Document
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 2024 disposition of Summit Midstream Utica, LLC
On March 22, 2024, Summit Midstream Partners, LP (“Summit” and, together with its subsidiaries, “SMLP” or the “Partnership”), and Summit Midstream OpCo, LP, an indirectly owned subsidiary of Summit (“OpCo”), completed the sale of Summit Midstream Utica, LLC (“Utica”) to a subsidiary of MPLX LP (“MPLX”) for cash consideration of $625.0 million, subject to customary post-closing adjustments (the “Summit Utica Sale”), pursuant to a Purchase and Sale Agreement, dated March 22, 2024, by and among OpCo, as Seller, MPLX, as Buyer, and solely for purposes of Section 12.18 thereto, Summit, as Seller Parent (each as defined therein). Utica is the owner of (i) approximately 36% of the issued and outstanding equity interests in Ohio Gathering Company, L.L.C. (“OGC”), (ii) approximately 38% of the issued and outstanding equity interests in Ohio Condensate Company, L.L.C. (together with OGC, “Ohio Gathering”) and (iii) midstream assets located in the Utica Shale. Ohio Gathering is the owner of a natural gas gathering system and condensate stabilization facility located in Belmont and Monroe counties in the Utica Shale in southeastern Ohio. MPLX is the operator of Ohio Gathering and, prior to the closing of the Transaction, was OpCo’s joint venture partner.
May 2024 disposition of Mountaineer Midstream assets
On May 1, 2024, the Partnership completed the sale of its Mountaineer Midstream system to Antero Midstream LLC for a cash sale price of $70 million, subject to customary post-closing adjustments (the “Mountaineer Transaction”). Mountaineer is the owner of midstream assets located in the Marcellus Shale. Prior to closing the Mountaineer Transaction, the Partnership also sold related compression assets located in the Marcellus Shale to a compression service provider for approximately $5 million in April 2024.
Unaudited Pro Forma Condensed Consolidated Financial Statements
The following unaudited pro forma condensed consolidated financial statements of the Partnership are presented to illustrate the effect to the Partnership’s historical financial position and operating results of (i) the Mountaineer Transaction and (ii) the Summit Utica Sale.
The Mountaineer Transaction and the Summit Utica Sale each constitute significant dispositions for purposes of Item 2.01 of Form 8-K. As a result, the Partnership prepared the accompanying unaudited pro forma condensed consolidated financial statements in accordance with Article 11 of Regulation S-X. This divestiture does not qualify as a discontinued operation as it does not represent a strategic shift that will have a major effect on SMLP’s operations or financial results.
The accompanying unaudited pro forma condensed consolidated balance sheet as of March 31, 2024 has been prepared to reflect the Mountaineer Transaction as if it had occurred on March 31, 2024. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2024 and for the year ended December 31, 2023 have been prepared as if the Mountaineer Transaction and Summit Utica Sale had occurred on January 1, 2023.
The unaudited pro forma condensed consolidated balance sheet and statements of operations included herein are for information purposes only and are not necessarily indicative of the results that might have occurred had the divestitures taken place on the respective dates assumed. Actual results may differ significantly from those reflected in the unaudited pro forma condensed consolidated financial statements for various reasons, including but not limited to, the differences between the assumptions used to prepare the unaudited pro forma condensed consolidated financial statements and actual results. The pro forma adjustments in the unaudited pro forma condensed consolidated balance sheet and the statements of operations included herein include the use of estimates and assumptions as described in the accompanying notes. The pro forma adjustments are based on information available to the Partnership at the time these unaudited pro forma condensed consolidated financial statements were prepared. The Partnership believes its current estimates provide a reasonable basis of presenting the significant effects of the divestitures. However, the estimates and assumptions are subject to change as additional information becomes available. The unaudited pro forma condensed consolidated financial statements include only those adjustments related to the divestitures.
The unaudited pro forma condensed consolidated financial statements are based on the historical consolidated financial statements of the Partnership and should be read in conjunction with the condensed consolidated financial statements and accompanying footnotes included in the Partnership’s Quarterly Report on Form 10-Q for the three months ended March 31, 2024 and the consolidated financial statements and accompanying footnotes included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the Securities and Exchange Commission on May 6, 2024 and March 15, 2024, respectively.
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
As of March 31, 2024 | | | | | | | | | | | | | | | | | | | |
(In thousands, except unit amounts) | Historical | | Pro forma Adjustments | | | | Pro forma Combined |
ASSETS | | | | | | | |
Cash and cash equivalents | $ | 344,590 | | | $ | 74,345 | | (a) (b) | | | $ | 418,935 | |
Restricted cash | 3,454 | | | — | | | | | 3,454 | |
Accounts receivable | 66,587 | | | (6,005) | | (b) | | | 60,582 | |
Other current assets | 5,935 | | | (100) | | (b) | | | 5,835 | |
Total current assets | 420,566 | | | 68,240 | | | | | 488,806 | |
Property, plant and equipment, net | 1,447,443 | | | (64,910) | | (b) | | | 1,382,533 | |
Intangible assets, net | 147,304 | | | (9,016) | | (b) | | | 138,288 | |
Investment in equity method investees | 273,476 | | | — | | | | | 273,476 | |
Other noncurrent assets | 31,786 | | | (375) | | (b) | | | 31,411 | |
TOTAL ASSETS | $ | 2,320,575 | | | $ | (6,061) | | | | | $ | 2,314,514 | |
| | | | | | | |
LIABILITIES AND CAPITAL | | | | | | | |
Trade accounts payable | $ | 18,063 | | | $ | 931 | | (b) (c) | | | $ | 18,994 | |
Accrued expenses | 36,554 | | | (670) | | (b) | | | 35,884 | |
Deferred revenue | 8,899 | | | — | | | | | 8,899 | |
Ad valorem taxes payable | 3,282 | | | (853) | | (b) | | | 2,429 | |
Accrued compensation and employee benefits | 2,824 | | | (51) | | (b) | | | 2,773 | |
Accrued interest | 44,826 | | | — | | | | | 44,826 | |
Accrued environmental remediation | 1,854 | | | — | | | | | 1,854 | |
Accrued settlement payable | 6,667 | | | — | | | | | 6,667 | |
Current portion of long-term debt | 29,098 | | | — | | | | | 29,098 | |
Other current liabilities | 7,476 | | | — | | | | | 7,476 | |
Total current liabilities | 159,543 | | | (643) | | | | | 158,900 | |
Long-term debt, net | 1,127,287 | | | — | | | | | 1,127,287 | |
Noncurrent deferred revenue | 28,761 | | | — | | | | | 28,761 | |
Noncurrent accrued environmental remediation | 1,278 | | | — | | | | | 1,278 | |
Other noncurrent liabilities | 28,298 | | | — | | | | | 28,298 | |
Total liabilities | 1,345,167 | | | (643) | | | | | 1,344,524 | |
Commitments and contingencies | | | | | | | |
| | | | | | | |
Mezzanine Capital | | | | | | | |
Subsidiary Series A Preferred Units | 126,794 | | | — | | | | | 126,794 | |
| | | | | | | |
Partners’ Capital | | | | | | | |
Series A Preferred Units | 100,113 | | | — | | | | | 100,113 | |
Common limited partner capital | 748,501 | | | (5,418) | | (b) (d) | | | 743,083 | |
Total partners’ capital | 848,614 | | | (5,418) | | | | | 843,196 | |
TOTAL LIABILITIES AND CAPITAL | $ | 2,320,575 | | | $ | (6,061) | | | | | $ | 2,314,514 | |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Three Months Ended March 31, 2024
| | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands, except per-unit amounts) | Historical | | Mountaineer Conforming Adjustments | | Utica Conforming Adjustments | | | | Pro forma Combined |
Revenues: | | | | | | | | | |
Gathering services and related fees | $ | 61,985 | | | $ | (5,980) | | (e) | $ | (10,873) | | (e) | | | $ | 45,132 | |
Natural gas, NGLs and condensate sales | 49,092 | | | — | | | — | | | | | 49,092 | |
Other revenues | 7,794 | | | — | | | — | | | | | 7,794 | |
Total revenues | 118,871 | | | (5,980) | | | (10,873) | | | | | 102,018 | |
Costs and expenses: | | | | | | | | | |
Cost of natural gas and NGLs | 30,182 | | | — | | | — | | | | | 30,182 | |
Operation and maintenance | 25,012 | | | (872) | | (e) | (1,021) | | (e) | | | 23,119 | |
General and administrative | 14,785 | | | (108) | | (e) | (92) | | (e) | | | 14,585 | |
Depreciation and amortization | 27,867 | | | (2,309) | | (e) | (1,939) | | (e) | | | 23,619 | |
Transaction costs | 7,791 | | | — | | | — | | | | | 7,791 | |
Acquisition integration costs | 40 | | | — | | | — | | | | | 40 | |
Gain on asset sales, net | (27) | | | — | | | — | | | | | (27) | |
Long-lived asset impairments | 67,916 | | | (67,916) | | (j) | — | | | | | — | |
Total costs and expenses | 173,566 | | | (71,205) | | | (3,052) | | | | | 99,309 | |
Other income, net | (13) | | | 752 | | (g) | 3,155 | | (g) | | | 3,894 | |
Gain on interest rate swaps | 2,590 | | | — | | | — | | | | | 2,590 | |
Gain (loss) on sale of business | 86,202 | | | — | | | (86,202) | | (i) | | | — | |
Gain on sale of equity method investment | 126,261 | | | — | | | (126,261) | | (i) | | | — | |
Interest expense | (37,846) | | | — | | | 5,935 | | (f) | | | (31,911) | |
Income (loss) before income taxes and equity method investment income | 122,499 | | | 65,977 | | | (211,194) | | | | | (22,718) | |
Income tax expense | (210) | | | — | | | — | | | | | (210) | |
Income from equity method investees | 10,638 | | | — | | | (7,039) | | (e) | | | 3,599 | |
Net income (loss) | $ | 132,927 | | | $ | 65,977 | | | $ | (218,233) | | | | | $ | (19,329) | |
Less: Net income attributable to Subsidiary Series A Preferred Units | (3,770) | | | — | | | — | | | | | (3,770) | |
Net income (loss) attributable to Summit Midstream Partners, LP | $ | 129,157 | | | $ | 65,977 | | | $ | (218,233) | | | | | $ | (23,099) | |
Less: net income attributable to Series A Preferred Units | (3,220) | | | — | | | — | | | | | (3,220) | |
| | | | | | | | | |
Net income (loss) attributable to common limited partners | $ | 125,937 | | | $ | 65,977 | | | $ | (218,233) | | | | | $ | (26,319) | |
Net income (loss) per limited partner unit: | | | | | | | | | |
Common unit – basic | $ | 12.05 | | | | | | | | | $ | (2.52) | |
Common unit – diluted | $ | 11.47 | | | | | | | | | $ | (2.40) | |
| | | | | | | | | |
Weighted-average limited partner units outstanding: | | | | | | | | | |
Common units – basic | 10,449 | | | | | | | | | 10,449 | |
Common units – diluted | 10,980 | | | | | | | | | 10,980 | |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
For the Year Ended December 31, 2023 | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands, except per-unit amounts) | Historical | | Mountaineer Conforming Adjustments | | Utica Conforming Adjustments | | | | Pro forma Combined |
Revenues: | | | | | | | | | |
Gathering services and related fees | $ | 248,223 | | | $ | (24,885) | | (e) | $ | (38,920) | | (e) | | | $ | 184,418 | |
Natural gas, NGLs and condensate sales | 179,254 | | | — | | | — | | | | | 179,254 | |
Other revenues | 31,426 | | | — | | | — | | | | | 31,426 | |
Total revenues | 458,903 | | | (24,885) | | | (38,920) | | | | | 395,098 | |
Costs and expenses: | | | | | | | | | |
Cost of natural gas and NGLs | 112,462 | | | — | | | — | | | | | 112,462 | |
Operation and maintenance | 100,741 | | | (4,361) | | (e) | (4,499) | | (e) | | | 91,881 | |
General and administrative | 42,135 | | | (398) | | (e) | (470) | | (e) | | | 41,267 | |
Depreciation and amortization | 122,764 | | | (9,266) | | (e) | (8,589) | | (e) | | | 104,909 | |
Transaction costs | 1,251 | | | 1,000 | | (h) | 7,889 | | (h) | | | 10,140 | |
Acquisition integration costs | 2,654 | | | — | | | — | | | | | 2,654 | |
Gain on asset sales, net | (260) | | | 7 | | (e) | — | | | | | (253) | |
Long-lived asset impairments | 540 | | | 67,916 | | (j) | — | | | | | 68,456 | |
Total costs and expenses | 382,287 | | | 54,898 | | | (5,669) | | | | | 431,516 | |
Other income, net | 865 | | | 3,017 | | (g) | 12,312 | | (g) | | | 16,194 | |
Gain on interest rate swaps | 1,830 | | | — | | | — | | | | | 1,830 | |
Gain (loss) on sale of business | (47) | | | — | | | 86,202 | | (i) | | | 86,155 | |
Gain on sale of equity method investment | — | | | — | | | 126,261 | | (i) | | | 126,261 | |
Interest expense | (140,784) | | | — | | | 26,227 | | (f) | | | (114,557) | |
Loss on early extinguishment of debt | (10,934) | | | — | | | — | | | | | (10,934) | |
Income (loss) before income taxes and equity method investment income | (72,454) | | | (76,766) | | | 217,751 | | | | | 68,531 | |
Income tax expense | (322) | | | — | | | — | | | | | (322) | |
Income from equity method investees | 33,829 | | | — | | | (22,922) | | (e) | | | 10,907 | |
Net income (loss) | $ | (38,947) | | | $ | (76,766) | | | $ | 194,829 | | | | | $ | 79,116 | |
Less: Net income attributable to Subsidiary Series A Preferred Units | (12,581) | | | — | | | — | | | | | (12,581) | |
Net income (loss) attributable to Summit Midstream Partners, LP | $ | (51,528) | | | $ | (76,766) | | | $ | 194,829 | | | | | $ | 66,535 | |
Less: net income attributable to Series A Preferred Units | (11,566) | | | — | | | — | | | | | (11,566) | |
| | | | | | | | | |
Net income (loss) attributable to common limited partners | $ | (63,094) | | | $ | (76,766) | | | $ | 194,829 | | | | | $ | 54,969 | |
Net income (loss) per limited partner unit: | | | | | | | | | |
Common unit – basic | $ | (6.11) | | | | | | | | | $ | 5.32 | |
Common unit – diluted | $ | (6.11) | | | | | | | | | $ | 5.21 | |
| | | | | | | | | |
Weighted-average limited partner units outstanding: | | | | | | | | | |
Common units – basic | 10,334 | | | | | | | | | 10,334 | |
Common units – diluted | 10,334 | | | | | | | | | 10,544 | |
The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.
SUMMIT MIDSTREAM PARTNERS, LP AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
1. BASIS OF PRESENTATION
The March 31, 2024 unaudited pro forma condensed consolidated balance sheet gives effect to the pro forma adjustments necessary to reflect the Mountaineer Transaction as if it had occurred on March 31, 2024. The unaudited pro forma condensed consolidated statement of operations gives effect to the pro forma adjustments necessary to reflect the Mountaineer Transaction and the Summit Utica Sale as if they had occurred on January 1, 2023. The unaudited pro forma adjustments related to the dispositions are based on available information and assumptions that management believes are (i) directly attributable to the Mountaineer Transaction and Summit Utica Sale; (ii) factually supportable and (iii) with respect to the unaudited consolidated statements of operations, expected to have a continuing impact on consolidated operating results.
2. PRO FORMA ADJUSTMENTS
The unaudited pro forma condensed consolidated statements reflect the following adjustments:
Balance Sheet
“Historical” - represents the historical unaudited consolidated balance sheet of the Partnership as of March 31, 2024.
(a) To adjust Partnership balance sheet accounts for cash proceeds received associated with the Mountaineer Transaction and the sale of compression assets.
b) To remove the Partnership’s assets and liabilities associated with the Mountaineer Transaction. The following is a summarization of the application of net proceeds and estimated loss on the Mountaineer Transaction and sale of compression equipment.
| | | | | |
(in thousands) | |
Sale price | $ | 74,400 | |
Cash on hand | (55) | |
Accounts receivable | (6,005) | |
Other current assets | (100) | |
Property, plant and equipment, net | (64,910) | |
Intangible assets | (9,016) | |
| |
Other noncurrent assets | (375) | |
Trade accounts payable, accrued expenses and other current liabilities | 643 | |
| |
| |
| |
(c) To adjust for the unrecognized transaction costs associated with the Mountaineer Transaction, primarily for investment bank, advisory and legal fees.
(d) To adjust for the estimated loss to be recognized by the Partnership related to the Mountaineer Transaction.
Income Statement
“Historical” - represents the historical audited statement of operations of the Partnership for the year ended December 31, 2023.
(e) Adjustments are to eliminate revenues and costs of Utica and Mountaineer from the Partnership’s consolidated financial results.
(f) To adjust interest expense for the impact of an estimated $313.0 million pay down of the Partnership’s asset-based revolving credit facility with proceeds received from the Summit Utica Sale, partially offset by increased interest expense resulting from an increase in commitment fees owed on the asset-based revolving credit facility.
(g) To adjust for the estimated interest income associated with the proceeds received from the Mountaineer Transaction and Summit Utica Sale.
(h) To adjust for unrecognized transaction costs associated with the Mountaineer Transaction and Summit Utica Sale, primarily for investment bank, advisory, and legal fees.
(i) To adjust the gain recognized as a result of the Summit Utica Sale as if the transaction had occurred on January 1, 2023.
(j) To adjust impairment associated with the Mountaineer Transaction as if the transaction had occurred on January 1, 2023.