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Summit Midstream Partners LP (NYSE:SMLP)
Q1 2020 Earnings Call
May 9, 2020, 9:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Welcome to the First Quarter 2020 Summit Midstream Partners, LP Earnings Conference Call. My name is Hilda, and I'll be your operator for today. [Operator Instructions]

Please note that this conference is being recorded. I will now turn the call over to Mr. Ross Wong. Mr. Wong, you may begin.

Ross Wong -- Senior Director, Corporate Development & Finance

Thanks, operator, and good morning, everyone. If you don't already have a copy of our earnings release that was issued earlier this morning, please visit our website at www.summitmidstream.com, where you will find it on the homepage, Events and Presentations section or Quarterly Results section.

With me today to discuss our first quarter of 2020 financial and operating results is Heath Deneke, our President and Chief Executive Officer; Marc Stratton, our Chief Financial Officer, along with other members of our senior management team.

Before we start, I'd like to remind you that our discussions today may contain forward-looking statements. These statements may include, but are not limited to, our estimates of future volumes, operating expenses and capital expenditures that may also include statements concerning anticipated cash flow, liquidity, business strategy and other plans and objectives for future operations. Although we believe that these expectations reflected in such forward-looking statements are reasonable, we can provide no assurance that such expectations will prove to be correct. Please see our 2019 annual report on Form 10-K, which is filed with the SEC on March 9, 2020, as well as our other SEC filings for a listing of factors that could cause actual results to differ materially from expected results.

Please also note that on this call, we use the terms EBITDA, adjusted EBITDA and distributable cash flow. These are non-GAAP financial measures, and we have provided reconciliations to the most directly comparable GAAP measures in our most recent earnings release.

And with that, I'll turn the call over to Heath.

J. Heath Deneke -- President and Chief Executive Officer

Okay. Thank you, Ross, and good morning, everyone. Thanks for joining us on Summit's First Quarter 2020 Earnings Call. So earlier this morning, Summit reported first quarter 2020 adjusted EBITDA of $66.1 million and distributable cash flow of $34.2 million. These results were in line with our expectations for the quarter, and include $1.5 million of unbudgeted deal costs associated with various strategic initiatives that we are evaluating, including the GP buy-in transaction that was announced earlier this week.

Look, I'm very excited about the definitive agreements we signed to acquire Summit Investments, which is the owner of our general partner. We certainly believe this transaction is a very important next step in our evolution and our continued progress. And I'll be happy to outline that in greater detail a bit further on in the call.

So look, as we are all aware, the market backdrop has changed significantly since our earnings call back in February. Certainly, the entire oil and gas sector is facing significant headwinds as a result of depressed crude oil prices and the impacts of the COVID-19 pandemic.

In late February, the natural gas market seemed particularly challenged due to a warm winter and oversupply situation of natural gas. This was partially driven or primarily driven by the large volume of associated natural gas production from all focus regions like the Permian Basin. Fast forwarding to today, that script has completely flipped as oil prices have fallen dramatically. And with it, the expectation for vast amounts of that associated gas production, which is resulting now and natural gas prices improving fairly significantly on a forward-looking basis. So challenging markets like the one we are in certainly highlight the strength of Summit's diversified business model and asset position.

For the first quarter of 2020, approximately 69% of our segment adjusted EBITDA originated from our natural gas-focused segments, which we believe will help provide relative stability in the near-term while preserving significant upside associated with future improvements to oil and NGL prices. Over the past two months, many of our oil and gas producers have announced prudent steps to reduce 2020 capital budgets, drilling completion plans, particularly in those crude oil-focused areas. Many of our customers have done so as well. And for the remainder of 2020, we are expecting these headwinds to continue, and for the oil-focused areas to be probably more impacted than our gas-focused regions.

So consistent with that theme, on May 3, we announced that we now expect our adjusted EBITDA to trend toward the low end of our original guidance range that we set of $260 million to $285 million. This incorporates decreased drilling activity, the deferral of well completions from customers and, on a limited scale, temporary production curtailments of uneconomic wells from certain customers, which are predominantly in the Williston and DJ segments through the month of May.

At this point, with the recent rise in oil futures to the mid-20 range and gas to the $2-plus levels for the month of June and beyond, we are not currently expecting to see a continuation of the roughly $3 million of monthly curtailment-related revenue impacts that we expect to occur in the month of May. However, these temporary shut-ins continue to be an ongoing risk factor that could cause our 2020 financial results to weaken beyond our recently stated guidance.

While we are bearish on the overall near-term outlook for our sector, I do want to point out that we have seen a number of bright spots that have had a positive impact on our first quarter results, and we believe will continue to provide momentum for the remainder of 2020.

In our Utica Shale segment, a five-well pad was commissioned in mid-March. It was commissioned on time and as expected. And the pad continues to generate aggregate production rates that are more than 15% higher than the forecasted -- or than the forecast, incorporated in our original financial guidance. For the month of April, our throughput levels on the Summit Utica system averaged in excess of 400 million a day. And we expect that production from these wells will provide a meaningful impact to our Utica Shale segment volumes and segment adjusted EBITDA over the next several quarters.

Our Permian Basin segment reached $1.6 million of adjusted EBITDA in the first quarter, which I think was a record, and it was driven by 13 new well connections in the fourth quarter and four new well completions in the first quarter. Although we are expecting slowdowns in the Williston and DJ, overall, we expect no material changes to our original guidance from our gas-focused areas and our Permian Basin segment.

On the Double E project, I'll let Marc provide more detail later on in the call. But the key takeaway there is that we do remain on track to place the project in service during the third quarter of 2021.

Now transitioning to an update on our strategic initiatives. As a reminder, we began implementing a plan in the fall of 2019 designed to strengthen our balance sheet, increase our financial flexibility and rightsize our cost structure to mitigate the impact of industry headwinds. We achieved several key milestones since then, including the transformational GP buy-in transaction that we announced earlier this week.

So let me hit on a few of those highlights. So as just discussed, we announced that SMLP entered into a definitive agreement with our GP sponsor, Energy Capital Partners, to acquire Summit Midstream Partners, LLC, or as we refer to it, Summit Investments. This came along with 5.9 million SMLP common units that were owned by ECP. And the total consideration for the transaction included $35 million in cash and warrants that would cover 10 million SMLP common units.

So I'm very excited about this transaction, and I do believe it will help position the company for success going forward. I certainly would like to thank ECP for being a very supportive sponsor over the past decade. However, the independent directors and I feel that now is an important time to reorganize both the structure and the governance of the Summit Midstream family of entities to endure through the challenging times ahead.

SMLP's acquisition of Summit Investments includes all of Summit Investments subsidiaries, including SMP Holdings. SMP Holdings is the owner of the GP interest in SMLP. It owns -- currently owns 45.3 million common units and the $180 million DPPO receivable. SMP Holdings also has a $158 million term loan that is outstanding and will continue to remain a liability of SMP Holdings, though it is important to note that all of the assets and liabilities of SMP Holdings are nonrecourse to SMLP. And Summit Investments and all of its subsidiaries will be unrestricted subsidiaries of SMLP.

Also in connection with the acquisition, ECP has agreed to provide a first lien senior secured loan to SMLP to provide the partnership with additional liquidity through its March 2021 maturity date. In our view, this transaction fully aligns the Board with the interest of SMLP's common and preferred unitholders as well as our creditors. Upon closing, ECP's directors, who currently hold a majority of the Board seats will resign, and the Board will be comprised of a majority of independent directors going forward.

Additionally, we will amend our partnership agreement to provide for the public election of directors beginning in 2022, which further ensures that the interest of our unitholders are being met. Importantly, the GP buy-in transaction enabled SMLP to immediately suspend its common and series A preferred unit distributions, which collectively account for approximately $76 million per year of annual cash flows -- outflows. These cash savings, coupled with the enhanced liquidity from the $35 million of loan proceeds from ECP are critical, especially during this time with high volatility in commodity prices. Eliminating these distributions will provide significant financial flexibility, and it will enable SMLP to continue to prioritize delevering the balance sheet.

We expect the GP buy-in transaction to close in the second quarter of 2020, and it remains subject to certain closing conditions, including the finalization of a new creditor agreement, which is associated with the ECP loan agreement. Second, we are making substantial progress on executing our financing plans for Double E, and we expect to secure nonrecourse bank financing that will fund the substantial majority of our remaining Double E capital obligations, and it limits our remaining 2020 capital expenditures on the project to approximately $10 million. Third, we continue to employ capital discipline throughout the entire organization, and I think this can be evidenced by our recently announced 33% reduction in our 2020 capital guidance. Now these further reductions are primarily reductions to our growth capital, which is as a result of the decreased activity that we're experiencing from our customers.

Look, our capital program remains highly adaptable. And we can adjust and align the timing of our 2020 growth expenditures with the activity levels of our customers.

And then lastly, I want to point out, we do continue to have some encouraging conversations related to divestitures and joint venture opportunities and some of our legacy and core asset footprints. We will continue to utilize a methodical, a very disciplined approach to evaluating these opportunities, and we will remain laser-focused on ensuring that any transaction that we enter into maximizes unitholder value. Our expectation is if we are successful with the divestiture that any of those proceeds would be utilized to delever SMLP's balance sheet.

I'm excited about the progress that SMLP has made in transforming the business over the last several months, and I know that there still are many attractive opportunities to capitalize on.

I'd also like to take the time to commend the entire Summit team for adapting quickly to changing market conditions and the disruption caused by the COVID-19 pandemic, and most importantly, for our employees' focus and continued commitment to operate safely, efficiently and effectively.

So with that, let me hand the call over to Marc to review our financial results.

Marc Stratton -- Executive Vice President and Chief Financial Officer

Great. Thanks, Heath, and good morning, everyone. I'll begin by walking through the segments that comprise our core focus areas. Starting with our Utica Shale segment. The SMU system averaged 222 million cubic feet a day in the first quarter, and segment adjusted EBITDA totaled $5.9 million, which is down approximately $2.7 million over the fourth quarter of 2019. The quarter-over-quarter decrease in segment adjusted EBITDA was primarily driven by a 12.6% decrease in throughput volumes and a nonrecurring $2.1 million payment that we received last quarter related to a contract amendment. Volumes were lower in the first quarter of 2020 as a result of natural production declines from the 10 wells that were connected in 2019, partially offset by seven new wells connected near at the end of the first quarter of 2020, including the five-well pad that was incorporated in our original guidance.

As Heath mentioned, the five-well pad site behind our Utica Shale system came online in mid-March and is generating aggregate initial production rates in excess of 160 million cubic feet per day. Together with additional dry gas well completions behind our TPL-7 Connector at the beginning of the second quarter, throughput levels on our Summit Utica system in April averaged more than 400 million cubic feet a day which is 80% higher than our average daily volume in the first quarter.

Turning to our Ohio Gathering segment. Adjusted EBITDA totaled $7.9 million for the quarter, which represented a $1.6 million decrease from the fourth quarter, primarily due to lower volume throughput and higher expenses. Gross volumes in the first quarter of 2020 were down 16% from the fourth quarter of 2019 due to natural declines associated with 13 new wells that were connected in the second half of 2019, partially offset by seven new wells that were connected in the condensate window of the play and yield lower natural gas production rates compared to the rich gas and dry gas windows.

We continue to expect our OGC customers to commission a total of 20 new wells behind the OGC system in 2020, and we do not intend to make capital contributions to OGC in 2020. Currently, approximately 110 million cubic feet a day of throughput is temporarily shut in upstream of the Ohio Gathering system due to condensate storage constraints in the region, which has been incorporated into our revised guidance. We expect this production to come back online before the end of the second quarter.

In the Williston, segment adjusted EBITDA of $16.2 million in the quarter was down from $20.2 million in the fourth quarter of 2019, primarily due to a 17.3% quarter-over-quarter decrease in liquids volume throughput to 98,000 barrels a day. 12 new wells were connected in the first quarter of 2020. However, volumes were offset by natural production declines from the more than 80 wells that were connected to our Williston systems in the second through fourth quarters of 2019. We expect deferrals of near-term activity and potential shut-ins from our customers in this region due to the recent reduction in crude oil prices. Once crude prices improve, we expect producers to utilize their 32 DUCs in inventory on acreage dedicated to our Williston Basin systems, since it is a capital-efficient way to bring additional production online.

DJ segment adjusted EBITDA totaled $5.9 million in the first quarter of 2020, a 10.8% decrease over the fourth quarter of 2019 due to approximately $600,000 of increased producer payments that were classified as capital reimbursement revenue versus gathering revenue and an 8.6% quarter-over-quarter decrease in total throughput to 32 million cubic feet a day. We also recorded an impairment in the quarter for $3.6 million of soft costs, incurred in connection with the cancellation of a compressor station project. However, this impairment was noncash and had no impact on segment adjusted EBITDA for the quarter.

We did not have any new DJ Basin well connections in the first quarter of 2020, and we expect deferrals of near-term completion activity from our customers due to the recent reduction in crude prices. Our customers currently have 26 wells in DUC inventory. And based on recent conversations with these customers, we now expect approximately 16 new well connections in 2020, which is approximately 70% less than our expectations when we released our initial guidance in February of 2020. Similar to our expectations in the Williston, we expect that DUC inventory wells will be a catalyst for production increases when crude oil prices improve.

Our Permian segment generated record quarterly segment adjusted EBITDA of $1.6 million in the first quarter of 2020, an increase of $1.5 million from the fourth quarter of 2019. These results were driven by 17 new well connections over the last two quarters, including four well connections in the first quarter of 2020 and resulted in a 32% quarter-over-quarter volume increase to 33 million cubic feet a day.

Our outlook for the Permian segment remains unchanged relative to our original 2020 financial guidance. Approximately two-third of the well connections we expected for the year have already come online. And one customer recently drilled and completed two new wells behind our Permian system but is waiting until crude prices improve to commence production.

Our legacy areas, which include the Piceance, Barnett and Marcellus segment, generated $37.6 million of combined segment adjusted EBITDA in the first quarter of 2020 and continued to generate strong free cash flow of $36.2 million based on $1.4 million of combined capital expenditures incurred in the period. Of note, in the Marcellus Shale segment, our anchor customer has 18 DUCs in inventory, all of which are planned to commence production in 2020. We had only assumed nine new well connections in 2020 when we released our initial guidance in February, so we would expect upside to our volume throughput and segment adjusted EBITDA expectations in the Marcellus if all 18 wells are connected this year.

As with many of our other systems, there is no incremental capital required to realize the volume and EBITDA benefits in the Marcellus because gas that hits the system is gathered from third-party gathering systems and delivered to us via central receipt points through our high-pressure system.

Given the uncertainty and volatility in the market, we continue to plan for only nine new wells being connected in 2020. And anecdotally, one of our larger customers in the Barnett Shale segment recently permitted three new wells behind our DFW system and intends to complete these wells in 2021. This was not expected from a few months ago, and is certainly a silver lining of the recent crude price decline and reduced expectation for associated gas production.

Now turning back to the partnership. SMLP reported first quarter 2020 net income of $5.3 million, which was negatively impacted by the $3.6 million noncash impairment charge in the DJ Basin and approximately $1.5 million of deal expenses related to our GP buy-in transaction and other asset sale processes we are evaluating. Capital expenditures totaled $18.6 million in the first quarter of 2020, including maintenance capital expenditures of $5.1 million, a decrease of 39.3% compared to the fourth quarter of 2019. Capital expenditures in the first quarter of 2020 were primarily related to completing growth projects in our Williston, DJ and Permian segments as well as onetime expenses associated with the relocation of our corporate headquarters.

As Heath previously highlighted, we continue to employ a rigorous level of discipline in all capital allocation decisions, and we expect total capital expenditures to range from $30 million to $50 million, which at the midpoint is down 33% from the original range of $50 million to $70 million.

Now for a quick update on Double E. During the first quarter of 2020, SMLP made cash investments totaling $58 million with respect to its 70% equity investment in Double E. And as of March 31, $65 million of the $80 million of redeemable preferred units committed from TPG had been issued. We are actively pursuing a nonrecourse bank financing to fund the majority of our remaining Double E capital obligations, which would defer any additional investment beyond the approximately $10 million already included in our capex forecast for 2020 to 2021.

Despite a more challenging backdrop, the Double E project is proceeding in line with our expected time line. There has been a general slowdown in the construction industry, which we expect to result in positive implications for Double E construction costs relative to our initial expectations. In addition, our anchor shipper continues to emphasize the importance of the Double E pipeline since it is a strategic and critical piece of infrastructure for its long-term production plans and for the Northern Delaware in general.

In March, we received a satisfactory environmental assessment report from the Federal Energy Regulatory Commission. And we still expect to receive a FERC 7(c) certificate for Double E in the third quarter of 2020.

We had $698 million outstanding under our $1.25 billion revolving credit facility as of March 31, and approximately $120 million of available borrowing capacity due to financial covenant limitations and a $9.1 million undrawn letter of credit. We also had $68 million of unrestricted cash on hand at quarter end. Total leverage at quarter end was approximately 5.05 times compared to a maximum limit of 5.5 times.

For the year, we expect to utilize cash flow from operations and the $76 million of cash savings from the suspension of common and preferred distributions to reduce debt by over $100 million, excluding the impact of any potential asset sales. Based on the current plan and in conjunction with expected EBITDA in 2020, we would expect leverage at the end of the year to be right around 5 times.

Now I'll turn the call back over to Heath for closing remarks.

J. Heath Deneke -- President and Chief Executive Officer

Thank you, Marc. I would like to close my comments, I think, by reiterating some of the key points around the state of our business. We believe that the recently announced GP buy-in transaction is transformational and that in conjunction with the suspension of our common and series A preferred unit distributions, gives somewhat a fighting chance to navigate through the choppy waters ahead and while repositioning the company for long-term success. We do think that the challenging macro environment will continue well into 2021, particularly in our oil-weighted basins, but let me assure you that we are leaving no stone unturned in our attempts to mitigate the impact of this downturn, restore the balance sheet and ensure that we are well positioned to capitalize on opportunities when better markets return.

We will continue to collaborate with our customers. We'll monitor the industry landscape, and we will provide updates throughout the remainder of the year so that we maintain transparency regarding our projections during these very turbulent times. We remain committed to strengthening the balance sheet and focusing on the things that we can control, which include our costs, our capital discipline and by ensuring that we're providing safe, reliable and efficient operations.

While we certainly made a lot of progress to date, I think there are additional opportunities that remain that can further enhance our business outlook, and our teams remain determined to capitalize on them. While we acknowledge that we have a big hill left in front of us to climb, I want to reiterate that I do feel optimistic, very optimistic, about the future of the company.

So with that, operator, I'd like to open the call up for questions.

Questions and Answers:

Operator

[Operator Instructions] We have a question from Tristan Richardson from SunTrust.

Tristan Richardson -- SunTrust -- Analyst

Hey, good morning, guys. Just -- appreciate the commentary about your -- just sort of activity you're seeing in your operating areas. I guess just one quick one on the partnership and the new structure. I understand that the DPPO might be -- the receivable might be offset against the payable and consolidated reporting, but just curious how you guys think about DPPO conceptually in terms of that obligation to what will be ultimately a subsidiary?

J. Heath Deneke -- President and Chief Executive Officer

Good morning, Tristan. This is Heath. I mean I think as you kind of pointed out, I mean, I think, when we acquired some of the investments, we did acquire the receivable, the DPPO receivable, if you will. And I think we kind of think of it as an intercompany note that we own. So I mean I think that's generally how we see it going forward. We are intending -- this quarter, as you know, Summit, SMPH, a subsidiary of Summit investments. We do have the outstanding term loan B at that entity. And so this quarter, we have decided we are intend to make a payment to SMPH. Now that the distributions have been turned off, we're going to make a payment this quarter to kind of keep the term loan B current. So I think it's intercompany. I think it's -- we own both sides of it. And that's -- I think that's how I'd answer that.

Tristan Richardson -- SunTrust -- Analyst

Okau. Thank you, guys, very much.

Operator

Our next question comes from James Carreker from US Capital Advisors.

James Carreker -- US Capital Advisors -- Analyst

Thanks. Just to follow-up on the term loan B. Is the expectation to continue to make payments on that? I assume that, that had formally been serviced by the distributions on the common units. Just as I think about future share count, what is the plan on that?

J. Heath Deneke -- President and Chief Executive Officer

Well, look, I think now that we've turned off the common distributions, I mean, we can continue to service the term loan B by making quarterly payments down or toward the DPPO. But look, that will be a decision that will be made on a quarterly basis by the independent board. And any decision that the new independent board will be making on a go-forward basis will be solely based on what it feels to be in the best interest of the partnership.

James Carreker -- US Capital Advisors -- Analyst

I guess what's the case to be made for continuing to make payments on that as you look to -- it seems like liquidity and balance sheet preservation is top of mind. So I mean, I guess, what would be the benefit to continue to make payments?

J. Heath Deneke -- President and Chief Executive Officer

Yes. I mean I think it's a good question. I think I don't want to speak for the Board on that. I think it's something that this quarter, we felt that it made sense to make the payment with the term with the term -- with the distributions just having been turned off. We're going to evaluate that in the long term, what we intend to do with the DPPO. And we'll have continued discussions with the term loan B holders. I think -- as a reminder, the term loan B has the ownership of 34.6 million common units -- or actually, we own them. But those units are pledged to the term loan B, as is the non-economic GP. So I think our general thought this quarter was we were agreeable to make that payment, and we'll reconvene next quarter and decide if that -- if it makes sense to continue to do so.

James Carreker -- US Capital Advisors -- Analyst

Sorry, can you confirm, you just said that term loan B also is -- has the right to the non-economic general partnership, not just the common units?

J. Heath Deneke -- President and Chief Executive Officer

That's correct.

James Carreker -- US Capital Advisors -- Analyst

Okay. And then just a follow-up on one other item. You talked about trying to set up financing for Double E. Can you just talk about where you are on the process on the bank facility, just given -- it seems like banks are trying to reduce their exposure to energy. Is there any concern that, that doesn't get across the finish line?

J. Heath Deneke -- President and Chief Executive Officer

Yes. Marc, do you want to take that one?

Marc Stratton -- Executive Vice President and Chief Financial Officer

Sure. Yes. No, James. Look, we're making good progress on the bank financing for Double E. It's a very strategic asset, again, for the producers in the Northern Delaware, including our partner in the project, and it's strategic to the basin in general. So although financing markets have tightened up a little bit, just given the strategic nature of the project, the contract profile, we think this is a very financeable project, and we expect to have financing in place concurrent with our FERC 7(c) certificate in the third quarter. So making good progress and expect we'll have a much better update for you on our next quarter earnings call in August.

James Carreker -- US Capital Advisors -- Analyst

Thank you.

Operator

Thank you. Our next question comes from Elvira Scotto from RBC Capital Markets.

Elvira Scotto -- RBC Capital Markets -- Analyst

Hey, good morning, everyone. just to follow-up on the DPPO and the term loan. So my understanding was that there's an interest coverage requirement on the term loan. And that used to be satisfied by the distributions on the units that the term loan holders have as collateral. Now that those distributions are gone, is the decision to continue to pay on the DPPO, is that to maintain that interest coverage?

And then my second question is related to that. So if you make the payment on the DPPO, is that cash then trapped at that entity where the DPPO and the term loan sit?

J. Heath Deneke -- President and Chief Executive Officer

I'll take a shot at your questions. Marc, you feel free if I leave something out. I think the answer to your first question, I believe, is yes. The common units used to -- that we were paying out were used to service the term loan B, and we certainly have the right option to continue to keep the term loan B current by making distributions or making payments, if you will, cash payments under the DPPO.

You're right, there is an interest coverage ratio there. And so we can we can make payments that would be in excess of the minimum service there. But the DPPO, just to be clear, is not part of the collateral package associated with the term loan B. So to the extent we made -- that we were making the interest coverage ratio satisfy that test, then any cash in excess of what was required to make the interest in minimum amortization, we don't believe would be trapped, if you will, or stuck in that entity. They could be cycled back.

Elvira Scotto -- RBC Capital Markets -- Analyst

Okay. Then what would happen if you didn't satisfy that covenant on the term loan?

J. Heath Deneke -- President and Chief Executive Officer

I don't think we really want to speculate upon that right now. As I said, we've kind of made the decision this quarter, the Board's made the decision as part of the GP buy-in transaction that we would satisfy that -- the Term Loan B this quarter. I think that's a decision that the independents will make on a quarterly basis going forward.

Elvira Scotto -- RBC Capital Markets -- Analyst

Okay. Got it. All right. Switching gears to the asset sales. So a question here. Does the recent change in market dynamics, i.e., the reduction in the associated gas production and potential for dry gas basins to benefit change your view of core versus non-core asset sales? And if not, have these dynamics that I just mentioned increased the interest in some of these dry gas assets that you're trying to sell?

J. Heath Deneke -- President and Chief Executive Officer

Yes. That's a good question. I mean I think -- look, I think as -- I think Marc pointed out during his commentary, certainly, we are seeing the benefits of having a diversified portfolio, balance -- fairly well balanced between liquids and gas. As it relates specifically to asset sales, what I'd say is that we certainly have seen an increase over the -- certainly over the past few months in interest, a lot of mainly private-backed companies that are looking to acquire assets. What I will tell you is that we still continue to see a gap in what we think is fair value and a level that we would transact at relative to what I would describe as others just being opportunistic and trying to -- try to get an asset at a steal.

So I still think there's a bid-ask spread there. But definitely, we have seen a uptick in interest related to our -- more of our gas basins. And so it has shifted a little bit in that before, I think we saw a lot more in our oil-weighted basins. And while there still are some inquiries and interest there, we have had some additional inbounds on more of our dry gas areas.

Elvira Scotto -- RBC Capital Markets -- Analyst

Great, Thank you very much.

Operator

Thank you. We have reached the time we had allotted for questions. I would like to turn the call back to Mr. Deneke for any final remarks.

J. Heath Deneke -- President and Chief Executive Officer

Great. Well, look, thanks, everyone, for joining us on the call today. I really appreciate that. And we certainly look forward to closing the GP buy-in transaction. Definitely see lots of transformational deal for the company. And we're excited about turning the page and getting to the next chapter for Summit. So as I say, I want to -- please, stay safe and well, and we look forward to speaking again soon. Thank you all.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Ross Wong -- Senior Director, Corporate Development & Finance

J. Heath Deneke -- President and Chief Executive Officer

Marc Stratton -- Executive Vice President and Chief Financial Officer

Tristan Richardson -- SunTrust -- Analyst

James Carreker -- US Capital Advisors -- Analyst

Elvira Scotto -- RBC Capital Markets -- Analyst

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