, you know, the crude and water cuts up there, you know, those pads are meaningful for volumetric growth behind the system. So excited to kind of see that upcoming. As it relates to kind of margin profile, you should think about the Rocky segment is roughly 35% kind of commodity price exposed. That's primarily our POP contracts in the DJ, as well as, you know, we retain all the condensate drip that falls off of our system and our compressor stations.
When you break that down a little further, Mark, I would think about it as, you know, between NGLs and crude, that represents roughly 75%, then residue represents the remaining 25% of that kind of product margin breakdown.
Bill-
Mark, just one thing.
Bill
Just add to what, you know, Bill was talking about with the Rockies segment. I mean, clearly it and the Permian are going to be the two largest drivers of growth for us in the out years. As we've kind of, you know, talked about and provided in some of our investment materials, you know, we see, roughly, you know, upwards of $100 million of EBITDA growth organically from 2025 into the 2030 time frame. If you think about that, you know, what does that mean from a Rockies?
Well, well, the things that Bill Mault has kind of articulated that we're seeing early signs and maybe even accelerating from what we, you know, thought when we actually published that, you know, you could see the Rockies growing from, you know, roughly around $85 million of contribution today to upwards of $160 million, you know, over that, over that, through 2030. Substantial amount of growth there. You know, like I said, we're probably seeing signs that potentially that growth may even get further accelerated from what we thought, the ramp up would be between now and 2030.
Yeah. Jumping on the end of that, Heath. This is Chris Tennant, Mark. We're having conversations with all of our major customers in that area, really thinking about the next cycle of growth and infrastructure needed to really plan accordingly. It gives us a lot of confidence when we look forward in those areas.
Are there any bolt-on acquisition opportunities in your operating regions, particularly the Rockies and Permian, where you're seeing the stronger operational momentum?
Yeah, certainly, I'd say the Rockies is probably where we see the most near-term opportunities. There's still a fair amount of privately owned, privately backed systems that need to find a, you know, a liquidity or an exit point here fairly soon. We're pretty active identifying and working, having conversations around some of those assets. You know, you should think of those kind of fitting that historical profile that we've executed over the past three years.
I mean, these are gonna be, you know, roughly kind of in that, let's call it six, you know, somewhere between 5-7x type purchase multiples on an LTM basis that are synergistic, that we think we can kind of drive down to, you know, a very creative levels or that we would be able to capture a lot of accretion from a value perspective and from a leverage perspective in the out years. I think the Permian is a little different. I do think there are some larger opportunities that we're kind of looking at.
You know, I think that's one of the differentiators between, you know There's probably more actionable items that we see in the Rockies that are kind of fit more that, call it $30 million to upwards of $100 million maybe. When you start getting into the Permian, the type of opportunities that we are seeing are probably, you know, north of that, maybe closer to $150 million- $200 million. They're not completely out of reach, but obviously, they're ones that take, you know, are gonna be more complex, you know, to execute on and something that, you know, I wouldn't rule out in the out years. I think near term, I think we're more focused on the Rockies opportunities at this point.
My last question is just what are the remaining plans and objectives in your broader capital structure optimization strategy? How do you prioritize the capital allocation between debt reduction, organic growth, acquisitions, and return of capital to shareholders?
Go ahead, Bill.
Yeah, Mark. I'd say, you know, over the next couple years, Mark, one thing that we've talked about, particularly when we did the refinancing of, you know, the Double E refinancing here last quarter, you know, we set that up whereby in, call it, that 2028 timeframe, you know, we've got the flexibility to kind of clean that up, bring it up on balance sheet in the recourse borrower group. That's probably the next kind of item on the list. You know, I don't think as we sit here today, Mark, you know, we've been prioritizing post-growth capital, you know, the remaining Free Cash Flow, prioritizing debt repayment to get to our kind of long-term leverage target in 3.5x . I think you'll see us prioritize that, Mark, till we get to that long-term leverage target.
It's a balancing act. As it relates to M&A and organic growth, you know, I'd tell you, a lot of our organic growth projects, you know, are commanding very, you know, call it 20%, 30% plus unlevered rates of return, which are obviously very attractive. You know, we'd make the long-term decision, you know, to focus on reinvesting in growth, you know, to the extent additional opportunities arise on the organic side.
That's great. That's very helpful. Thank you very much.
Thank you, Mark.
Thank you. As a reminder, ladies and gentlemen, if you do have any questions at this time, please do star one- one on your telephone. This does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect.