DT Midstream, Inc. Q3 FY2024 earnings call

• Strong Q3 operational performance with continued commercialization of organic projects.
• Increased 2024 adjusted EBITDA guidance to $950 million to $980 million.
• Reaffirmed 2025 adjusted EBITDA early outlook.
• Final investment decision on LEAP Phase 4 expansion (increasing capacity by 200 MMcf/d, expected completion in the first half of 2026) and upsizing of the Stonewall MVP interconnect (increasing capacity by 100 MMcf/d, expected completion in the first half of 2026).
• Progress on carbon capture and sequestration project in Louisiana, with pre-FID detailed engineering design ongoing, awaiting regulatory clarification from the Louisiana DENR, with FID now expected in the first half of 2025.
• Discussion on natural gas market fundamentals, noting short-term choppiness but supportive signals with storage surplus working off and LNG demand growth expected in 2025 and beyond.

In the third quarter, DT Midstream's pipeline segment results were $3 million greater than the second quarter, driven by a full quarter contribution from the LEAP Phase 3 expansion. The gathering segment results decreased by $10 million compared to the second quarter. Total gathering volumes across the Haynesville and Northeast averaged approximately 2.9 billion cubic feet per day in Q3, with Haynesville volumes slightly up from the prior quarter and Northeast volumes lower primarily due to the Appalachia Gathering System volumes.

• Raised 2024 adjusted EBITDA guidance to $950 million to $980 million.
• Reaffirmed 2025 adjusted EBITDA early outlook, with formal 2025 guidance to be provided on the year-end call.
• Raised distributable cash flow guidance range to $670 million to $700 million.
• Reduced 2024 growth capital guidance range to $330 million to $350 million.
• Increased 2025 committed growth capital to approximately $310 million due to new projects reaching FID.

• Regulatory delays for the carbon capture and sequestration project in Louisiana, waiting on the Louisiana DENR for Class VI permit application clarification.
• Market choppiness in the short term.

Q: Just want to kind of follow up on the guidance increase for this year. And I know you're not going to update '25 at this juncture, but just any high level thoughts on forward read throughs on that. And as focus starts to shift to 2026 early look, can you talk about operating leverage across the asset base as the macro improves?

A: David Slater discusses portfolio durability, 2025 growth expectations, and LEAP Phase 4 indicating market sentiment.

Q: And speaking about incremental opportunities, I think Louisiana connectivity, specifically into Henry Hub is an item of concern, I think, for maybe some on the customer side and the producers are looking to get there. It seems like there might not be enough connectivity in the hub and that could lead to a wider basis. Just wondering if you subscribe to this view and what opportunities this could present for DTM.

A: David Slater emphasizes Haynesville network's interconnectivity.

Q: You've been talking about these six potential data center projects. I’m wondering if you can give us a sense of timing and how these opportunities are developing. I believe they're all behind the meter solutions. I'm just wondering, does that make the regulatory process faster, more onerous? Just trying to get a little more color on what's going on.

A: David Slater discusses ongoing discussions, regulatory considerations.

Q: And then I just wanted to ask about Northeast volumes, they've been trending slightly lower the last few quarters. Can you speak to what you're seeing there? And then your comment that Q4, you're expecting a ramp in volumes. Can you just clarify, is that referring to Haynesville or also Appalachia or both?

A: David Slater mentions modest recovery expected in Q4 for both basins.

Q: On the data center power demand fund, putting the competitive processes aside. Can you just remind us how should we book end the size and scope of these projects? And how much can this move the needle relative to your base assets?

A: David Slater discusses ~$50M to $100M CapEx range, impact on portfolio.

Q: And then on the heels of the Fitch upgrade, can you just provide additional color on your credit outlook in general and next steps with Moody's?

A: Jeff Jewell discusses Moody's positive outlook and S&P neutral.

Q: I wanted to go back to the gas macro and the production ramp a little bit. I appreciate the comments on kind of towards the year-end recovery. I guess I'd just be curious if you could flesh that a little bit and talk a little bit about when you think we might get back to the production peaks that we saw almost a year ago and then maybe when we can start to break through that, really kind of a view on when we'll really need production to ramp above those year end '23 levels?

A: David Slater discusses 2025 market constructive for producers, Haynesville recovery timing.

Q: I definitely appreciate the thoughts. Maybe just a quick follow-up. Could you just remind us where NEXUS sits in terms of potential expansion capacity? What opportunities there could look like from a cost or timing perspective? I know it probably goes back to some of the conversations we've had earlier in this call, but kind of specific update on NEXUS would be great.

A: David Slater discusses hydraulic optimization and future capital-driven expansion.

Q: So last time with Q4 earnings, you gave new details on the project backlog and the medium term growth target of 5% to 7%. I want to confirm, is that something you plan to update again with Q4 earnings? And any color you could give on puts and takes to the backlog and five year outlook since you provided it earlier this year?

A: David Slater mentions year-end call refresh of backlog.

Q: The second question, just going back to the data centers, and I know this is pretty fresh still. But how has the Supreme Court's decision to not stay the EPA 111(d) that sets a utilization cap on new gas plants impacted your discussions, if at all, with data center customers? Is that something customers want clarity on for that rule or are they comfortable knowing they might need a carbon capture solution at some point?

A: David Slater discusses ongoing discussions, no immediate behavior change.

Q: The first question maybe just start with the CapEx outlook. It looks like 2025 is kind of filling up nicely here. But Jeff, you talked about staying free cash flow positive in '24 and '25. So just curious how you're thinking about the headroom from here to add more projects next year? And maybe if you could just provide a sense of what types of projects you're looking to get over the line in the next quarter or two?

A: David Slater and Jeff Jewell discuss financial policies, focus on organic growth, M&A strategy.

Q: Second question, just kind of on this topic, still, David, you just mentioned a sort of long organic sort of growth backlog there. Just curious how you're thinking about the relative attractiveness here on the M&A side? You have that strong backlog, of course, organically, but hard to ignore the equity currency here. So just curious, are there any asset candidates out there that maybe didn't make sense a year ago that suddenly look a little more attractive now?

A: David Slater discusses M&A strategy, focus on disciplined execution.

Q: So now that Chesapeake and SWN is closed, just wondering if there's any updated outlook on commercial puts and takes with Expand and whether you're expecting any shifts in production that could potentially benefit your acreage? And on LEAD Phase 4, were those customers you mentioned, was that related to the Blue Union expansion announced last quarter?

A: David Slater discusses working with Expand, LEAD Phase 4 related to Blue Union expansion.

Q: Now that Chesapeake and SWN is closed, just wondering if there's any updated outlook on commercial puts and takes with Expand and whether you're expecting any shifts in production that could potentially benefit your acreage? And on LEAD Phase 4, were those customers you mentioned, was that related to the Blue Union expansion announced last quarter?

A: David Slater discusses working with Expand, LEAD Phase 4 related to Blue Union expansion.

Q: And maybe last one for me is, it seems like the CCS project, maybe the expectation for FID was pushed out a couple of quarters. Just anything to call out there?

A: David Slater discusses regulatory holding pattern waiting on Louisiana DENR