Summit Midstream Partners divests Utica assets to MPLX LP for $625m

Summit Midstream Partners, LP (NYSE: SMLP) announced a significant transaction, selling its Utica Position, comprising approximately 36% interest in Ohio Gathering Company, LLC (“OGC”), approximately 38% interest in Ohio Condensate Company, LLC (“OCC”), and its wholly owned Utica assets to a subsidiary of MPLX LP (“MPLX”) for a substantial $625 million in cash. This transaction, referred to as the “Utica Divestiture,” marks a pivotal moment in Summit’s strategy to enhance its financial profile and concentrate on growth sectors within its portfolio.

The decision to sell came as a result of a comprehensive strategic review initiated by Summit’s Board of Directors on October 3, 2023, in consultation with external advisors. The Board explored a range of options to maximize unitholder value, including a possible sale of Summit itself, other divestiture opportunities, and partnership-level transactions. The unanimous Board approval of the Utica Divestiture concludes this strategic review, signaling a new chapter for Summit as it continues to explore avenues for value enhancement.

In light of this strategic realignment, Summit’s Board also considered various corporate structures to maximize long-term unitholder value, leading to the decision to pursue a conversion to a C-Corporation. This transition is aimed at improving trading liquidity, broadening the potential investor base, and optimizing tax implications for unitholders. A Special Meeting will be called later this year to seek unitholder approval for this conversion, with a proxy statement to be issued providing further details.

Transaction Highlights:

– Significant value realization for Summit, enhancing its credit profile and financial flexibility.

– Reduction of Summit’s net leverage to below 4.0x, aligning with its target leverage ratio.

– Increased liquidity, including an undrawn $400 million credit facility and over $325 million in unrestricted cash.

– A shift in Summit’s portfolio focus towards crude oil-oriented basins, comprising approximately 55% post-transaction.

– Accelerated potential for equity distributions and continued funding for organic growth projects.

Heath Deneke, President, CEO, and Chairman of Summit, expressed satisfaction with the transaction, noting the value creation opportunities for unitholders and the strategic realignment towards growth segments, particularly in the Permian and Rockies regions. Deneke highlighted the potential for further commercialization of Summit’s assets and the pursuit of synergistic acquisitions to build scale and enhance service offerings.

The divested assets include the Summit Utica system, a natural gas gathering system in southeastern Ohio, and the Ohio Gathering, which provides gathering services and condensate stabilization in the Utica Shale region. These assets have historically operated under long-term, fee-based agreements, contributing to Summit’s stable cash flow profile.

RBC Capital Markets, LLC served as financial advisor, and Locke Lord L.L.P. as legal advisor to Summit for the Utica Transaction.

This strategic divestiture not only streamlines Summit Midstream Partners’ operations but also strengthens its financial standing, allowing for enhanced focus on growth opportunities within its core areas. As the energy sector continues to evolve, Summit’s proactive approach positions it well for future success and sustainability.