Summit Midstream Launches Open Season on Natural Gas Pipeline

(Reuters) — Pipeline operator Summit Midstream Partners on Monday launched a non-binding open season to gauge interest for services of a natural gas pipeline running from the Delaware Basin in New Mexico and Texas to the Waha hub in West Texas.

The open season for the 135-mile Double E pipeline will run through April 29, the company said in a statement.

The pipeline can move 386 million cubic feet per day, and is jointly owned by Summit and Exxon Mobil, with Summit holding a 70% stake.

In January 2021, Double E Pipeline LLC submitted a request to U.S. energy regulators for approval to commence construction on the natural gas pipeline project in an effort to address the critical need for expanded gas transportation infrastructure in the Permian region, Reuters reported.

The Permian Basin, renowned as the largest U.S. production area for crude oil and the second-largest for natural gas, had faced challenges stemming from the surge in oil drilling activity in 2021, which generated significant associated gas production. Insufficient pipeline capacity resulted in a surplus of natural gas, leading to periodic price fluctuations at the Waha hub, where gas prices occasionally turned negative, compelling some producers to pay others to take their excess gas.

In a recent announcement, Summit Midstream revealed its decision to divest its Utica assets to a subsidiary of midstream company MPLX LP on March 22 for approximately $625 million in cash. This move sent Summit's shares soaring by about 38% to $26.88, marking their highest point since December 2021. The sale significantly shifts Summit's portfolio focus toward crude oil-rich basins, which will now constitute more than half of its assets.

Summit's decision to sell its natural gas gathering system in southeastern Ohio and equity interests in Ohio Gathering and Ohio Condensate to MPLX subsidiary aligns with its strategic vision to optimize value and reduce debt. Summit's CEO, Heath Deneke, expressed confidence in the company's future, stating, "We believe there are several value optimizing strategies to pursue to further build scale, particularly in our Permian and Rockies segments."

The sale will not only bolster Summit's financial position but also enhance liquidity, with the addition of a $400 million credit facility and over $325 million in unrestricted cash. MPLX's expertise in midstream operations, particularly in U.S. natural gas basins, bodes well for seamless integration and operational efficiency, according to Morningstar analyst Stephen Ellis.

Summit's decision to engage in strategic asset evaluations and explore potential deals, including asset sales, comes amidst a dynamic energy landscape. With the completion of the Utica asset sale and the commencement of the open season for the Double E pipeline, Summit Midstream positions itself for growth and resilience in the evolving energy sector.

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