Good morning and welcome to DT Midstream's Second Quarter 2024 Earnings Conference Call. All participants are in a listen-only mode. After the speaker's remarks, we will have a question-and-answer session. This conference call is being recorded. I would now like to turn the call over to 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 two 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, everybody. And thank you for joining. During today's call, I'll touch on our financial results, provide an update on the latest commercial activity and construction progress on our growth initiatives. I'll then close with some commentary on gas market fundamentals before turning it over to Jeff to review our financial performance and outlook. So, with that, we had another strong quarter, and the business continues to perform in line with our full-year plan. We are reaffirming our 2024 adjusted EBITDA guidance range and our 2025 adjusted EBITDA early outlook range. Our construction and commercial teams are making great strides in advancing our backlog of organic growth projects, positioning the company for continued success. This morning, we are pleased to announce that our LEAP Phase 3 expansion was placed into service early and on budget, increasing capacity from 1.7 bcf to 1.9 bcf per day and further expanding our Haynesville System's wellhead to water connectivity. As a reminder, this expansion was underpinned by long-term take-or-pay contracts and leverages incremental looping and compression, providing reliable, timely access to growing Gulf Coast LNG demand. We continue to be in active discussions for a LEAP Phase 4 expansion, with strong recognition by producers of the coming demand starting next year and the long-term value for production access to Gulf Coast markets. Sticking with our Haynesville System, we've also executed agreements to connect three producers that are located in East Texas, further expanding and diversifying the supply access of our system. These agreements with private producers are underpinned by long-term contracts with sizable acreage dedications and include all of the delivery point flexibility of the system, including potential access to LEAP. Turning to our energy transition platform, our carbon capture and sequestration project in Louisiana continues to progress as planned. The third-party evaluation of the Class V test well was recently completed, and the results confirm the formation suitability for CO2 sequestration. We've commenced a more detailed engineering design of the system and injection site and are awaiting the final Class VI well permit requirements from the Louisiana DENR. We are very happy with how the project is progressing, and it remains on track for the second half of 2024 FID. This morning, we are also excited to announce that earlier this month we reached an agreement to advance a new clean fuels gathering project. This project consists of the acquisition of an existing treating plant and the build-out of a new gas gathering system which will gather fugitive coal mine methane from acreage dedicated by a producer. This new project is right in our wheelhouse and is expected to provide significant tax credit and environmental benefits, leveraging the producers' development and operational experience and our gathering, treating, and tax credit expertise. We are excited about our entry into this emerging and growing clean fuel space through the advancement of this opportunity from our project backlog, and we'll keep you updated as it progresses. Finally, I wanted to take a moment to address the natural gas market fundamentals. In spite of the choppiness in the short-term market, which is trading on weather, our portfolio has remained durable, and we continue to be bullish on the need for natural gas infrastructure in the long term. We are nearing the next wave of new LNG demand growth, which will increase the call on natural gas production in 2025 and are pleased to see some fee gas deliveries to these new facilities already starting. We fully expect that growing LNG demand will underpin the gas market over the next decade, especially along the Gulf Coast corridor, which can be served directly via our Haynesville System. Beyond this new demand from LNG, we continue to be highly focused on advancing power demand related gas infrastructure opportunities across our footprint as new large industrial loads such as data centers emerge. With speed to market and reliability being foremost considerations for many of these facilities, natural gas-fired power generation will be needed to provide stable and predictable baseload energy. We anticipate this power demand growth will require incremental pipeline and natural gas storage infrastructure, creating growth opportunities for DTM, and we are currently engaged in early-stage commercial discussions with six potential projects across our network. While not all of these opportunities may advance, we are excited about the prospect to serve this emerging demand growth. So, in summary, I am very pleased with how our team has performed in this challenged short-term commodity market, as we continue to commercialize growth opportunities from our project backlog. 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 second quarter, we delivered overall adjusted EBITDA of $248 million, representing a $3 million increase from the prior quarter. Our pipeline segment results were $3 million below the first quarter, reflecting higher firm revenue from LEAP and our Washington 10 storage complex, offset by lower seasonal revenues from our pipeline joint ventures. Gathering segment results were $6 million greater than the first quarter, reflecting lower base business EBITDA due to the timing of producer plans and a planned maintenance outage at one of our Haynesville treating plants, offset by favorable one-time items of approximately $10 million, which were initially expected to be recorded in the fourth quarter. Operationally, total gathering volumes across both the Haynesville and Northeast averaged approximately 2.9 billion cubic feet a day in the second quarter, with volumes down in both regions compared to the prior quarter. In the Northeast, second quarter volumes reflected the impact of planned producer curtailments, partially offset by the continued ramp-up in production on the Ohio Utica system. And in the Haynesville second quarter, volumes were lower due to the timing of producer activity and the impact of the treating plant planned maintenance outage. As we've previously noted, our 2024 plan and guidance assume that gathering volumes and base business adjusted EBITDA would be lower in the second and third quarters, with a ramp expected in the fourth quarter, driven by incremental contributions from our new projects and a more constructive market environment for producers. We are confident in our full-year outlook and are reaffirming our 2024 adjusted EBITDA guidance range and our 2025 adjusted EBITDA early outlook, reflecting our strong start and confidence in the balance of the year. We've increased our committed capital in 2024 and 2025 to reflect new projects reaching FID, with approximately $330 million committed in 2024 and approximately $180 million committed in 2025. This committed growth capital includes initial payments associated with our new clean fuels gathering project, with the expectation that there will be additional spending forthcoming to build incremental project facilities in 2024 and 2025, as well as potential contingent payments due to the seller over the next several years, subject to the achievement of project milestones. We will provide additional detail on the project in the coming quarters as the team finalizes scope and works to advance the project. Following our successful commercialization and commitment to new projects, we are updating our 2024 growth capital guidance range to $330 million to $375 million. The high end of our guidance range is unchanged, and we continue to expect to spend within free cash flow in 2024 and 2025. We are committed to preserving the strength of our balance sheet and achieving an investment-grade credit rating, and we had very productive meetings with the rating agencies in May with recent positive actions from two of the agencies positioning us to potentially receive an upgrade to investment grade later this year. Finally, today we also announced the declaration of our second quarter dividend of $0.735 per share, unchanged from the prior quarter. We remain committed to growing the dividend 5% to 7% per year in line with our long-term adjusted EBITDA growth. I'll now pass it back over to David for closing remarks.

Thanks, Jeff. So, in summary, we are very pleased with our progress this year and are feeling confident in our full-year guidance for 2024 and early outlook range for 2025. Our short-cycle growth investments continue to track on budget and on schedule, which will contribute meaningful growth over the next two years. Our approach to capital allocation remains thoughtful and disciplined, with our focus on spending within cash flow over the balance of our five-year plan and achieving an investment-grade credit rating. As we look across the portfolio, we continue to see significant growth opportunities with our strategically located asset footprint, building torque as new LNG and power demand increases the call on natural gas, and through the emergence of our energy transition platform. We can now open up the line for questions.

Our first question comes from Jeremy Tonet from JP Morgan. Please go ahead. Your line is open.

Hi, good morning.

Morning, Jeremy.

I want to dive in a little bit more if I could, with regards to potential projects. I think six that you're talking about that could support logistics for data center opportunities, if I had that right there. Just wondering if you could provide a bit more detail on what the scale and scope of these projects might look like as far as timing of online or size, or is this a FERC process to come online? Just wondering if you can share any incremental details on the potential scope there. I'm assuming that this is in Ohio.

Thank you for the question, Jeremy. We are very enthusiastic about the numerous opportunities we are currently discussing. You are correct that these opportunities are primarily driven by the increased power demand largely due to data center development. However, there is also a rising need for gas-fired generation. Recently, many of our discussions have focused on data centers, but overall, there is a solid growth in power demand for gas-fired generation in these areas. I would love to provide more specific details, but due to confidentiality agreements related to many of these discussions, I will keep my comments at a high level. Most of these are lateral opportunities in these locations. There might be some additional opportunities on the mainlines that could emerge from this. We see this as very beneficial for the entire network by generating new demand and connecting it to existing infrastructure. I will refrain from sharing more details for now. As I mentioned in my opening remarks, we have many ongoing discussions, and while not all will lead to commercialization, I am confident in our commercial team's success rate. As these discussions progress and we are able to share more information, we will definitely provide further updates.

Got it. Makes sense. We eagerly await more details there. Pivoting to the new clean fuels gathering project, was just wondering if you might be able to share any more on what this looks like? Is this on or adjacent to your existing footprint? Is this in Pennsylvania, I imagine, for fugitive coal mine methane? Or could this be out West? Just kind of curious, I guess, how you see the scale of this potential business over time.

Sure, Jeremy. So let's just start at the highest level. This is fugitive coal-fed methane capture. And I think, as we all know, methane is the most damaging greenhouse gas. So it has a very positive environmental benefit. So locationally, it's in and around what I'll call our existing footprint. And I'll just leave it there. And again, we just closed this transaction. This is a subsequent event conversation that we're having right now for the quarter. So we'll provide more detail, probably third quarter or year-end as we scope out the complete development plan and can lay out more specifics and details for you. But I just say at the highest level, the demand for clean fuels in the country, we believe is growing at a very rapid pace. Many states are developing clean fuel standards. So this product we believe will be in high demand going forward. And this kind of lands right in our wheelhouse in terms of our core competencies. We understand how to gather, we understand how to treat, and we have a lot of experience in tax monetization in the company. So we found a really good partner to work with that is complementary to our skill set. And we believe there's a future runway of growth opportunities in front of this. Step number one is to commercialize this. Step number two will be to look for incremental opportunities beyond this.

Got it. Very helpful. I'll leave it there. Thanks.

Our next question comes from Michael Blum from Wells Fargo. Please go ahead. Your line is open.

Thanks. Good morning, everyone. I wanted to go back to your commentary on producer expectations in the Haynesville for the rest of the year. You're expecting a rebound by the fourth quarter. I'm wondering, though, if you're hearing any change yet in producer, either messaging to you or just activity levels as we sort of are here now, past midpoint of the year.

Sure, I'll address that, Michael. It's a good question. It seems like we're experiencing a bit of a dip in short-term prices this summer. We had seen a nice recovery about a month ago, but now we find ourselves back in a low point. We're very aware of what EQT mentioned in their recent call. Therefore, we're adopting a cautious approach to the third quarter and the remainder of the year, considering how sensitive the market is to price fluctuations until we see an increase in demand later this year and into next year. As I mentioned previously, there are promising early signs of some fee gas emerging from the new facilities. However, until these facilities are operational and demand is more secure, we anticipate remaining in this fluctuating short-term market that seems to respond to daily weather changes. We need to navigate through summer and into fall, where we can gain better visibility into winter and start seeing an increase in demand within the North American system. This is how we're guiding our results as we look towards a potential uplift in the fourth quarter and a more favorable price environment in 2025 and beyond.

Great. Appreciate all that. And then, I wanted to ask about a project that you believe. You announced it last quarter, this project, this interconnect project into Mountain Valley pipeline. I wonder if you have any updates there. Does that spur any like additional interest from other producers who maybe want to access Mountain Valley via your system?

Yeah. So I think once we announced that transaction, which was anchored, which had an anchor customer underpinning it, we've opened up the opportunity to other shippers on our Appalachia network there, and we're in an active dialogue with those shippers to the extent that they want to participate. If they do, Michael, that would result in an upsizing of the project. We're not at that point to announce it yet, but as you'd expect, we're actively working that with a group of our existing customers.

Great. Thank you so much.

You're welcome.

Our next question comes from John Mackay from Goldman Sachs. Please go ahead. Your line is open.

Hey, good morning. Thank you for the time. I wanted to go back to, David, your comments around kind of volumes into the back half of the year and then into '25. We have the EBITDA guidance range unchanged for the year. I guess, just curious how much of that remaining range, I guess, is that gathering sensitivity? Is there anything else in the portfolio that you're watching on? And then more broadly, can you just kind of remind us what your contracting position looks like in terms of kind of MVC support into the back half of the year as well? Thanks.

Yeah. Great question, John. So I'll start by saying we're halfway through the year and we're in a really good position right now, halfway in, in terms of achieving our guidance. And I'm just going to reflect back on the previous comments I made around price, that we're taking a cautious approach. We see this price double dip phenomenon happening, and it's happening real time. So we're taking a cautious approach for the balance of the year. I think, as you're aware, as the investors are aware, we have significant MVCs that underpin our Gathering segment, which really protects the downside. And I think for us, the rest of the year is going to be all about that incremental molecule that likely is driven around the price structure that lays out for the balance of the year. We're highly confident in hitting our guidance, but in terms of that incremental molecule, which is the incremental revenue, it's really going to be, I think, price-driven for the second half of the year. And again, we've taken a cautious approach to just sitting tight with the guidance range as laid out.

Thank you. As we look ahead to 2025 and anticipate an increase in demand, how much of that additional capacity do you expect to come from the Haynesville compared to supply from other sources entering the state?

Yeah. I think for us, the interconnectivity that we have with that incremental demand, we're connected directly to the locations that that demand secures supply from, which is predominantly Gillis. So we feel real good about our system being built, being in service. That incremental demand is going to show up. We're going to have the ability to serve that incremental demand directly and timely. And I think that'll be our advantage. And we feel really confident about that in 2025. And I'd say some of the items that we've announced today would be proof points to that confidence. Those three new producers, private producers that we were serving and going to do some work for to bring them online next year, I think are looking at the same fundamentals that I just described.

I appreciate that. Thank you.

Our next question comes from Keith Stanley from Wolfe Research. Please go ahead. Your line is open.

Hi. Good morning. Want to follow up on that last questions, line of thought. You have some big competitors coming on and looking more likely to get built now with LEG and NG3. Are you seeing that reduce demand at all near term for incremental LEAP expansions, or are you seeing the connectivity of the system still driving a lot of near-term demand, even with some competing projects likely moving forward?

Yeah. Keith, I think those projects moving forward, I think their in-service timing is, I think, earliest, late '25. So again, I think this next wave of demand that washes through the market will be there in front of their capacity being available. So I think that gives us an advantage. Again, I think what we announced today with those three new producers accessing the system have recognized, have recognized that advantage. Obviously, we're working to commercialize our Phase 3 LEAP expansion and feel highly confident that we're going to do that. So again, we're trying to take advantage of that situation that's playing out in the market right now and capturing another wave of expansion in front of those other two projects being constructed and completed and brought into service late '25, perhaps beyond depending on their schedules.

That's helpful. Second question, I just want to go back. So you point to over $1.3 billion of projects in the backlog through 2027. You're making progress on that. It seems like you have good visibility to hit your growth targets through that 2027 period. So given that, how are you viewing M&A these days as a way to maybe further boost growth? Is it on the back burner because of what you have organically in front of you, or do you see acquisitions as a tool to maybe even enhance the growth rate over the next few years?

Yeah. I would describe our long-term growth target as five to seven percent, with a midpoint of six percent. The organic backlog of projects supports this growth rate, and we do not need mergers and acquisitions to achieve it. Since our spin-off, we have consistently maintained this growth rate through organic opportunities, so we are very confident in our ability to reach it purely through organic efforts. As you mentioned in your question, M&A is more of an option for us and could potentially accelerate our underlying growth rate, but it would need to make economic sense if such opportunities arise. That's our overall perspective on the matter.

Thank you.

Our next question comes from Spiro Dounis from Citi. Please go ahead. Your line is open.

Thanks, operator. Maybe go back to that $1.3 billion backlog. Just curious if you have any sense of directionally, maybe where you think that goes from here is that kind of a nice, steady state you hope to maintain? A lot of chatter around data centers and power to them are broadly. So curious if there's an acceleration in that backlog actually gets even higher over time and what kind of projects you think start to fill it from here.

That's an interesting question, Spiro. I believe the current market fundamentals, particularly with the recent robust power demand forecast, are leading everyone to anticipate increased gas infrastructure development. If this trend continues, it could foster a stronger environment for midstream investments. I agree with your point that there might be emerging tailwinds in the market that could enhance our backlog over time. It's still early in the process. As we've discussed, we are actively pursuing several opportunities, but we recognize that we won't succeed in all of them. However, we are a moderately sized company with a solid set of opportunities in this emerging area. I suspect other midstream companies are in similar positions and exploring comparable opportunities. It seems there could be a stronger foundational growth entering this sector right now. I'm eager to see whether this trend continues over the next six to twelve months and if companies like ours begin to commercialize some of these opportunities effectively. This area aligns well with our expertise and existing asset base, making it a significant focus for us at this time, Spiro.

Got it. Understood. Second question, going back to the new East Texas gathering. You did mention the potential to come on to LEAP. And so maybe a few parts questionnaire. Curious, is there enough space on the line now to accommodate all those volumes, or does that sort of further support a Phase 4 expansion? And I guess, curious what other options your customers have. I guess, they could price more locally, but maybe just walk us through the dynamics of why it would make sense for these volumes to eventually get to LEAP.

That's a great question. The current contracts allow full access to our delivery point flexibility throughout the entire Haynesville. Primarily, customers are utilizing the local or in-basin delivery points, but they also have access to LEAP delivery points with a capacity of 400 million a day. As this volume increases, if it ends up on the primary LEAP delivery points, it could potentially support an expansion at LEAP.

Perfect. I'll leave it there for today. Thank you, gentlemen.

Our next question comes from Sunil Sibal from Seaport Global Securities. Please go ahead. Your line is open.

Yeah. Hi. Good morning, everybody, and thanks for the clarity on the call. So I just wanted to dwell on the clean fuels opportunity a little bit better. So it seems like you get an initial payment in the second half, and then the project really kicks in, in 2025. I was curious if you could quantify this a little bit going forward in 2025 or forward years. How should we think about this opportunity? Is this resulting in discussions with other clients also in the region, which could help grow this set?

Yeah. Let me touch on that. And again, we're describing a subsequent event activity here. So I'm probably going to be not able to provide as much clarity as you would like here. But I'll just step back and maybe reiterate some of my earlier comments, is that the demand for clean fuels in this country is growing rapidly right now. We're seeing more and more clean fuel standards being either implemented or discussed in different jurisdictions to be implemented in the future. So we're viewing this segment of the market as a very early days, emerging segment from a demand perspective, and there's not a lot of supply. So we spent a lot of time looking at, okay, what are all the areas of opportunity on the supply side to bring this product to market? This particular opportunity fit very nicely within our wheelhouse in terms of geography, in terms of skill set, and our ability to execute well with a partner producer that is looking at this fugitive. Methane emissions is very problematic inside their portfolio. So it checks a lot of boxes in terms of strategically doing a lot of good things for all the parties involved. So we'd like to commercialize this particular opportunity, which, as we refine the scope, will be able to provide some answers to the questions that you were just asking me in more specifics. But I'm just going to ask you to pause on that, and that'll probably come in a quarter or so. But more broadly, we're looking at this as a nice entree into this segment. And there's lots of opportunities around the country to do similar work with other companies. And we're viewing that as a growth area. It's very early days, and I think as we advance this development, we'll be keeping everybody tuned in. If I could point you to the project backlog or organic project backlog, we have identified clean fuels as an area that we've been pursuing in that allocation of capital over that five-year plan. So we talk about 20% of the capital going into this energy transition space. Part of it's going to go into our carbon capture and storage project from Louisiana. We fully expect another portion of it to go into this clean fuels segment. So, very excited. It's just really early days, and as we can put more definition around this for the investors, we fully intend to do that.

Okay. Thanks for flushing that out. And then, just wanted to clarify one thing with regard to your discussions with rating agencies on credit moves. So once these moves happen, so that will basically put the whole capital structure on IG footing, i.e., the secured and the unsecured both, I presume.

Yes.

Hey, Sunil. You're correct that we have fall away provisions in our capital structure. It does take a couple of other rating agencies to reach a conclusion for that to start activating. That is indeed the natural process. We have intentionally structured our capital to handle this smoothly when it happens. A significant factor in this will be the Chesapeake SWN merger, as that is linked to Fitch's positive watch and Moody's positive outlook, which are both contingent on the successful completion of that merger.

Understood. And could you talk a little bit broadly about how does the IG move help DTM. You expect significant savings in terms of your financing cost is more like strategic goal.

It covers several areas. The most obvious is related to financing costs. Our debt is trading close to investment grade now, but there's still some distance. We also have a bit of collateral that we're able to reclaim. On the equity side, it opens up our portfolio to investors focused on investment-grade investments. This also positions us for potential indexes looking for investment-grade assets. From a commercial perspective, being investment grade provides a positive reputation. So, as part of our negotiations and commercial activities, there is a benefit from being classified as investment grade. We view this across all these aspects as a positive move, which is why we have been pursuing it for the last few years.

Got it. Thank you very much.

Yeah. You bet.

Hi. Good morning, everyone. Thanks for squeezing me in. Only have one. Just wondering if we could get your latest thoughts on gas storage along the US Gulf Coast, maybe as we get closer to some of these LNG projects coming online. Is that something that you've been looking at? And maybe more broadly, just the needs for gas storage related to some of these incremental power demand type opportunities, and what you might be looking at on your footprint.

Sure thing. Good morning, Robert. I'm glad to squeeze you in. Regarding storage, we see multiple opportunities within our storage portfolio. Firstly, in Michigan, we've been pleased with the contract renewals we've executed this year. We are renewing and extending contracts at higher rates and longer terms in a strong storage market that we are currently experiencing. Importantly, we have been under-investing in storage. The ratio of working capacity in the country compared to the demand indicates we have lagged in our investment efforts. As more gas-fired generation and renewables come online in the electric sector, I believe this will exacerbate the existing disparity, which will drive the fundamental value of storage as we approach the latter half of the decade. That summarizes our view on existing storage opportunities for incremental growth. We are also closely exploring greenfield options in Michigan; however, we are not yet at a price point that would clear the market, but we're getting close. In the Gulf, many of our customers in the Haynesville System have been showing interest in storage and looking to partner or co-develop storage projects. There is a clear perceived need for additional storage to support the LNG expansions in the Gulf. This is an active area for many companies, including ours, and it involves finding the right location, geology, and price—essentially, the trifecta. We are putting in a lot of effort towards this, as are other companies. So, stay tuned for more updates. There is a general agreement in the market about the need for more storage; it's just a matter of commercially clearing the market and identifying the right projects that can advance.

Got it. That's helpful. Thanks for the time, everyone.

We have no further questions. I would like to turn the call back over to David Slater for closing remarks.

Well, thank you very much for joining us today and great questions. We certainly appreciate your interest in DT Midstream and enjoy the rest of your day. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.