Welcome to the DT Midstream Second Quarter 2021 Earnings Conference Call. Please be advised that today's conference is being recorded. I will now turn it over to our speaker today, Todd Lohrmann, Director of Investor Relations. Thank you. Please go ahead.

Good morning, and welcome, everyone. Before we get started, I would like to remind you to read the safe harbor statement on Page 2 of the presentation, including the reference to forward-looking statements. Our presentation also includes references to non-GAAP financial measures. Please refer to the reconciliations to GAAP contained in the appendix. Joining me this morning are David Slater, President and CEO; and Jeff Jewell, Executive Vice President and CFO. I'll now turn it over to David to start the call.

Thanks, Todd. Good morning, and thanks, everyone, for joining us today. I'm very excited to be hosting our inaugural quarterly earnings call after a successful spin-off from DTE. We have been operating as a stand-alone company for just over a month now, and I am pleased to see our business continue its strong performance. I could not be happier with the job the team has done, getting us to this point today. I'd like to personally thank the many people involved in our successful spin, including the employees of both DTM and DTE, the Boards of both companies, and research analysts along with debt and equity investors. Because of your contributions, we are well positioned for continued success. Let's start on Slide 3. For the first half of the year, we delivered strong growth across both business segments and are on track to achieve our 2021 adjusted EBITDA and operating earnings guidance with a bias to the upper end of both ranges. Our Board of Directors is officially in place and yesterday approved our first quarterly dividend of $0.60 per share, which will be paid in the fourth quarter of this year. DTM announced dividend, when combined with that of DTE Energy, is delivering the higher combined dividend that we described pre-spin. We are also highly confident in our growth trajectory beyond 2021. We are affirming our '22 early outlook for adjusted EBITDA and increasing our 2022 early outlook for operating earnings. Let's turn to Slide 4. As a stand-alone C-corp, DTM offers a unique opportunity for investors. Our asset platforms are well positioned to serve key markets from the two premier dry gas basins in the country, providing wellhead-to-market services. We have a clean balance sheet with low leverage and no significant maturities for seven years, supporting our self-funded growth agenda. Our strong cash flow generation is underpinned by long-term take-or-pay contracts. And we are committed to a best-in-class ESG program with leading C-corp governance and net zero carbon emissions by 2050. I'll now pass it over to Jeff, who will cover our financial results.

Thanks, David, and good morning, everyone. I'll start on Slide 5. We continue to deliver strong results from both business segments, our first half 2021 adjusted EBITDA of $384 million, which was $43 million higher year-over-year and was split roughly 50-50 between pipeline and gathering. Pipeline adjusted EBITDA was $199 million, and gathering adjusted EBITDA was $185 million. Our first half 2021 operating earnings were $174 million, which was $32 million higher year-over-year. The year-over-year increases in adjusted EBITDA and operating earnings were driven by the in-service of LEAP Gathering Lateral Pipeline and higher gathering volumes. Now let's turn to Slide 6 and discuss the full year 2021. Based on our strong year-to-date performance, we are reaffirming both our 2021 adjusted EBITDA and operating earnings guidance with the potential to be at the higher end of both guidance ranges. This year-over-year growth is driven by strong operational performance across our portfolio and includes offsetting a half year of new public company expenses. Moving to Slide 7. Year-to-date, distributable cash flow is driven by strong performance across both segments. We are revising our 2021 capital guidance range to be $205 million to $230 million due to cost efficiency and a small amount of project timing. Our five-year growth agenda of $1.2 billion to $1.7 billion remains unchanged. We have significant financial flexibility with our cash flows, and we will allocate to maximize value for our shareholders. Moving on to the next slide to talk about 2022. Looking ahead to 2022, we are highly confident in achieving our growth targets. We expect 2022 adjusted EBITDA to be between $755 million and $795 million, representing 5% to 7% growth from 2021 guidance, which includes offsetting a full year of public company cost. We now expect 2022 operating earnings to grow in line with adjusted EBITDA, driven by interest expense favorability. Therefore, we are raising our outlook for 2022 operating earnings to $314 million to $330 million. I'll now turn it back over to David.

Thanks, Jeff. Moving on to Slide 9. In the second quarter of 2021, we gathered over 2.5 Bcf a day of production volumes, representing 3% overall growth from the prior quarter. Growth in the Haynesville was driven by higher production volumes on Blue Union, and the system recently hit a record high for volumes during the month of July. In the Northeast, we saw strong volume growth on the Appalachia Gathering System, which offset declines in other gathering areas. As you know, our portfolio has high contributions from contracted take-or-pay agreements, which minimized the impact of volumes on results. Let's turn to Slide 10, and I'll discuss why we are so confident in our 2022 growth. We continue to see strong organic growth into 2022. And the number of assets are delivering highly accretive growth, including contracted growth on LEAP and higher rates and longer contract terms on NEXUS. Also, we continue to support growing production from our producer base, with contract expansions on Appalachia Gathering, contractor treating, and gathering expansions on Blue Union, and new third-party expansions. In summary, we are highly confident in our '22 growth. Moving to Slide 11. Looking beyond 2022, our commercial team has been busy developing and executing multiple transactions to solidify accretive growth. We have made significant progress in achieving our strategic priorities, which includes adding new counterparties to enhance portfolio diversification, extending the portfolio of contract tenor across both segments, and increasing contract rates. At Blue Union, we have executed agreements with four new counterparties as strong supply and demand fundamentals in the Haynesville and Gulf Coast improve the value of our assets. We continue to extend contract tenors across the portfolio. At our Appalachia Gathering System, we extended about one-third of the capacity for five years with two shippers. Emerging constraints in Appalachia have led to improved NEXUS rates and contract tenors, and Millennium has also benefited from contract renewals. NEXUS has also completed two new market lateral connections. In Michigan, we received a positive regulatory ruling to convert and expand a portion of our gathering assets to serve DT gas. Now let's turn to Slide 12, and I'll wrap up the call. In summary, we are on track for a strong 2021. We delivered great first half results and expect to be at the upper end of our adjusted EBITDA and operating earnings guidance ranges. We are also well positioned for continued distinctive growth into 2022. And with that, we can now open up the line for questions.

And your first question comes from Jeremy Tonet of JPMorgan.

I just wanted to start off by asking about the recent increase in gas prices. Could you provide more details on your discussions with producer customers regarding their reactions? Specifically, are producers considering drilling more in your areas, and what feedback are you receiving as we look toward 2022 in response to these higher prices?

Sure, Jeremy. Let me provide some color around that. So I'll start off at the highest level. This higher price environment is supportive to all of our producer customers. And it's going to increase their cash flow and improve their balance sheets. We've been watching the Q2 announcements probably just like your team has been. And we're definitely seeing for the public's continued disciplined approach to deploying capital, ensuring that they have positive free cash flow and a continued trend to improve their balance sheets. We think that's very favorable for the sector and provides a stronger foundation in the sector. It certainly improves our customers' financial position and financial rating over time. So we view that as very positive. We continue to see growth in our portfolio in the public sector, and that's what I'll call disciplined growth, Jeremy. The private side of our business is a little different. I think we see more activity happening inside our portfolio on the private side. And some of that, we've talked about here on the call already in terms of some of the new contracting that we've done. But there seems to be a little bit of a different behavioral response on the private side. They seem to be more inclined to accelerate activity into this stronger price deck. But we view this very favorably and believe this will be very supportive for our business longer term.

Got it. That's very helpful there. And then I just wanted to kind of pivot towards capital allocation policy. And this being kind of the first call, I just want to have you guys walk us through how you think about CapEx versus return to shareholders versus deleveraging. How do you see these different competing paths on capital?

Yes. Great question, Jeremy. We have a really robust growth agenda in front of us right now, and it's coming primarily from organic opportunities on and around our existing footprint. We're in a really good spot in terms of having a clean balance sheet and have a clear line of sight around growth that will be self-funded with our cash flow, which naturally will delever us over time. So we feel really positive right now about deploying capital to growth projects that meet that very disciplined investment criteria that we've talked to you about in the past. To the extent that projects don't meet that criteria, we will look at deploying that capital in other ways to maximize shareholder value. And those options are either through an accelerated deleveraging or through a mechanism to return more cash to the shareholders. So again, we're always going to look at this to maximize shareholder value in the long term. And we feel very blessed and fortunate that we have a really robust portfolio of opportunities in front of us that we believe will deliver returns that will be very favorable for the shareholders.

Got it. That's helpful. It seems like that lends itself to continue deleveraging as well given the retained cash flow. So helpful there. And just wanted to see, I guess, the last one real quick. The amine treaters that you guys have in the Haynesville, it seems like that might lend itself towards some CCS opportunities there. I'm wondering if you might be able to talk about that a bit.

Yes. I sure can, Jeremy. I think as we said previously, we are very actively pursuing investment opportunities in what I'll call a lower carbon future. And yes, our situation in the Haynesville with the amine treaters, I think, puts us in a very good position to develop a CCS project down in the Haynesville. We're actively working on that. It's probably too early to get into the specifics, but we view that as an area of focus here over the next six to twelve months to get a project like that off the ground. We are also looking at projects up in Michigan, sort of a similar structured project around CCS. So that is an area that is getting a lot of attention inside our organization right now. And I feel that it aligns a lot of our natural assets and competencies. It's great in our geographic footprint, and it's great inside our competencies in terms of being able to capture CO2, pipe it, and store it. So more to come on that, Jeremy, as the project advances but definitely an area of focus for us.

And your next question comes from the line of Spiro Dounis of Credit Suisse.

Congratulations on the spinout. David or Jeff, I want to start by discussing the growth capital expenditures. There was a significant reduction in the first quarter, yet you are still able to maintain your EBITDA growth target for 2022. I'm curious about this; you mentioned optimization and some timing factors. Could you provide more details on the nature of that reduction and how you are managing to uphold the growth outlook?

Yes. I sure can. It was a very modest reduction. I think we pulled it back around $40 million or so. And it's really simple. It's just some timing. And some of the projects are coming in under budget right now and still delivering the EBITDA. So I think the way I look at it is we're delivering really strong EBITDA growth next year with a very accretive deployment of capital to generate that.

Perfect. Second one, sticking with the CapEx theme, looking out the sort of five-year range of $1.2 billion to $1.7 billion, a two-part question here. So first, what's going to determine the high or low end of that range? And then second, when you think about what that range represents, are these projects that are in sort of various stages of development that are very visible to you? Or are these more aspirational in nature? Is this a target you think you need to hit to develop and grow at a certain rate?

Yes. The projects we have in clear view at the moment, which are likely to unfold during the first three or four years of that five-year plan, include a LEAP expansion for which we are actively engaged in discussions. We are also observing expansions in several of our gathering platforms in both the Haynesville and Appalachia regions. Additionally, we are experiencing strong interest in lateral expansions across our pipeline network, particularly in the northern areas. We highlighted a few in our presentation, with NEXUS creating two new market connections. The lateral business around our northern asset footprint is developing strongly, similar to the Birdsboro project that is currently part of our portfolio. These are the three main areas of focus for us that are clearly visible and we are actively developing, which will utilize significant portions of our capital agenda.

Your next question comes from the line of Robert Mosca of Mizuho.

Just on those newly executed Blue Union agreements, were any of those signed in 2Q? And is there anything you'd provide in the way of volume expectations, perhaps the potential to wrap those volumes onto LEAP eventually?

Yes, Rob. Great question. Yes, those agreements are very hot off the press. In aggregate, there's 150 million a day of commitments amongst those counterparties. The diversified piece is just allocation of capacity from Indigo to diversified. So the three others that are, what I'll call, truly incremental represent about 150 million a day of capacity. And yes, we expect, at least in the near term, much of those volumes, if not all of those volumes, to flow on LEAP.

Got it. Okay. That's helpful. I'm curious about the factors contributing to the growth in Appalachia and the decline in Susquehanna regarding the change in some of the Northeast gathering volumes. Are producers choosing to shift production to areas with higher NGL content? Any information you can provide would be appreciated.

Yes. I think it's more just timing, timing of how people's drill plans have played out over the year. So we're definitely seeing growth on AGS, and AGS is a dry system. So it's dry Appalachia production. Susquehanna is probably going to be flat. I'm going to say flat this year as to when we'll be holding production there. And then in the other gathering assets in the north, so the Michigan assets, Tioga, we did see some declines there. And that's sort of why Appalachia in aggregate was relatively flat when you kind of put all those numbers together. And then we're seeing really encouraging growth in the Haynesville. The Haynesville system, we hit a high this month on Haynesville, the Blue Union system, which is very encouraging. And we're very happy with the gathering results we're seeing. We're running ahead of plan in both segments, both the pipeline segment and the gathering segment.

Your next question comes from the line of Jean Ann Salisbury of Bernstein.

I appreciate the 1.23 Bcf/d gathering volume you shared for Haynesville. Since you mentioned the capacity of that gathering system is 2 Bcf/d, should I understand that you can essentially increase by another 0.8 Bcf/d with minimal capital expenditures, perhaps just some costs related to well connections? It seems that the infrastructure is already in place.

Yes, Jean. The Blue Union system is a complex gathering system. So I wouldn't simplify it the way you described it. But what I will say is that we're always looking to make sure that we optimize all of our systems such that they're creating the maximum accretion possible to the company. As that system gets built out, there certainly is open runway in pockets and areas in that system that we expect Indigo or SWN to be utilizing as they continue to drill the acreage. But I do expect we will continue to see expansions in Blue Union, especially in some of the areas, the most economic resource areas where if you rationally are deploying capital, you would tend to deploy it first, the very best rock. And those areas of the system will attract a lot of drilling attention and, as such, may require expansions over time.

Okay. That makes sense. I wanted to ask about the new contracts for the 165 on NEXUS. My understanding was that NEXUS was originally designed for 1.5 Bcf/d, but you could only flow 1.2 Bcf/d due to insufficient market demand. Is the 165 incremental to that 1.2? With the market connections you've discussed, would it be flowing between 1.3 and 1.4? Is that the right way to think about it? Or is it part of the 1 point figure related to the 165?

Yes. Let me clarify that. First, the capacity of NEXUS was originally designed at 1.5, but we decided not to build one of the compressor stations. Therefore, the actual nameplate capacity of NEXUS is approximately 1.3. Secondly, regarding the incremental 165, we are encouraged by the contracting activity that has taken place over the last couple of months. We are observing strong price signals from Appalachia, with rate expansions on all longer-term contracts. A number of investment-grade customers have taken on that capacity. Essentially, for the capacity we didn't sell long-term with anchor agreements, we've been transitioning those seasonal and annual agreements to long-term contracts, thus reducing our management of that capacity in the annual market. Given the current market dynamics, I believe our team will continue to secure contracts and extend their terms at favorable rates. There is significant inbound interest in the NEXUS capacity, and we are likely the only exit pipeline in Appalachia that has substantial capacity available to the market right now.

Okay. So on this 165, that's not really incremental like flows that's just replacing seasonal with contracted, which I agree is very good, but there's still more that you could add if there was a market for it by adding a compressor station in the future? Is that the right way to think about it?

Yes. That's exactly how to think about it. So that station that we chose not to build, we could certainly build it and create incremental capacity out of the basin. And that certainly is something that the team is looking at and evaluating continuously.

Your next question comes from Sunil Sibal of Seaport Global.

So I just had a couple of follow-ups from previous questions. So first, on the recent contracts that you signed in Haynesville, could you give us a sense of what kind of rates you're seeing on these new contracts versus what you had previously?

Yes, I'll keep it high-level. We are really encouraged by bringing new third parties onto the system, which was one of our strategic priorities when we made the acquisition over two years ago. Currently, there are 55 rigs operating in the Haynesville, indicating a lot of robust activity. At this moment, we won't provide more public information regarding the details of those contracts due to the competitive environment in Haynesville. However, I mentioned earlier that the contract MDQs total 150 million a day, and the three new parties—Rockcliff, Comstock, and Tellurian—are all actively growing and have expressed their growth aspirations publicly. We are very pleased to have them as customers and look forward to collaborating closely with them as their plans develop and expand over time.

Understood. Regarding their ESG goals, I see you have some existing assets that align well with the CCS technology. I am curious if you have explored other alternative technologies besides amine treating for removing CO2 from the gas stream and what your thoughts are on that.

As we consider our goal of achieving net zero by 2050 and assess our emissions footprint, the emissions in the Haynesville area are a key focus. This presents a significant opportunity for carbon capture and storage, which will be our main area of concentration. Additionally, there are numerous other opportunities throughout our portfolio to reduce our footprint, such as pipeline expansions using electric compression and ensuring we have a clean electricity source to power that compression. We are closely evaluating these options. We are also engaged in extensive discussions with various parties about hydrogen and its potential use within our current operations, as well as with our large industrial customers who are interested in exploring a hydrogen blend for their feedstock. We are investigating many different areas at this stage, and although it's still early, the developments are very promising. We aim to play a role in this sector in North America, and I want DTM to position itself to leverage our assets for a lower carbon footprint in the future. This is an exciting and evolving area, and I anticipate that many new technologies will emerge. My strategic approach focuses on utilizing proven technologies that are currently available, as this helps mitigate technological risks when deploying capital. This is why our priorities include established technologies, with carbon capture and storage being one of them.

Understood. One kind of follow-up on that. So the capital outlay, that $1.2 billion to $1.7 billion that they have laid out, could you give us a sense of how much of these ESG evaluations that you're doing are a component of that? Or is there potential or meaningful upside on that capital spend if some of these things that you're evaluating would get to FID?

Yes. The way I would think about it in terms of that capital agenda, I would think about it that some of that capital agenda will get deployed into these new emerging areas. And it's at this point, I wouldn't describe it as incremental per se. I think as we get a little further along and start to move these projects forward and firm them up, we will certainly be updating you on our thinking around that. But yes, that's a great question, how much of that will go towards what I'll call this new platform. And it's just a little early to really provide detailed guidance on that. But as we mature, we will definitely be providing that to the investors.

And there are no further questions at this time.

Well, thank you. And I just want to thank everybody for joining us today. And please stay safe and have a great weekend.

And this concludes today's conference call. Thank you for participating. You may now disconnect.