Summit Midstream Moves To MLP 2.0 Model, Opportunity With 11%-Plus Yield And Growth

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Summit Midstream Partners (SMLP) is a medium-size midstream company with $750 million in market capitalization. Its focus is on natural gas, crude oil, and produced water gathering and processing. SMLP has operations in seven different resource basins in the United States and therefore it has a highly diversified geographic footprint. It has stable and recurrent cash flows because its operations are fee based. Over 95% of gross margin is fee based.

Just last week, SMLP announced some solid earnings along with several strategic moves to enhance its growth prospects, fortify the capital position, simplify the capital structure, and reduce reliance on external funding sources. Importantly, the move also included buying out their General Partner's IDR and reducing future distributions by 50% to achieve these goals.
Usually when companies reduce distributions, it's because of bad earnings or a negative outlook. This was definitely not the case for SMLP. Unfortunately investors initially focused on the 50% distribution cut as the stock finished significantly down for the day.
Source: Seeking Alpha Website February 26, 2019
Going through the earnings announcement and conference call, they were very loaded with information. It turns out, like some other partnerships, the SMLP has a chance to participate in very good projects. Management did not want to pass up those projects as it might... Read more