Summit Midstream (SMC) risk factors, FY2024 10-K

Risks Related to Our Operations

1. 01We may not have sufficient cash from operations following the establishment of cash reserves and payment of fees and expenses to enable us to pay dividends to holders of our Series A Preferred Stock and common stock
2. 02Further, absent a material change to our business, we do not expect to pay dividends on the common stock in the foreseeable future, and our outstanding indebtedness restricts our ability to pay cash dividends on any of our equity securities. We intend to use our cash flow to reduce debt and invest in our business
3. 03We depend on a relatively small number of customers for a significant portion of our revenues. The loss of, or material nonpayment or nonperformance by, or the curtailment of production by, any one or more of our customers could materially adversely affect our revenues, cash flows and results of operations
4. 04If any of our customers curtail or reduce production in our areas of operation, it could reduce throughput on our systems and, therefore, materially adversely affect our revenues, cash flows and results of operations
5. 05We are exposed to the creditworthiness and performance of our customers, suppliers and contract counterparties and any material nonpayment or nonperformance by one or more of these parties could materially adversely affect our financial and operating results
6. 06Significant prolonged weakness in natural gas, NGL and crude oil prices could reduce throughput on our systems and materially adversely affect our revenues and results of operations
7. 07If our customers do not increase the volumes they provide to our gathering systems, our results of operations and financial condition may be materially adversely affected
8. 08Certain of our gathering and processing agreements contain provisions that can reduce the cash flow stability that the agreements were designed to achieve
9. 09We have not obtained independent evaluations of all of the reserves connected to our gathering systems; therefore, in the future, customer volumes on our systems could be less than we anticipate
10. 10Our industry is highly competitive, and increased competitive pressure could materially adversely affect our business and operating results
11. 11We may not be able to renew or replace expiring contracts at favorable rates or on a long-term basis
12. 12If third-party pipelines or other midstream facilities interconnected to our gathering systems become partially or fully unavailable, our revenues and cash flows could be materially adversely affected
13. 13Crude oil and natural gas production and gathering may be adversely affected by weather conditions and terrain, which in turn could negatively impact the operations of our gathering, treating, transportation and processing facilities and our construction of additional facilities
14. 14rise to certain termination rights and/or the release of dedicated acreage. Any resulting terminations or releases could materially adversely affect our business and results of operations
15. 15Interruptions in operations at any of our facilities may adversely affect our operations and cash flows available for dividends
16. 16Any significant interruption at any of our gathering, treating, transporting or processing facilities, or in our ability to provide gathering, treating, transporting or processing services, could adversely affect our operations
17. 17populated areas, including residential areas, commercial business centers and industrial sites, could increase the damages resulting from such events
18. 18We have had and continue to have discussions with unaffiliated third parties with respect to potential strategic transactions
19. 19The construction of new assets, including for example, the Double E Pipeline, which was placed into service in November 2021, involve numerous regulatory, environmental, political, legal and economic uncertainties that are beyond our control
20. 20We do not own all of the land on which our pipelines and facilities are located, which could result in disruptions to our operations
21. 21Our ability to operate our business effectively could be impaired if we fail to attract and retain key personnel, and a shortage of skilled labor in the midstream energy industry could reduce employee productivity and increase costs, which could have a material adverse effect on our business and results of operations
22. 22A transition from hydrocarbon energy sources to alternative energy sources could lead to changes in demand, technology and public sentiment, which could have material adverse effects on our business and results of operations

Risks Related to Our Finances

1. 23Limited access to and/or availability of the commercial bank market or debt and equity capital markets could impair our ability to grow or cause us to be unable to meet future capital requirements
2. 24We have a significant amount of indebtedness. Our leverage and debt service obligations may adversely affect our financial condition, results of operations and business prospects, and may limit our flexibility to obtain financing and to pursue other business opportunities
3. 25We may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness or to refinance, which may not be successful
4. 26The failure to successfully integrate the business and operations of Tall Oak in the expected time frame may adversely affect the Company’s future results
5. 27Restrictions in the Permian Transmission Credit Facilities, the indenture governing the 2029 Secured Notes and the Amended and Restated ABL Facility could materially adversely affect our business, financial condition, results of operations and ability to make cash dividends
6. 28Inflation could have adverse effects on our results of operation
7. 29An increase in interest rates will cause our debt service obligations to increase
8. 30A downgrade of our credit rating could impact our liquidity, access to capital and our costs of doing business, and independent third parties determine our credit ratings outside of our control
9. 31We have in the past and may in the future incur losses due to an impairment in the carrying value of our long-lived assets or equity method investments
10. 32A portion of our revenues are directly exposed to changes in crude oil, natural gas and NGL prices, and our exposure may increase in the future

Regulatory and Environmental Policy Risks

1. 33We settled a matter that was previously under investigation by federal and state regulatory agencies regarding a pipeline rupture and release of produced water by one of our subsidiaries. The resulting compliance requirements of the settlement may impact our results of operations or cash flows
2. 34A change in laws and regulations applicable to our assets or services, or the interpretation or implementation of existing laws and regulations may cause our revenues to decline or our operation and maintenance expenses to increase
3. 35Increased regulation of hydraulic fracturing could result in reductions or delays in customer production, which could materially adversely impact our revenues
4. 36Further, several federal governmental agencies (including the EPA) have conducted reviews and studies on the environmental aspects of hydraulic fracturing in the past. The results of such reviews or studies could spur initiatives to further regulate hydraulic fracturing
5. 37We are subject to FERC jurisdiction, federal anti-market manipulation laws and regulations, potentially other federal regulatory requirements and state and local regulation and could be materially affected by changes in such laws and regulations, or in the way they are interpreted and enforced
6. 38We are subject to stringent environmental laws and regulations that may expose us to significant costs and liabilities
7. 39We may incur greater than anticipated costs and liabilities as a result of pipeline safety requirements
8. 40Climate change legislation, regulatory initiatives and litigation could result in increased operating costs and reduced demand for the services we provide
9. 41Statutory and regulatory requirements for swap transactions could have an adverse impact on our ability to hedge risks associated with our business and increase the working capital requirements to conduct these activities
10. 42We may face opposition to the development, permitting, construction or operation of our pipelines and facilities from various groups

Risks Related to the Common Stock and Series A Preferred Stock

1. 43The price of the common stock or Series A Preferred Stock may experience volatility
2. 44Our Governing Documents contain provisions that may make it difficult for a third party to acquire control of the Company, even if a change in control would result in the purchase of your shares of common stock or Series A Preferred Stock at a premium to the market price or would otherwise be beneficial to you
3. 45approval. If the Board of Directors elects to issue Preferred Stock or Blank Check Common Stock, it could be more difficult for a third party to acquire the Company
4. 46We do not expect to pay dividends on our common stock for the foreseeable future
5. 47The value of our common stock may be diluted by future equity issuances and shares eligible for future sale may have adverse effects on our share price

Risks Related to Tax

1. 48The Company is a holding company, and its principal asset is our ownership of Partnership Common Units. Accordingly, we are dependent upon distributions from SMLP to pay dividends, if any, and to pay taxes and other expenses
2. 49The Tall Oak Acquisition and subsequent changes in stock ownership of the Company (including upon the redemption or exchange of the shares of Class B Common Stock and associated Partnership Common Units for common stock) may trigger a limitation on the utilization of net operating loss carryforwards of the Company
3. 50If SMLP were to become a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, the Company and SMLP might be subject to potentially significant tax inefficiencies

Risks Related to Terrorism and Cyberterrorism

1. 51Terrorist attacks and threats, escalation of military activity in response to these attacks, or acts of war could have a material adverse effect on our business, financial condition or results of operations
2. 52Our operations depend on the use of IT and OT systems that could be the target of a cyberattack, including state-sponsored attacks or cyberterrorism
3. 53increased remote access to information systems by employees and contractors can increase exposure to potential cybersecurity incidents