Good day, and welcome to the DT Midstream Third Quarter 2022 Earnings Conference Call. Please note, today's conference is being recorded. At this time, I would like to turn the conference over to Todd Lohrmann, Director of Investor Relations. Mr. Lohrmann, you may begin your conference.

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, and good morning, everyone, and thank you for joining. I'll start today's call by discussing our financial performance and reviewing our key growth initiatives that we executed during the quarter, and provide an update on our other major development projects and commercial initiatives. Then I'll turn it over to Jeff to review our third quarter financial results and outlook. So with that, we had another strong quarter with both business segments delivering great results. As I communicated on our second quarter call, the business was running ahead of plan. And we expect the growth to be weighted towards the second half of the year. As you can see in our third quarter results, we are delivering that growth. And as a result, we are increasing our 2022 adjusted EBITDA guidance range to $810 million to $825 million, which reflects the strong performance from our base business and the uplift from our recent Millennium Pipeline acquisition. We continue to focus on organic growth opportunities and I'm excited to report that we've reached the final investment decision on our phase 3 Haynesville system expansion, which will add another 300 million cubic feet a day of capacity on LEAP impact by a long-term firm contract. This is another example of our ability to add timely and efficient incremental capacity to LEAP and provide a low-risk economic pathway for our customers to access attractive domestic and LNG export markets on the Gulf Coast. This latest phase, combined with the previously announced expansions, will increase the capacity LEAP by 90% from 1 Bcf a day to 1.9 Bcf a day. And we remain in active commercial discussions for further expansions. A few weeks ago, we closed on the Millennium Pipeline acquisition that resulted in us doubling our ownership interest in the asset. This transaction is immediately accretive, significantly accelerates our growth plan and directly aligns with our core investment thesis. This was a great opportunity for us to increase our ownership in this fully contracted pipeline, and we are very pleased to be the majority owner of this premier asset, which we helped develop and have owned since 2008 and successfully expanded in 2019. With our additional ownership of Millennium, we are further increasing the contribution from our pipeline segment, which was approximately 55% this quarter and will be close to 60% in 2023. Now for an update on our ongoing growth projects. All projects remain solidly on track, both from a cost and schedule perspective, and we have been successful in optimizing our capital outlays for these projects this year. During the third quarter, we completed a portion of our Blue Union expansion, which will continue to phase in through the first quarter of 2024, supporting our customers' drilling plan and our LEAP expansions. We also placed in service our Phase 1 Appalachia Gathering System expansion during the third quarter, which supported incremental volume growth. We continue to see strong interest for capacity out of Appalachia on Stonewall as well as NEXUS as takeaway constraints remain an issue for producers. And on NEXUS, we recently executed another new 5-year agreement at attractive rates. We are also advancing our CCS opportunity in Louisiana and are finalizing our Class VI well permit application, which we plan to file with the EPA by the end of November, representing an acceleration from our previous filing target. I'll now pass it over to Jeff to walk you through our quarterly financials and outlook.

Thanks, David, and good morning, everyone. In the third quarter, we delivered overall adjusted EBITDA of $207 million, which was driven by strong performance in both our pipeline and gathering segments. The pipeline segment delivered strong sequential quarterly growth after adjusting for the impact of a one-time settlement that was recognized in the second quarter. Segment results were driven by higher revenues from increased short-term rates on LEAP and improved contracting on NEXUS. Gathering segment results were driven by higher volumes on Blue Union due to capacity expansion. Operationally, total gathering volumes across both the Haynesville and Northeast averaged over 3 billion cubic feet a day in the third quarter, which is a 15% increase from Q3 2021 and was driven by the in-service of expansion projects in both regions. With our strong year-to-date business performance and confidence in the balance of the year, we are increasing our 2022 adjusted EBITDA guidance range to $810 million to $825 million, which also includes the fourth quarter uplift of the Millennium Pipeline acquisition. We are also moving our overall 2022 capital guidance range to $860 million to $910 million to reflect the Millennium Pipeline acquisition and favorable retiming and efficiencies on our organic growth projects. Additionally, we are raising our 2023 adjusted EBITDA early outlook range to $865 million to $905 million to reflect the incremental full-year uplift of the Millennium Pipeline acquisition. We look forward to providing a complete update of our 2023 guidance on our year-end call, which will include a refreshed view for our base business and our long-term growth capital plan. I also wanted to provide an update regarding our balance sheet strength and flexibility. Earlier this month, we upsized our revolving credit facility to $1 billion, extended the term out by another year to 2027, lowered the fee structure, and included fallaway language for when we achieve investment grade. We remain committed to the strength of our balance sheet and our 4x leverage ratio ceiling. I'll now pass it back over to David for more details on our ESG program and closing remarks.

Thanks, Jeff. We remain focused on advancing our ESG agenda, and we are participating in two industry organizations focused on energy transition initiatives, the Appalachian Energy Future and the Appalachian Regional Clean Hydrogen Hub. We look forward to collaborating with these groups as we seek to develop clean energy opportunities for the region. So in summary, we continue to be very pleased with our 2022 financial, commercial, and operational successes and the company is very well positioned to significantly grow and deliver stable, durable returns for '23 and into '24 and well beyond. We can now open up the line for questions.

Your first question comes from the line of Jeremy Tonet with JPMorgan.

Just want to dial in a little bit on your commentary with regards to the base business improving. Wondering if you could help us kind of quantify that a bit or think about that a bit more and especially as it relates to 2023, is there any reason that wasn't kind of rolled into the guidance update there for '23? So I'm just wondering along those lines, what you can say.

Jeremy, yes, we'll provide a refreshed look on the year-end call. As you know, a lot of our customers don't settle out on their planning until the end of the year, sometimes even early into the next year. So we want to give you a really clear and high-quality look. So we're going to just sit tight on that. We're very confident with what we're providing right now. And like I said, we'll refresh that for everybody on the year-end call.

Got it. I was also wondering, I guess, what more you can say on CCS in Louisiana, I guess, thoughts on the state getting primacy in just the local environment there. I think we saw Livingston in Parish some kind of pushback against CCS infrastructure. So just wondering if you could kind of update us on what you see on the ground there.

Sure. So the first thing is that we're accelerating our Class VI well permit. We expect to do that federally. We're very aware that Louisiana is working with the EPA to get primacy, but unclear as to when that will occur. So we just want to move forward to hold schedule. So that will happen here in November. We're very engaged locally right now on this project and doing what we normally do across our business, which is engage at the local level, work through the details, with all the local officials, including the state officials and individual landowners. So that's sort of the season of the project that we're in right now. We're in that local engagement season. And I don't really want to get into more details at this point, Jeremy, but suffice it to say that everything is moving forward as planned.

That's helpful. Just real quick last one here. Who is the 5-year agreement with? And what are the prospects for more of those coming through? And what size was that contract again?

You're referring to the NEXUS contract, Jeremy?

Yes, sir.

Yes. So it's a 5-year contract, and this will be public information that's with an investment-grade counterparty, worth $50 million a day.

Your next question comes from the line of John Mackay with Goldman Sachs.

I wanted to revisit the 2022 guidance. It seems that nearly half of the increase is attributed to Millennium, while the other half, as you mentioned, is from the base business. I believe Jeremy already asked this, but I'd like to follow up on what specific factors you are observing this year that are contributing to the increase. Could you provide some detailed information?

Sure, John. I'll give you a few thoughts and then Jeff can maybe give you a few more details. But I'd say a couple of things. One is timing of some of the expansions that we're in flight on. I believe a few of them came in a little earlier than we had in the original plan, which allowed those volumes to flow and corresponding incremental revenue just come through. But we're also seeing some favorability across the portfolio in our pipeline segment. And Jeff, maybe you can provide a few details on that.

Yes, good morning. We've been discussing throughout the year the positive trends we've observed across all our platforms. This has been evident throughout the year and continued in the third quarter. Additionally, we mentioned having a few short-term arrangements that allowed us to optimize capacity in LEAP and other areas, contributing to our favorable results. We are also confident in the year-end guidance we have provided, which we stand by for the full year.

Okay. And then maybe let's pick up on gathering a little bit more. There's been a little bit of a back and forth all year between volumes and margins. We saw gathering EBITDA up less than volumes overall where. Maybe you could just talk a little bit about what you're seeing on margins there and maybe how that should trend over the next couple of quarters?

Sure, John. I'll maybe just remind everybody sort of how some of this is working in the portfolio. So for some of our LEAP activity, that is coming in on what I'll call a short haul on the gathering system. So we're seeing the gathering volumes ramp, but that is coming through at a different rate than what I'll call the full monty gathering where we're doing gathering and treating and then delivering to the pipelines. So that's probably the easiest way to explain it to help you guys understand how that plays through.

Maybe just following up on that quickly. Any sense you can share on us as we're looking into the fourth quarter and going forward on the volume side? I mean are those short-term volumes that should roll off? Or is this growth we saw in the third quarter kind of ratable as you look in '23?

Yes, I believe we will continue to see strong volumes in the fourth quarter. Based on our current assessment, this trend should persist, and I do not anticipate any surprises in the fourth quarter.

Your next question comes from the line of Marc Solecitto with Barclays.

Congrats on the solid quarter. Maybe just sticking with the Haynesville here. Should we think the sequential increase in volumes was really just a partial quarter of contribution from the Blue Union expansion capacity that came on or any update on where volumes are today? And then as it relates to the ramp through 1Q '24, should we expect that to be fairly ratable from here?

Thanks, Marc, for the comments on the quarter. So maybe we'll just start with the third quarter. Yes, we brought in incremental facilities through the quarter. So that exit, what I'll call our exit rate is probably going to be more indicative of what the fourth quarter will look like. In terms of next year, just to be honest with you, I don't have those numbers sitting in front of me, so I don't want to make a comment without having that data in front of me. And we can certainly follow up offline with you on the details around '23.

Got it. And just to follow up there, what was the exit rate at the end of 3Q?

Jeff, do you have that handy?

Yes, I can provide that. On page 5, you can see our average volumes for the quarter. For Haynesville, we were at 1.66, and for Northeast, it was 1.35. This brings our total gathering to an average of about 3 Bcf.

Got it. And then you've now mentioned 900 million cubic feet of capacity expansions on LEAP, and you have 500 million cubic feet of capacity being added on Blue Union, should we think there are more expansion opportunities on Blue Union tied to the lead capacity coming on with Phase 3? Or could you talk about some of the dynamics there?

Yes. I think the simplest way to describe that is for some of the LEAP expansions, a portion of it is going to be fed through the Blue Union gathering system. But a portion of those expansions, we're going to be picking up that tree to gas from third-party gathering systems.

Your next question comes from the line of Alex Kania with Wolf Research.

Maybe the first question is just following up on the Class VI well permit. Just maybe the thought process behind accelerating it. Was it really just kind of an acceleration of interest customers coming from IRA and increased carbon CCUS tax credit? And then maybe also just again, thinking about your understanding about how the process of permitting goes in terms of timelines from that as well through the EPA process.

Sure, Alex, that's a great question. For us, the fresh acceleration means we want to move through the process as efficiently as possible. If we can shorten that timeline by a month, that's beneficial, and we are prepared to file. It’s really that straightforward. Regarding our next steps, once we file, I believe there aren’t many others who have gone through this process, so as we proceed, we’ll be as transparent as possible and will have more clarity on the timeline. Generally, it seems like the consensus is an 18- to 24-month window, but we'll gain more insights as we engage with the regulator and address the various requirements. We've been actively collaborating with all stakeholders to ensure we submit a high-quality application, allowing us to progress swiftly and successfully through the process.

Great. As a follow-up on Millennium, could you provide more insight on how you view the financing, particularly considering it was funded with cash and credit facility draws? How do you plan to optimize financing costs in the current interest rate environment or over time?

Yes. So I'll start and then maybe pass it over to Jeff to fill it in. But as you alluded to, we are sitting on a significant cash position. The business has been performing really well since we've spun, running well ahead of plan. And yes, we had a significant cash component that we used for that acquisition. And then as Jeff alluded in his comments, we are using the revolver to top that up. But Jeff, maybe you can provide some comments on how to manage that mid-year term and maybe a longer-term view?

Yes, sure can, Alex. Yes. So again, we're really pleased with where we sit strategically the way the balance sheet is set up. And so like David mentioned, we used cash. We're ahead of plans. We're able to use more of that. We use the revolver and so now because of what we've got available both with the term loan B and then with the revolver, we've got strategic options, the ability to be able to pay that down. And we've got a couple of options on how to do that, and we're reviewing those. We've got project financing capabilities available to take that on and then we could also do term or some of that activity out. And just as a reminder, we don't have any maturities due for several years. So again, we've got a lot of flexibility in how we manage this. But again, overall, we're pretty pleased with where we're sitting.

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

Just wondering how does the Millennium purchase fit within your 5-year CapEx outlook, that $1.2 billion to $1.7 billion. Does that 5-year plan still exist along with the Millennium purchase? Or is it part and parcel?

Yes. Rob. Great question. So I'd say we're using some of that original plan in this acquisition. As we alluded to on the call, we will bring forward kind of a refreshed long-term view on our capital plan on the year-end call. But yes, that's kind of how we're thinking about it right now. So a portion of that, the midpoint of $1.5 billion, as everyone on the call knows, we've deployed a significant amount of that already organically across the portfolio and all those projects are in flight over the next couple of years. This is a piece of that total. But again, we'll give you a refreshed view on the year-end call. And I'm going to pick up on my earlier comment from the earlier question. The business is running ahead of plan across the board also on the balance sheet side. So it's enabling us additional balance sheet flexibility as we pursue additional investment opportunities.

Got it. That's helpful. And maybe I was hoping you can kind of talk about the decision to buy the Millennium stake as opposed to maybe deploying capital in areas that might have a little bit more growth like the Haynesville. Was this just more about, it's an asset you knew you're building scale with a pretty high-quality contract base? And should we talk of this to mean that maybe Haynesville M&A is not really the playbook for right now?

Yes. I will first address the strategic rationale behind the Millennium acquisition. Whenever we invest capital, we closely examine the fundamentals of the asset. Millennium is an asset we are very familiar with due to our ownership and development history. It has strong supply fundamentals and robust demand fundamentals in the market. This asset caters to the highest-priced market in North America, which is New England. There are strong demand signals indicating that the market is likely to face a long-term shortfall in natural gas capacity. The fundamentals surrounding the asset are solid. Additionally, it aligns with our investment thesis as it is fully contracted with stable cash flows. It is an irreplaceable asset in a region where adding new capacity is challenging. Another factor is our partnership agreements. We have had successful partnerships with TransCanada and National Grid since the asset was built. The partnership structure allows partners with preferential rights if one wishes to exit, creating an option value in our portfolio. We had the opportunity to realize that option value through this transaction. Lastly, this acquisition enhances the scale of our pipeline segment, which is the more valuable part of our business. All these factors contributed to our decision to complete this transaction. I hope that clarifies things, Rob.

Yes. No, thanks. That was great color. And maybe lastly, I know in the past, you've said that you plan to grow your dividend commensurate with cash flows. And I guess when you talk to the board early next year, is this something that you might highlight as to why you can nudge that dividend towards the higher end of your growth guidance range?

Yes, Rob. You're correct, and we will maintain our guidance to grow our dividend accordingly. We view this as an integral part of total shareholder return and our investment strategy. We will increase it in line with our cash flows, and as those cash flows expand, we will certainly consider that in relation to the dividend. However, that’s about all we want to disclose regarding our thoughts on the dividend. We'll ensure it grows in accordance with the cash flows.

We achieved significant growth earlier this year, experiencing a strong performance immediately after the spin-off, which was reflected in our dividend behavior. You can expect us to maintain a similar approach in the future.

Your next question comes from the line of Michael Blum with Wells Fargo.

Maybe just to stay on the Millennium acquisition for a second. I really wanted to get more of your broader thoughts on M&A here. Do you see additional opportunities to increase interest in assets that we already have a stake? Would you look at other assets in your two operating regions? I just want to get your broader thoughts on this.

Sure. Well, as I said earlier, for all of our partnership assets, we have unique features in all of those partnerships. I refer to it as option value and if those options ever strike, we will obviously look at that. As we've said in the past, when we look at deploying capital, we really like to deploy it to organic opportunities, and we have just a rich set of organic opportunities in the portfolio today in both Appalachia and the Haynesville. And have been just meticulously executing on those. We haven't missed any of those opportunities. What happened with Millennium was truly incremental and would have been outside the original plan. But again, it was that option value event that occurred. So in terms of M&A more broadly, we are very aware of the assets in our neighborhood that are consistent with our investment thesis that are on the market. We look at them. But again, we go back to that value creation equation at the end of the day, and that they have to fit within the capital plan, and they have to drive long-term value creation for you, the shareholders ultimately. So we continue to maintain that disciplined lens on M&A and stay very aware of it, but also aware of where it sits in the priority. It's probably #2 in our capital allocation priority vis-a-vis organic growth.

Got it. Okay. That makes sense. Second question, just want to make sure if I'm doing my math correctly, if I back off the Millennium CapEx, it looks like both your growth and maintenance CapEx for 2022 came down. So I'm wondering if you could just speak to that. And does that mean anything in terms of a cadence or run rate going forward into '23 and beyond?

Sure. Your calculations are accurate. The figures did decrease. I mentioned this briefly during the second quarter call, highlighting our ongoing efforts to reduce capital expenditures on new projects or postpone capital outlays, which enhances the returns on these projects. We successfully managed to do this without affecting the projects or their schedules. I commend the construction team for achieving this. Additionally, on maintenance capital expenditures, we found we could be a bit more efficient compared to our initial guidance, so we wanted to provide an update on that in Q3.

There are no further questions at this time. I'll turn the call over to David Slater for closing remarks.

Well, thank you for joining us today, and we certainly appreciate all the questions and your interest in DT Midstream. Have a great day and a wonderful weekend, everybody. Take care.

This concludes today's conference. You may now disconnect.