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Summit Midstream Partners, LP (NYSE:SMLP) latest: 08 May, at a glance

Summit Midstream Partners, LP (NYSE:SMLP), closed the day at $0.85, a rise of 3.41 per cent and a stock price that brought its market cap to $83.95 million. It has been generating revenue of $443.5 million while net income posted by the company in last 12 months was -$398.4 million. When looking at performance, we see the stock demonstrating a weekly performance of -31.02% while keeping a monthly performance of 25.35%. Quarterly performance saw a drop of -67.61% and continued the negative trend with a yearly performance of -89.58% while showing YTD performance of -74.37% which was -82.21% for last six months.

Summit Midstream Partners, LP (NYSE: SMLP) came announcing a definitive agreement with Energy Capital Partners II, LLC (“ECP”) on May 3, 2020,  to acquire Summit Midstream Partners, LLC (“Summit Investments”), the privately held company that indirectly owns SMLP’s general partner, Summit Midstream GP, LLC (the “GP”), as well as 5.9 million SMLP common units owned separately by ECP, for $35 million in cash plus warrants covering 10 million SMLP common units (the “GP Buy-in Transaction”).  Pursuant to terms of the GP Buy-in Transaction, at closing, ECP will loan the full $35 million of cash proceeds to SMLP under a first-lien senior secured credit agreement which will bear interest at 8.0% per annum and the principal on which will be paid at maturity on March 31, 2021 (the “ECP Loan”).  SMLP intends to utilize the proceeds of the ECP Loan to enhance its liquidity position and for general corporate purposes.  The acquisition will result in a more simplified corporate structure whereby Summit Investments, and all of its subsidiaries, will become wholly owned subsidiaries of SMLP, and SMLP will be governed by a board consisting of a majority of independent directors.  

Summit Investments owns 100% of Summit Midstream Partners Holdings, LLC (“SMP Holdings”) which owns 100% of Summit Midstream GP, LLC, the general partner of SMLP, 45.3 million SMLP common units, cash on hand, and the $180.75 million deferred purchase price obligation (“DPPO”) receivable, all of which will remain outstanding as of the closing.  SMP Holdings will continue as the borrower under a $158.2 million term loan which matures in May 2022 and is secured by approximately 34.6 million of the SMLP common units owned by SMP Holdings and the GP interest.  The acquired entities will be unrestricted subsidiaries under SMLP’s senior notes indentures, and will not be guarantors or restricted subsidiaries under SMLP’s revolving credit facility.  As such, SMLP’s financial performance covenant calculations will not include borrowings under the term loan.     

SMLP also announced its intention to immediately suspend its distributions payable on its common units and on its 9.50% Series A fixed-to-floating rate cumulative redeemable perpetual preferred units.  The suspension of the common and preferred distributions will enable SMLP to retain an incremental approximately $76 million of cash in the business annually, which it intends to use to de-lever the balance sheet, enhance liquidity and increase financial flexibility.  The unpaid distributions on the preferred units will continue to accrue. Upon closing of the GP Buy-in Transaction, all directors affiliated with ECP will resign from the Board of Directors of SMLP’s General Partner (the “Board”).  Going forward, the Board will consist of a majority of independent directors, thereby fully aligning the interests of the Board with SMLP’s public unitholders.  SMLP will amend its partnership agreement in connection with the GP Buy-in Transaction to provide for the public election of directors on a staggered basis beginning in 2022. Heath Deneke, President and Chief Executive Officer, commented, “SMLP’s announcement to acquire our general partner interests, place SMLP’s control in the hands of a majority independent board and concurrently suspend our common distributions as well as payment on our preferred distributions sets up SMLP for long-term success.  The suspension of approximately $76 million of common distributions and cash payment of our preferred distributions combined with the $35 million loan from ECP enhances SMLP’s near term liquidity position and creates significant financial flexibility to help the business navigate through a turbulent and volatile time for the entire oil and gas industry.”

The 52-week range for the stock was 0.50 – 8.62 that put its current price at a premium of 69.7% to the 52-week low price whereas it is trading at a discount of -90.16% to the 52-week high price. The Oil & Gas Midstream company is currently upholding a gross margin of 63.7% while maintaining a net profit margin of -89.8%. Operating margin for the last 12 months remained 8.9%. The company’s EPS for trailing 12 months is -$4.62 and its annual dividend yield is 58.93%. It is estimated to be posting an EPS of $0.05 for the current quarter. The Beta number showed the stock is subject to risk 246% more than the market as a whole. In the trailing twelve months, its return on assets (ROA) is -14.1% while ROE for the same period is -55% and have seen an average of 2% return on investment (ROI).

The outstanding share count is 98.94 million shares but the size of available float is 40.67 million shares. The stock’s current price is lagging SMA-200 by -75.35% which is also -10.14% down from SMA-50. Reducing that period to a shorter term, we see the price is also lagging -5.8% to the SMA-20. Volatility for the week was 18.79%, which was 16.87% in the previous month. The company closed the session with a trading volume of 498.44 thousand shares, below from its average daily trading volume of 647.95 thousand.