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. [Operator Instructions] 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…

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. Pipelines 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 notes. 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.

[Operator Instructions] 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, 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 really just -- 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 have 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 can we expand the export capacity out of the basin incrementally with an easy low-risk, low-cost expansion opportunity.

And then turning, I guess, to the Haynesville, just wondering, there seems to be competition down there for new pipe. But just curious, if you -- for the LEAP system, given its footprint, given the expansion capabilities, just wondering where could the system grow to over 5 years from now, you think given the profile for Haynesville production growth as it stands now?

Yes. That's a great question, Jeremy. And certainly, as I said in our opening remarks, one of our top priorities with the commercial team. But if you really just step back, you can see that there's a really strong demand like that, that 78 Bcf is real over the next 7 to 8 years. So when we look at the assets, our ability to expand, we can expand quickly incrementally with compression. So it's low risk and quick to bring it online for our customers so we can ramp with the production. But when we get beyond that 2 Bcf a day with compression, we can go up to 3 Bcf a day as we begin to look the system. So again, doing it all inside our right away inside our footprint, again, it can be done incrementally as the demand is in and the producers are ready to make those commitments. So it's -- we're really excited about it. And stay tuned as we can sort of continue to progress that beyond what we announced on the year-end call. We're going to expand -- we're in flight now expanding the system for 300 million a day and again, look to keep adding increments as we progress here with 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 time line when this could become more real and just really Classic wells, Louisiana seeking primacy there, thoughts on time line or anything else on this topic that you could provide more color on would be helpful.

Sure. So we're -- the way I'll describe it, Jeremy, we're just -- we're following our very disciplined development plan. The next major milestone for us will be that Class 6 application. I think as you -- as we've talked before, Louisiana is trying to get primacy. Our plan is -- we will file regardless of whether Louisiana has primacy or not, just because these applications take some time to go through the regulatory process anywhere from two to three years. So getting this filed this year is a high priority for us. But we want to file it with high-quality information. It's a very rigorous process. So again, that's part of that disciplined development that the team is adhering to where we're just methodically doing all the homework and the due diligence in the right way so that when we do file that application, it's a high-quality application. The regulators know what's going to be in it before we file it, and it can progress through the process in a smooth fashion. So that's how we're thinking about it. It's somewhat new. A lot of other companies are sort of in the same position we're in. And it's also somewhat of a -- as you're acquiring the rights that you need to do this, again, that disciplined approach. We just want to be very cognizant of getting all the pieces together before we put that application out there in the public domain so that we have no 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 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's 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 there is that you're comparing a Q1 inside DTE where we didn't have the stand-alone incremental public company costs. So that's really the delta there that you're looking at. And then maybe I'm just going to pull it back. I'm going to pull back to the higher level is that when we -- on the year-end call when we announced the Haynesville system expansion, and I'll just talk on the gathering side, just to put it in perspective, we announced a 25% increase in our gathering system in that expansion. It was $500 million a day. So just to put it into perspective, are we -- is our Haynesville gathering system growing with production. I think the answer is clear that it is, we're going to grow that system by about 25% with that 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, fourth quarter this year and we ramped 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.

That's -- maybe just as one more one. We've seen M&A on the G&P side, kind of more bolt-on G&P M&A pick up a little bit. Just wondering if you guys have looked at any of that, what your appetite might be? And how you're kind of thinking about that overall?

Sure. Yes. So we're aware of all the assets that are in the market that have been in the market and are currently in the market. Our approach right now on that is, again, just taking a very disciplined look at things, and they have to -- they would have to strategically fit and they obviously have to have value creation for us. So that's kind of our progative on that. We're flushed with greenfield opportunities right now, very focused on executing all of the announced projects and pursuing new greenfield projects. And I think as those are very accretive and very good investments for the investors with strong returns when you're doing it on top of your existing assets. So we're always trying to be good stewards of the capital that we have here and making sure that we're getting it to the place that provides the highest shareholder value at the end of the day. So that's how we think about M&A right now in the current environment that we're in. And so we're looking and we're aware of it and open to it, but it has to deliver at the end of the day, the value that we expect.

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. Thanks for the question, Rob. So I mean, we're really pleased with what we announced on AGS. And again, just to put it into context, between what we announced today and what we announced, I believe, late last year, we're growing that system 35% over the next year or two. So that is really strong growth in Appalachia. And I think you asked exactly the correct question, Rob. Where is that gas going? How can those producers drill that up and get it out. Just to remind everybody, AGS connects directly to NEXUS. So it's NEXUS is a free way out of the basin for AGS. It's directly connected to NEXUS. And AGS is also directly connected to our Stonewall pipeline, which again, we announced previously a new firm contract on Stonewall. It's another avenue out of Appalachia that has open capacity available. So between those two exit freeways, the producers on AGS are able to step up their production. So we're extremely happy with that. I mean that -- that is a very great outcome for us and very pleased to work with our key customers there. The -- as you -- I think as you know, one of our major customers on stonewalls Antero. And Antero has a long-term firm commitment to Cove Point and Stonewall is the primary avenue for their gas to get to Cove Point. And so we're really excited about what's happening on AGS right now.

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. Good question. What we did when we did that transaction, again, we wanted to make a significant move in converting our -- the floating to the fixed. So we've executed on that. But we also wanted to maintain a strategic optionality with that the Term Loan B provides you because it's got that prepay feature. And as David talked about, we've got over 60% of our growth capital committed. And so again, as the commercial team continues to firm up our growth capital, then we'll reassess what do we want to do with the rest of that Term Loan B. So that sort of provides you a path and sort of a view of what we're thinking there. And from a capital structure, perspective, yes, we're very comfortable with the overall debt levels that we have because as we've talked about our growth capital aligned with the opportunity we have, that fits inside of our free cash flow. So we're able to self-fund all of our growth. Therefore, we don't need external capital. That's why we're very comfortable with the overall side of our capital structure.

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

Just wondering with the takeaway constraints out of Appalachia, we've seen a number of Permian pipes announced some compression expansion. Is that something that could -- you could do for NEXUS to kind of increase the takeaway?

Yes, James, Dave, this is David. Yes. So we had an open season late last year to look at opportunities on NEXUS. And yes, that's certainly one opportunity that we're actively pursuing whether compression expansion is viable. There's a couple other techniques, I'll say it that way, that we're looking at on NEXUS to enable incremental capacity at very modest incremental capital. And like I said earlier, low-risk investments that are on a relative basis, much easier to do. But we're -- that's a priority for us. NEXUS is a brand-new asset, very well connected to the downstream markets. And with this price signal, a lot of these producers are looking for how can they grow their production. Appalachia is a world-class resource long, long-term drillable resource. A lot of producers are sitting in a lot of undeveloped acreage. We have this wonderful price opportunity in front of them right now. They just need to have confidence they can take those volumes to durable long-term markets. So it's an absolute priority for us to create more freeway capacity out of the basin. And we're working both the NEXUS side, and like I alluded to earlier, the Stonewall side. So the pathway north into the upper Midwest markets and the pathway south and east towards the East Coast or towards the Gulf Coast to get some of that Appalachian gas down into the LNG corridor. So we're going to both ends, looking for any optimizations that we can do with these assets to eke out more incremental 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.

Yes. Just given the point of the conversations right now on NEXUS, I'm going to -- I'm just not -- I'm not in a position to share that publicly right now on NEXUS. But I will remind -- I'll share publicly the southern piece. Because I think we've talked about it in the past, Stonewall is a 36-inch pipe that is -- has no compression on it. So there's open runway on Stonewall and there's easy expansion opportunities on Stonewall. And then we can take that comfortably up to 2 Bcf a day, probably a little beyond under the right operating circumstances. So again, I think this is where we're looking at how do we do rational low-risk, low-cost expansions to help these producers monetize some of their acreage. And obviously, for Stonewall, we have to work in conjunction with our other pipeline rather in the industry to get beyond the southern end of stone walling further 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.

Yes. So I'll say the AGS expansion is a very strong return expansion for us. And again, there's a lot of activity going on, on AGS right now. And again, I'd just bear with me here, we'll -- we will provide that information. So I just can't do it just yet. There are other opportunities we're pursuing on AGS that I don't want that information out in the public domain at this point. So that's the AGS situation. And on CCS, again, I'm going to refer back to that disciplined development approach that we always like to take. And again, I think until we are prepared to file that EPA Class 6 application. Again, we want to just keep some of the details out of the public domain as we navigate through the development cycle here. We're at a very sensitive point in the cycle. And again, as soon as we're comfortable sharing that with you, we will.

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. And 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 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.