Summit Midstream Corporation (NYSE: SMC) (“Summit”, “SMC” or the “Company”) announced that its wholly owned subsidiary, Summit Midstream Holdings, LLC (“SMP Holdings”), has acquired Moonrise Midstream, LLC (“Moonrise” or “Moonrise Midstream”) from Fundare Resources Company Holdco, LLC (“Fundare”) for a total consideration of $90 million, including $70 million in cash and $20 million in SMC equity. Summit also provided an operational update for its broader DJ Basin position.
Highlights:
Expands Summit’s gathering and processing footprint in the DJ Basin with ~80 miles of natural gas gathering pipeline, ~25 miles of crude oil gathering pipeline and 65 MMcf/d of additional processing capacity, expandable to ~100 MMcf/d with modest capital investment
Provides Summit’s DJ Basin customers with additional processing capacity, redundancy and flow assurance, while positioning Summit to handle sizeable volume growth expected in the future in a capital-efficient manner
Represents the continuation of Summit’s corporate consolidation strategy, building scale through strategic, bolt-on acquisitions in key basins where Summit can drive additional value through commercial and operational synergies
Value-accretive acquisition multiple of approximately 5.0x 2024 Adjusted EBITDA
Transaction structure includes $70 million of up-front cash, which is leverage-neutral, representing ~3.9x 2024 Adjusted EBITDA
Creates commercial and operational synergies, commercial upside and additional in-basin consolidation opportunities
Heath Deneke, President, Chief Executive Officer and Chairman, commented, “We are pleased to announce the successful completion of this strategic bolt-on acquisition that further enhances our position in the DJ Basin. This acquisition not only expands our footprint and dedicated acreage in one of the most active areas of the DJ Basin but also provides incremental processing capacity that we expect to utilize in the coming years as volumes behind our legacy systems continue to grow. Following the acquisitions of the Outrigger and Sterling systems in December 2022, we have experienced significant volume growth behind our integrated DJ gathering and processing system and certain areas of our system are nearing full utilization. As a result of the limited available system capacity, some of our customers have deferred development activity behind our system in 2025. There are currently three rigs running behind our dedicated acreage position in the DJ and two of our key customers have sizeable multi-year development plans beginning in 2026. Moonrise adds 65 MMcf/d of processing capacity, approximately half of which is expected to be available to help alleviate our integrated DJ system constraints and enable our customers to continue to increase activity and grow volumes in 2026 and beyond.
Summit is already operationally connected to the Moonrise system through multiple existing interconnections, and we expect to capture significant operational and commercial synergies with the combined systems. The expanded pipeline footprint will alleviate localized pipeline constraints on the northern end of our system and enable Summit to optimize capital expenditures as development shifts further north. With additional and expandable processing capacity at Moonrise, we will be able to further improve our plant operating margins, reduce reliance on third-party offloads, increase our overall system reliability and flow assurance, and optimize NGL recoveries, which will benefit both Summit and our customers.
We remain extremely excited about the long-term opportunities in the DJ Basin as our customers continue to execute their development programs, with more than 800 dedicated undeveloped locations and sizable acreage positions in the area that Summit is very well-positioned to serve with the combined systems.”
Transaction Details
Under the terms of the acquisition agreements, Summit will acquire 100% of the membership interest in Moonrise Midstream, LLC for $70 million upfront cash consideration, financed through Summit’s credit facility, and approximately 0.5 million shares of SMC Class A common stock.
Moonrise Midstream Overview
The Moonrise assets, located in Weld County, Colorado, are comprised of a 65 MMcf/d natural gas processing plant, approximately 80 miles of low-pressure natural gas gathering lines, 22,300 horsepower of compression, and approximately 25 miles of crude oil gathering pipelines. The gathering agreements for Moonrise are long-term, primarily fee-based contracts with approximately 50% of dedicated volumes under life-of-lease agreements and the other 50% have a weighted average remaining term of over 13 years. Volume throughput on the Moonrise system is underpinned by acreage dedications, with an estimated 60,000 leased acres from its key customers, including Fundare Resources, Verdad, Bison IV and a large integrated energy company. The dedicated acreage spans highly productive, oil prone areas within the DJ Basin, with producers primarily targeting the Niobrara and Codell formations. Moonrise delivers residue gas to Trailblazer / Rockies Express Pipeline, natural gas liquids to Overland Pass Pipeline, and crude oil to Pony Express Pipeline.
Advisors
Troutman Pepper Locke L.L.P. served as legal advisor to Summit. Evercore served as financial advisor and Baker Botts L.L.P. served as legal advisor to Fundare.
