Analyst Summary
- Summit Midstream Holdings, LLC acquired Moonrise Midstream, LLC from Fundare Resources Company HoldCo, LLC for $90 million.
- The consideration consisted of $70 million in cash and 462,265 shares of Summit Midstream Corporation’s common stock.
- The acquisition expands Summit’s gathering and processing footprint in the DJ Basin, adding approximately 80 miles of natural gas gathering pipeline and 65 MMcf/d of processing capacity.
- The acquisition is expected to provide Summit’s DJ Basin customers with additional processing capacity and flow assurance.
- The transaction is structured to be leverage-neutral, with the upfront cash consideration representing approximately 3.9x 2024 Adjusted EBITDA.
- The company granted certain registration rights to the seller with respect to the issued shares and the company is required to use its reasonable best efforts to file with the SEC a registration statement within 60 days of the closing date, registering for resale the issued shares.
- The seller may not transfer any of the issued shares prior to the expiration of the three-month period following the closing date.
Potential Implications
Company Performance
- The acquisition is expected to enhance Summit’s position in the DJ Basin and enable it to handle future volume growth.
- The additional processing capacity is expected to alleviate system constraints and allow customers to increase activity and grow volumes.
- The combined systems are expected to create operational and commercial synergies.
- The acquisition is expected to improve plant operating margins, reduce reliance on third-party offloads, and optimize NGL recoveries.
Stock Price
- The acquisition could positively impact Summit’s stock price due to the expected synergies and growth opportunities.
- The leverage-neutral financing of the cash portion of the acquisition may be viewed favorably by investors.