DT Midstream, Inc. Q2 FY2026 earnings call

• Market Fundamentals & Strategic Positioning

  • Ongoing global supply disruptions have increased demand for U.S. sourced LNG, supporting additional LNG-related infrastructure investment along the Gulf Coast and creating expansion opportunities for the firm's Haynesville system.
  • Natural gas remains the most reliable, affordable large-scale domestic energy source to meet growing power demand, and the firm's interstate pipeline footprint is strategically positioned to serve this growth.

• New FID Organic Growth Projects

  • The firm reached FID on approximately $300 million in new organic growth projects pulled from its backlog, all supported by long-term customer contracts.
  • Haynesville LEAP pipeline expansion: Adds 200 MMCF per day of capacity, bringing total LEAP capacity to 2.3 BCF per day, expected in-service in H2 2028.
  • Viking modernization Phase 1: Improves reliability for capacity serving the Twin Cities, Minnesota, expected in-service Q4 2028.
  • Appalachia gathering system expansion: 100 MMCF per day expansion supported by a new long-term gathering agreement, expected in-service Q4 2027, delivering supply to Nexus and Texas Eastern.
  • New Nexus interconnect: 380 MMCF per day capacity to serve a natural gas-fired power plant supplying a new Ohio data center, bringing total new Nexus mainline demand added this year to over 0.5 BCF per day.

• Active Project Development & Construction

  • Upcoming expansion projects (MIST on Midwestern, Vector 2030) are progressing through commercialization, with encouraging customer demand; MIST is expected to be developed in multiple southbound and northbound phases, with a binding open season as the next milestone.
  • Guardian Phase 1 has received FERC approval, and the FERC 7C application for the Guardian G3 expansion was submitted in June 2024; all active in-flight projects remain on schedule and on budget.

• Financial & Capital Update

  • The firm has a strong balance sheet: Moody's raised its proportional leverage downgrade threshold from 4.0x to 4.25x, and Fitch raised its on-balance sheet leverage threshold from 4.0x to 4.5x.
  • The Board of Directors approved a Q2 dividend of $0.88 per share, unchanged from the prior quarter; management remains committed to growing the dividend in line with adjusted EBITDA growth.

In the second quarter, the firm reported adjusted EBITDA of $305 million, a $3 million decrease quarter-over-quarter. The Pipeline segment generated adjusted EBITDA that was $14 million lower than the prior quarter, driven by seasonally lower revenues from joint venture pipelines, partially offset by higher revenues on the Stonewall system. The Gathering segment generated adjusted EBITDA that was $11 million higher than the prior quarter, reflecting higher throughput volumes on the Blue Union system. Operationsally, Haynesville gathering volumes averaged 2.2 BCF per day (an all-time quarterly record), while Northeast gathering volumes averaged 1.38 BCF per day. Growth capital investment for the quarter was $86 million, in line with planned levels.

• Management reaffirmed the full year 2024 adjusted EBITDA guidance range (the call does not specify the exact numerical range).
• Management also reaffirmed the 2026 adjusted EBITDA guidance range and maintained the early 2027 adjusted EBITDA outlook.
• The newly FID-approved projects will bring committed capital spending to approximately $425 million in 2026 and approximately $560 million in 2027.
• Q3 2024 adjusted EBITDA is expected to be lower than the strong Q2 2024 result, due to planned gathering network maintenance and temporarily lower Northeast volumes tied to producer activity timing; Haynesville volumes are expected to remain flat sequentially from Q2.
• Growth capital spending is expected to ramp up over the second half of 2024.

No specific material operational risks, financial risks, or operational failures were discussed during this earning call.

Q: Can you detail MIST project phasing, size, competitive landscape, supply options, and how MIST relates to the Borealis project?

A: Customer demand timing drives MIST's commercial timeline, and the project will be split into southbound and northbound phases. Management expects the first phase could enter service as early as late 2029, and notes the project is broadly similar in size and scale to the Guardian G3 expansion. The Midwestern pipeline already has diverse, existing supply connections (REX, Vector, Alliance, Tennessee Gas, Texas Gas) giving it a unique advantage, and management is agnostic to new upstream supply projects: any successful upstream expansion (including Borealis) adds more supply options to Midwestern, making MIST and Borealis complementary rather than competitive.

Q: If Permian natural gas production grows over the next few years, will that reduce Haynesville supply demand for LNG, and threaten the goal of reaching 4 BCF per day of LEAP capacity?

A: Management has already proactively expanded connectivity to Carthage, which will be a major hub for Permian gas moving east, to access this growing supply. Total long-term demand for natural gas (for both LNG export and domestic use) is extremely robust, and will require growing production from all basins, including both Permian and Haynesville. This market growth will create opportunities across the entire pipeline ecosystem, and does not change the long-term outlook for expanding LEAP to 4 BCF per day.

Q: What is the current capacity status of the Nexus pipeline, and how do you expect future growth to unfold?

A: Nexus currently has a total capacity of 1.4 BCF per day, and is effectively fully contracted today, with only limited short-term expiring capacity available for new long-term contracts, putting Nexus in a strong market position. The firm's strategy has been to first connect new demand centers (including the recent data center-serving interconnect) to the Nexus mainline, and the existing pipeline was built with pre-prepared infrastructure for future compression expansion that can add incremental capacity easily. Management will patiently monetize available capacity first before triggering a full Nexus expansion as demand crystallizes.

Q: How would large-scale new long-distance pipeline capacity to move growing basin production to new demand centers likely timeline look?

A: Large-scale FERC-regulated pipeline projects typically take 7-8 years from initial concept to in-service operation, though the fastest possible timeline from now is 3-4 years for development. The earliest any large new projects would enter service is the early 2030s, matching current long-term demand projections that show 30-40 BCF per day of incremental new North American natural gas demand over the next 20 years, which will require major new pipeline investment. Management is strategically focused on capturing opportunities in this space, but it is still early in the development process.