Summit Midstream Partners, a Houston-based company, has been facing delays in its well completions due to the impact of lower commodity prices. As a result, the company is now one to two quarters behind schedule for its well connects.
President, Chief Executive, and Chairman Heath Deneke acknowledged the challenges faced by Summit Midstream Partners in its second quarter of 2023. The company's financial and operating results fell below management expectations. Deneke attributed this to temporary production shut-ins behind their Barnett system, completion delays in the Williston and Utica regions, and lower-than-anticipated commodity prices.
Despite these headwinds, Summit Midstream Partners remained active during the quarter, successfully connecting a total of 89 wells. This included 26 wells in the Northeast region, 4 in the Barnett region, 15 in the Piceance region, 38 in the DJ region, and 6 in the Williston region. Deneke expressed confidence that these wells would reach peak production in the fourth quarter.
Despite challenges faced in the Rockies segment, Summit Midstream Partners experienced a 15% volume growth in its Northeast segment. This growth drove a 13% increase in segment-adjusted EBITDA, amounting to $2.4 million for the quarter. However, due to delays in 30 wells, the Rockies segment fell behind expectations for the quarter but is expected to catch up in the second half of the year.
NGL and Residue Gas Prices
In the second quarter, NGL prices and residue gas prices faced significant challenges, falling approximately 25% to 35% below our expectations. This decline had several outcomes: producers delayed completions for a few months, shut-in around 25 MMcf/d of Barnett production, and directly affected our percent-of-proceeds contracts in the DJ Basin.
Expectations for Commodity Prices
We believe that the second quarter represents the low point for commodity prices, as strip NGL and natural gas prices are projected to strengthen in the third and fourth quarter.
Impact on Well Connects
Despite an overall consistency in the total number of well connects we expected in 2023 (approximately 300 for the year), delays in completion timing will have an impact on the calendar year results, as stated by Deneke.
Recent Well Connections
Subsequent to the quarter-end, we successfully connected 45 wells. Among these, 28 were located in the Williston region while the remaining 17 were in the Utica region. These connections will significantly contribute to the volumetric growth in the Rockies and Northeast segments.
Delayed Schedule Estimate
On average, we estimate that we are trending one to two quarters behind schedule. While disappointing in terms of calendar year results, it is important to note that customer activity levels remain strong. To date, 195 wells have been turned in-line, with more than 180 drilled-but-uncompleted wells ("DUCs") and 11 rigs currently operating behind our systems.