Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the DT Midstream Q1 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. Todd Lohrmann, Director of Investor Relations. You may begin.

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.

Thank you, Todd, and good morning, everyone, and thanks for joining. On today's call, I'll start by highlighting some of our key results this quarter, then discuss the constructive fundamentals that are playing out around our assets and our execution on previously announced projects. I'll pass it over to Jeff to review our first quarter financial results, and then I will close with some remarks on our future opportunities. So with that, we had a strong first quarter performance that puts us firmly on track for our plan for the year, and we are highly confident in our ability to achieve our 2022 guidance. Our commercial team was very busy advancing our investment plan. On our Appalachia Gathering System, we reached agreements with two existing customers that will result in an attractive incremental expansion, with approximately 200 million a day of added system capacity, a significant term extension, and an expansion of dedicated acreage. On our NEXUS pipeline, we executed a 5-year contract for $100 million a day of capacity with an investment-grade shipper at attractive rates. We are also advancing our ESG-focused initiatives, which are a priority for us. As Jeff will cover in more detail, we successfully locked in the interest rates and extended the term on a portion of our variable-rate debt. So it's been a very busy and productive quarter, moving the company forward. Turning to the fundamentals. The environment for natural gas continues to remain strong. The geopolitical situation with the Russia-Ukraine war has highlighted the importance of energy security, both domestically and abroad. The role for U.S. natural gas in the form of LNG will be critical in supporting Europe and ending Europe's dependency on Russian energy supplies. U.S. LNG can also displace coal globally as a fuel source for electric generation, which supports worldwide decarbonization efforts in a timely and cost-efficient way. DTM's assets are very well positioned to enable U.S. LNG export growth both out of Appalachia and the Haynesville. We currently have approximately 2 Bcf a day of access to LNG export markets, which our shippers have under long-term contracts. Our Elite pipeline flows gas to three export terminals on the Gulf Coast and our Stonewall pipeline provides a critical pathway for Appalachian gas to the Cove Point terminal on the East Coast and to the pipelines that serve the Gulf Coast LNG corridor. The strong gas price environment is also benefiting many of our customers, and we expect it to continue to improve their cash flows and credit metrics, making these customers stronger, which will provide additional flexibility to grow production over time. We are seeing a response to the strong fundamentals in both of the basins where we operate. In the Haynesville, production is continuing at record levels and strong rig activity points to robust future growth. Projections are for 7 billion to 8 billion cubic feet a day of growth in both Haynesville supply and Louisiana Gulf Coast LNG demand between now and 2030. This is translating to very strong demand for pipeline capacity from the Haynesville to the Gulf Coast. The price environment is also sending a strong signal to drill in Appalachia. With takeaway capacity constraints in the basin, there is a high demand for any existing capacity or easily expanded capacity to get gas further downstream towards markets. I will touch a little bit more on the specific opportunities created by the fundamental environment later on the call. Before I pass it over to Jeff, I wanted to give an update on our previously announced expansion projects, which will begin entering service starting the second quarter of this year as further detailed on Slide 14 of the presentation. Our team is highly focused on executing these projects and all major projects remain on track. We have ordered critical long-lead equipment and continue to proactively manage the supply chain situation. I'll now pass it over to Jeff to walk you through our quarterly financials and outlook.

Thanks, David. Good morning, everyone. Our first quarter results placed us firmly on track for our full year 2022 plan. In the first quarter, we delivered overall adjusted EBITDA of $191 million. This strong first quarter performance combined with balance of year growth from our new projects and planned growth in our existing businesses makes us highly confident that we will achieve our full year 2022 adjusted EBITDA guidance. We are also well positioned to achieve our early outlook for 2023. Regarding our quarterly segment level performance, we had largely consistent results for both our pipeline and gathering segments compared to the fourth quarter of 2021. Pipeline segment results include higher contributions from our pipeline joint ventures, offset by lower short-term contracted volumes on Stonewall. Our Gathering segment results for the first quarter included the impact of planned maintenance on our Haynesville system. Operationally, our total gathering volumes across both the Haynesville and Appalachia averaged 2.9 billion cubic feet per day and included the continuing benefit of the new customer volumes on our Haynesville system, which were pulled forward into 2021. Now turning to our balance sheet. We are always evaluating ways to improve on an already strong position, which is why we recently took action with a bond issuance in the investment-grade market, which effectively converted 60% of our 7-year term loan to a 10-year senior note. The execution of this leverage neutral transaction fixes the interest rate on a large portion of our floating debt and extends our weighted average debt maturity out to 8 years. I'll now turn it back over to David for more details on our growth opportunities and recent advancements in our ESG agenda.

Thanks, Jeff. Less than a year since our spin-off from DTE, we have committed over 50% of our $1.2 billion to $1.7 billion 5-year investment plan to organic projects at attractive returns. In the Haynesville, the strong fundamental environment continues to provide tailwinds in our pursuit of a Phase II Haynesville system expansion, which remains a top priority for our commercial team. We believe that new projects are needed to facilitate the delivery of Haynesville gas to the LNG export terminals and expansions of existing systems such as LEAP is quicker and a lower-risk solution than a greenfield build. In Appalachia, we continue to have discussions on the NEXUS open season, and we'll keep pursuing favorable recontracting opportunities at improved rates. In our emerging third business platform, we continue our disciplined work to advance our CCS project in the Louisiana area towards an EPA Class 6 permit application filing. We will continue to prioritize our ESG leadership by offering our customers low carbon services. For example, we have joined with Cheniere to monitor emissions at our Haynesville operations to support the ability to carbon tag future LNG cargoes. We're also putting the finishing touches on our inaugural sustainability report, which we plan to publish later this month. So in summary, I feel really good about the start to the year, and I am confident that we are on track to deliver on our full year '22 guidance and achieve our 2023 early outlook. The very strong fundamentals surrounding our assets has been very optimistic about the durability of our portfolio, which supports our future growth opportunities and the company's performance over the long term. We can now open up the line for questions.

Our first question today is from Jeremy Tonet with JPMorgan. Your line is open.

With the new NEXUS contract there, I was just wondering if you could provide a bit more. Any details on the rates there or how the environment looks as you're signing? I imagine the rates would look strong given the scarcity of takeaway coming out of Appalachia. But any color you could provide there would be helpful.

Yes. Absolutely, Jeremy. You're correct. We're seeing more interest in any available capacity that's in the network that's uncontracted today. Given the strong price signals for Appalachia producers to drill, they don't want to drill and flood the basin; they want to drill and go to a market. So that's been really positive. The contract that we announced is with a strong investment-grade driller in Appalachia. All that information will become public, Jeremy, for you guys to look at on the NEXUS website through the FERC process. But yes, we're seeing strong rates; I'll just say it that way. Rate escalation, as we've been talking over the last 12 months, that continues. So we're really happy about that. We look to do more of that in conjunction with working through the details of the NEXUS open season. We're really looking at how we can expand the export capacity out of the basin incrementally with an easy, low-risk, low-cost expansion opportunity.

Turning to the Haynesville, there seems to be competition for new pipe. I'm curious about the LEAP system's potential growth over the next five years, considering the current profile of Haynesville production growth.

Yes, that's a great question, Jeremy. As I mentioned in our opening remarks, one of our top priorities is with the commercial team. If you take a step back, you'll notice a strong demand, with 7 to 8 Bcf expected over the next 7 to 8 years. When we assess our assets and the potential for expansion, we can do so quickly and incrementally using compression, which is a low-risk method to bring it online for our customers to align with production. Once we exceed 2 Bcf a day with compression, we can increase to 3 Bcf a day as we analyze the system. This can all take place within our existing right-of-way, allowing for incremental development as demand increases and producers are ready to make commitments. We are very excited about this and encourage you to stay tuned as we continue to advance what we've announced during our year-end call. We are currently in the process of expanding the system for an additional 300 million a day, and we anticipate adding more increments as we move forward with our customers.

And just one last one, if I could, as it relates to carbon capture development within Louisiana. Any other thoughts you could provide, I guess, on timeline when this could become more real and just really Classic wells, Louisiana seeking primacy there, thoughts on timeline or anything else on this topic that you could provide more color on would be helpful.

Sure. The way I'll describe it, Jeremy, is that we're following a disciplined development plan. The next major milestone for us will be the Class 6 application. As we've mentioned before, Louisiana is trying to obtain primacy. Our plan is to file regardless of whether Louisiana has primacy, because these applications typically take two to three years to navigate through the regulatory process. Therefore, getting this filed this year is a top priority for us. However, we want to ensure that we submit it with high-quality information. It's a rigorous process, and part of our disciplined development involves methodically completing all the necessary homework and due diligence to ensure that when we file the application, it is of high quality. The regulators will know what to expect before we submit it, enabling it to progress smoothly through the process. We are mindful of acquiring all the necessary rights while maintaining this disciplined approach. We want to be careful to have everything in place before making the application public to avoid any issues along the way.

The next question is from Michael Blum with Wells Fargo. Your line is open.

To go back to a comment, just some comments you made about supply chain and cost issues as related to the growth projects. I just want to make sure I understand. Are you saying that kind of in spite of those issues and inflation that we're seeing, the cost for your projects really hasn't changed materially?

So when we FID the projects, we factored in what I'll call the supply chain realities that we were seeing in the market. And really, what I'm saying here, Michael, is just confirming that those projects remain on track, on budget. We knew there was going to be some pressure. So that was factored into the capital and the commercial structure when we made the investment decision. And we're just being really mindful of that because of all the pressure that we all see in the supply chain to keep our eyes on that so that we don't have any project changes along the way here.

And then also just wanted to ask about the Gathering segment. Year-over-year, the volumes are up pretty substantially, I think like 18%, but your EBITDA is up only modestly year-over-year. So I'm wondering if you could just walk us through that dynamic and also whether we'll eventually see those higher volumes translate to cash flows.

Michael, it's Jeff Jewell. Yes, one thing when you think about year-over-year, you’re referring to first quarter, first quarter, as remember, there's public company costs that are planned through. That's why in the deck we're sort of guiding people the fourth quarter over the first quarter. So that's the dynamic you're seeing. But of course, when you look at our 2022 guidance and then even our 2023 guidance, you can see the planned growth, both the new projects and within the business that, that growth is planned through both of those. David, do you want to add on to that?

Yes, that's really the answer. You're comparing a Q1 period in DTE when we didn't incur the standalone incremental public company costs, which is the primary difference you're noticing. To step back to a broader view, during the year-end call when we announced the Haynesville system expansion, specifically on the gathering side, we highlighted a 25% increase in our gathering system with that expansion, which is significant at $500 million a day. It's clear that our Haynesville gathering system is expanding alongside production; we plan to grow that system by approximately 25% with the announced expansion.

The next question is from John Mackay with Goldman Sachs. Your line is open.

Maybe I just wanted to follow up on kind of some of the Haynesville stuff. And I'm sorry if you guys said this and I missed it. But could you just talk a little bit more about just getting through the maintenance and kind of maybe where we are sitting right now? I know last quarter, you also talked about some of the shorter-term contracts that are pulled in the fourth quarter. Just really trying to think about what the second quarter plus trajectory could look like there.

Yes. John, it's David. Yes. So the way I think about it at a high level quarter-over-quarter, we have relatively flat volumes on the Haynesville system. So we have the Haynesville system running at a very high utilization right now. And yes, I think we noted that we had some planned maintenance that showed up in March in the first quarter. And that was contemplated in our guidance. That was what we had in our plan. We have significant expansions that are underway. And those are detailed thought I believe, on Slide 14 in the deck that sort of walks the growth that will occur second quarter, third quarter, and fourth quarter this year as we ramp that up. And so we've got a significant expansion that we're in flight on right now that we'll be building out on. And again, it's fully contracted with an anchor shipper. And just to remind everybody that we had a really strong fourth quarter last year. We pulled forward into the fourth quarter a number of new customers that came on the system that we didn't expect were going to come on until kind of the end of the year. So that's why you see that real strong growth Q3 to Q4. And then – and basically, they all came on in Q4. So we're running relatively flat as we work through the expansions now in 2022 and have the system running at a very high utilization right now.

Maybe just to confirm there. So the Haynesville gathering expansion is more of a third quarter in service. Second quarter is going to be relatively flatter on the volume side. Is that fair?

Yes. I'm just glancing at that slide that I just pointed to just to remind myself on the quarters here. But yes, most of the Haynesville gathering shows up in Q3 of 2022. Yes, we're going to be seeing other expansions that we've previously announced showing up in Q2, but not on the Haynesville system.

We've noticed an increase in merger and acquisition activities, particularly with bolt-on transactions in the gathering and processing sector. I'm curious if you have explored any opportunities in that area, your interest level, and your overall perspective on it.

Sure. We are aware of all the assets that are currently available and those that have been on the market. Our current strategy involves a disciplined evaluation of these opportunities, ensuring they align strategically and bring value creation for us. We have plenty of greenfield opportunities ahead, and our main focus is on executing the projects we've already announced while also exploring new greenfield projects. These investments can be highly beneficial for our investors, particularly when built upon our existing assets. We are committed to managing our capital effectively, ensuring it supports the highest shareholder value. This is the perspective we hold regarding M&A in the current environment. We are open to exploring opportunities, but they must ultimately deliver the expected value.

The next question is from Robert Mosca with Mizuho Securities. Your line is open.

Just wondering if there's any more juice to squeeze on some of these Northeast gathering expansions just given the regional pipeline constraints. And could you remind us how AGS is situated so that you can get incremental volume out of the basin? And could you do something similar on Susquehanna?

Yes, thank you for the question, Rob. We are very pleased with the announcement regarding AGS. To provide some context, between our current announcement and the one made late last year, we expect to grow that system by 35% over the next year or two, indicating significant growth in Appalachia. You asked an important question about where that gas will go and how producers can extract and transport it. AGS is directly connected to the NEXUS pipeline, which acts like a major route out of the basin. Additionally, AGS connects to our Stonewall pipeline, for which we’ve recently secured a new firm contract, offering another way to move gas out of Appalachia with available capacity. With these two options, producers on AGS can increase their output. We are extremely satisfied with this development and are pleased to collaborate with our key customers. As you know, Antero is one of our major customers on Stonewall, and they have a long-term firm commitment to Cove Point. Stonewall serves as the main route for their gas to reach Cove Point. We are very excited about the current progress with AGS.

And I guess turning to financing. Just wondering if you have any plans to term out the remaining $400 million on your Term B loan. And should we take through financing to mean that $2.7 billion of long-term debt is kind of what you view as a comfortable indebtedness level longer term?

Rob, this is Jeff. That's a great question. In our recent transaction, we aimed to make a significant shift from floating to fixed rates, and we successfully achieved that. We also wanted to retain strategic flexibility provided by the Term Loan B, especially with its prepayment option. As David mentioned, we've already committed over 60% of our growth capital. As the commercial team finalizes our growth capital initiatives, we will reevaluate how to approach the remaining Term Loan B. This gives you an insight into our thinking on the matter. Regarding our capital structure, we are quite comfortable with our overall debt levels. Our growth capital is aligned with the opportunities we see, which fits within our free cash flow, allowing us to self-fund all our growth without needing external capital. This is why we feel confident about the state of our capital structure.

Our next question is from James Carreker with U.S. Capital Advisors. Your line is open.

I was curious about the takeaway constraints from Appalachia. We've noticed several announcements regarding compression expansion in Permian pipes. Is there a possibility for NEXUS to implement something similar to enhance its takeaway capacity?

Yes, James, Dave, this is David. We recently held an open season to explore opportunities on NEXUS, and expansion through compression is definitely one of the options we are actively considering. Additionally, we are exploring a few other methods to enhance capacity on NEXUS with minimal capital investment. As I mentioned earlier, these low-risk investments are relatively easier to implement. NEXUS is a new asset that is well-connected to downstream markets, and the current price situation has many producers eager to increase their output. The Appalachian region has a long-term, world-class resource rich in drillable assets, with many producers having significant undeveloped land. Given the favorable pricing environment, they need assurance that they can transport their gas to stable, long-term markets. Therefore, it is critical for us to increase the export capacity from this region. We are focusing on both the NEXUS and Stonewall projects, seeking routes north into the upper Midwest markets and south and east toward the East Coast and Gulf Coast to facilitate the transportation of Appalachian gas to the LNG corridor. Our goal is to find any possible optimizations with these assets to maximize additional capacity.

Any sense for the magnitude of how much capacity could be added via, I guess, compression or these other techniques either NEXUS or NEXUS plus Stonewall?

I'm not able to share specific information about NEXUS at this time. However, I can mention the southern aspect. We've previously discussed that Stonewall has a 36-inch pipeline with no compression, providing us with ample opportunity for expansion. We can potentially increase its capacity to about 2 Bcf a day, possibly even more under favorable conditions. Our focus is on implementing sensible, low-risk, and affordable expansions to assist producers in capitalizing on their acreage. For Stonewall, we will need to coordinate with our other pipeline and the wider industry to extend our reach beyond the southern end and into the load centers.

And if I could fit one more. And any sense on how much CapEx is associated with this most recent announcement for the expansion of AGS. And any thoughts on what the CapEx could be for any CCS projects down the road?

The AGS expansion represents a very strong return for us, and there's a lot happening with AGS at the moment. Please bear with me; we will provide that information soon, but I can't disclose it just yet. There are other opportunities we are exploring within AGS that I prefer to keep private for now. Regarding CCS, I want to highlight our disciplined development approach. Until we are ready to file the EPA Class 6 application, we need to keep some details confidential while we work through the development process. We're at a critical stage in this cycle, and we will share information with you as soon as we feel comfortable doing so.

We have no further questions at this time. I'll turn it over to David Slater for any closing remarks.

Well, great. Thank you, everybody, for joining us today, and we truly appreciate your interest in DTM. I personally look forward to seeing many of you at the EIC investor conference later this month in person and live, and lots of really exciting things happening in the sector and for our company right now. Many of which we've touched on today, and I'm very excited about the future opportunities in front of the company. And with that, stay safe, and have a great day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.