HOUSTON - Summit Midstream (NYSE:SMLP) Partners, LP (NYSE: SMLP) has announced the sale of its Utica Shale-related assets to a subsidiary of MPLX (NYSE:MPLX) LP for $625 million in cash. The assets in the transaction include Summit Midstream Utica, LLC and interests in Ohio Gathering Company, LLC and Ohio Condensate Company, LLC.
The sale is the result of a strategic review initiated by Summit's Board of Directors on October 3, 2023, in which they evaluated various opportunities to maximize unitholder value, including a potential sale of the company or other transactions. The Board unanimously approved the divestiture, marking the end of their strategic alternatives process.
The transaction is expected to improve Summit's financial position by reducing its net leverage to below 4.0x and increasing liquidity, with an undrawn $400 million credit facility and over $325 million in unrestricted cash. The deal also shifts Summit's portfolio focus towards approximately 55% crude oil-oriented basins.
Summit's President, CEO, and Chairman, Heath Deneke, stated the divestiture creates substantial value for unitholders and positions the company to pursue growth opportunities, especially in the Permian and Rockies segments. Deneke also mentioned the possibility of resuming preferred and common equity distributions as Summit works towards achieving its net leverage targets.
The sold assets include a natural gas gathering system serving the Utica and Point Pleasant shale formations and a condensate stabilization facility, both operating under long-term, fee-based agreements.
Summit expects to revise its pro forma 2024 Adjusted EBITDA guidance to between $185 million and $220 million. The transaction is also seen as an enabler for Summit to reduce its cost of capital in the current environment of elevated interest rates.
In addition to the asset sale, Summit's Board is considering converting the company to a C-Corp structure to enhance trading liquidity and expand the investor base. A Special Meeting is planned for later this year to seek unitholder approval for the conversion, with a proxy statement to be filed providing more details on the rationale and benefits.
RBC Capital Markets, LLC and Locke Lord L.L.P. served as financial and legal advisors, respectively, for the transaction.
This news is based on a press release statement from Summit Midstream Partners, LP.
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