Thank you for standing by. My name is Briana, and I will be your conference operator today. At this time, I would like to welcome everyone to the DT Midstream First Quarter 2023 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]. I will now turn the call over to Todd Lohrmann, Director of Investor Relations. 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. Following the successful issuance of debt at NEXUS pipeline, we are modifying our adjusted EBITDA calculation to reflect full proportional EBITDA from our equity method investees. Please refer to the updated definition of adjusted EBITDA and the reconciliation to GAAP contained in the appendix as well as the definitions and reconciliations of our other non-GAAP financial measures. The appendix also contains details on the debt balances and interest expense at our equity method investees. 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 am pleased to report we had another strong quarter with both business segments delivering great results that are in line with our full year plan. As I communicated on our year end call, we expect growth to be weighted towards the second half of the year as we bring projects online. Standing here today, I am confident in our full year guidance range for 2023 and early outlook range for 2024. All of our key growth projects remain on budget and on schedule. And during the quarter, we made significant progress derisking these projects by completing major construction activities and firming up project costs. Approximately 80% of our overall growth project capital costs have been locked in through our spend to date and committed procurement contracts. And I'd like to give a big thanks to the entire team for their dedication as they work to ensure these projects meet the expected in-service states for our customers. I also want to commend our employees for their excellent safety performance with no recordable safety incidents so far this year. We are continuing to advance our CCS opportunity in Louisiana, following the acceptance of the Class VI well permit application by the EPA. We have completed seismic surveys and continue to evaluate geological characteristics in support of our application. Last Friday, the EPA announced they are opening a public comment window on a proposal to grant the State of Louisiana's request or primacy over Class VI injection wells. We are very encouraged by this announcement and we'll continue to work closely with both the EPA and the state of Louisiana as we advance the project towards a final investment decision. I want to take a moment to address the natural gas…

Thanks, David, and good morning, everyone. In the first quarter, we delivered overall adjusted EBITDA of $225 million. Our Pipeline segment results reflect continued strong performance at our storage complex and our pipeline joint ventures, offset by reduced short term revenues following a strong fourth quarter. Our Gathering segment results were in line with the fourth quarter, except for the $2 million impact from the transferring our Michigan gathering asset to the Pipeline segment, following the service conversion and the start of the new 20 year transport contract. Operationally, total gathering volumes across both the Haynesville and the Northeast averaged approximately 3 billion cubic feet a day in the first quarter. We expect gathering volume growth to be back half weighted this year, which is driven by the in-service of our expansion projects and timing of customer activity. Growth CapEx for the quarter was $227 million as we made significant progress de-risking our organic growth projects. We are maintaining our full year growth CapEx range of $575 million to $650 million. Our total committed growth capital remains approximately $800 million and is slated for organic growth projects. The committed total, which is inclusive of our 2023 investment implies a significant step down in capital spend in 2024. We recently took the opportunity to further optimize our balance sheet with the issuance of $750 million of new investment grade debt at NEXUS pipeline, with DTM’s proportional share being approximately $375 million. Funds from the transaction will be distributed in early May and will be used to support organic growth and pay down our revolving credit facility. This transaction will free up additional liquidity and provide interest expense savings. Overall, we are very pleased with results of this financing. We remain committed to the strength of our balance sheet and our 4 times long term leverage ratio ceiling. As Todd mentioned, we are modifying our adjusted EBITDA metric, which impacts our adjusted EBITDA guidance. The updated 2023 guidance can be found on Page 6 in the earnings presentation. This update to our guidance solely reflects the change in our adjusted EBITDA metric and does not reflect any changes to the base business. I'll now pass it back over to David for closing remarks.

So in summary, we feel really good about our full year guidance range for 2023 and our early outlook range for 2024. Our construction projects have been significantly derisked and are primarily backed by take-or-pay contracts. We continue to have a healthy business development inventory of organic growth projects and expect that improving market fundamentals over the course of the year will yield additional opportunities. We can now open up the line for questions.

[Operator Instructions] Your first question comes from the line of Spiro Dounis with Citi.

First question, you guys mentioned that the natural gas prices to some degree, have an impact on rigs here in the near term. But just curious if you sort of think out, it sounds like your outlook really hasn't changed when we think longer term. And so I know one thing, you are pursuing was an expansion of LEAP towards 3 Bcf a day at some point. Just curious if you could maybe just walk us through customer interest levels on continuing that expansion now versus maybe a quarter or two ago and how are you thinking about the timing of that potential expansion?

So we continue to have really active dialog with a series of customers on the next phase of LEAP expansion. As we sit here today, we're mid-2023 and that '25, '26 next wave of LNG is quickly approaching. And I think one of the advantages that we offer the market is our ability to expand in what I'll call bite-sized increments, just like Phase 1, 2 and 3 were. So we continue to have a lot of customers interested in incremental LEAP capacity. Again, I think just recognizing the environment, we're in a bit of a weak moment in the commodity cycle right now. I think most of those customers are very self aware of that. And one half things kind of lined out and ready to go when they're prepared to make the next incremental commitment. So we feel real good about our competitive position. We've done really well in what I'll call the first wave of the expansion work. We punched above our weight and we're able to contract a large portion of the market share, and I expect the same thing will happen in the second wave.

Second one, maybe just going to the new EBITDA methodology. Two part question on this one. So first, I guess, what was the thinking of not sort of keeping it the way it was and reducing that EBITDA by the interest levels, especially now that you're going to have a little bit more JV debt, it would seem like that gap or that variable between EBITDA to cash flow will be a little bit bigger now? And then the second part of that question, as we think about the '24 preliminary outlook that did not change to reflect this methodology, it looks like. Any sort of reason behind that or just sort of too early?

So I'll take the first piece and then David will help on the '24. So for us, it was pretty simple. We just want to make sure that we're being transparent and simple. And again, that's well known approach when you've got material JV debt that you sort of moved to a proportional reporting method and so that's what we're trying to do. And obviously, with the NEXUS, that was a material change in our JV debt, so that's why we're doing it now. And of course, we really like the JV debt being able to finance at that level because we're able to do it an investment grade, nonrecourse. And as we're -- as you can see the rate that we got, we're just tickled pink with that rate that we've got. We can do it at a lower cost. So that's kind of why we made the change at this time.

Yes, maybe I'll pick up on the second half. So I'll comment briefly on NEXUS. It was always contemplated that at the right time in the evolution of that pipe, we would put JV level debt on it. So this is really us executing the plan. In terms of 2024, there's puts and takes every quarter on forward-looking guidance and this is no different. We have puts and takes in 2024. It hasn't changed our view on our confidence in our 2024 guidance and it's been our practice that we'll refresh 2024 typically at the end of the current year and as we bring it into the current prompt year cycle. So that's just kind of been our practice, Spiro. So no concerns there.

Your next question comes from Michael Blum with Wells Fargo.

Just had a couple -- I just want to make sure I understand a couple of things. On Slide 11, I think you reiterate your long term 4 times leverage ratio ceiling. So I just wanted to understand that a little bit better. Is that -- would you allow yourself to go above that in the short term if you have good line of sight that you get back below 4 times within a reasonable amount of time or is that what long term means in that slide now, or is that really like a hard cap at 4 times?

Again, another good -- very good question. So you're right. Our commitment is to the long term 4 times, which includes the proportion, just so that we're clear on that. And again, why we're comfortable with that 4 times is because we've got a high degree of demand contracts, stable cash flows and we have no direct commodity exposure. So that's how why we feel good with that 4 times. But you're spot on with the investment profile that we currently have, we are going to be temporarily over that 4 times, probably at the end of this year. But with our plan, we feel that we're going to be able to de-lever down into the mid-3s over the next several years on how things are going to play out.

And then I just wanted to ask about the increase in storage rates. I'm wondering if you can just quantify, maybe uplift in terms of either contribution or just like rate of change, how much upside are you seeing in storage rates?

Yes, Michael, we've just seen a really strong storage market present itself over the last probably five to six months. And we had a significant amount of capacity rolling actually in our portfolio, just the way we have that portfolio structured. So the commercial team has been doing just an excellent job here in the first quarter, renewing a number of contracts and capturing these higher rates. We're probably seeing rates that are 40% to 60% higher than we've seen perhaps last year in the storage market. So we're really encouraged by that. I think we have talked to you folks about the storage market in the past. And I'd say a couple of years ago, we were sort of in the trough, if I can use that term. In the storage market, it was a pretty weak storage market and we were intentionally terming out capacity in that weak market. So as the market has materially improved, and I think it's a function of just a higher volatility in the energy complex here in North America, we're looking to take advantage of that and contract up and term out to the extent that we can inside our storage business. So that's a bright star in the portfolio at the moment. And it's always nice to have a diversified portfolio.

And then just last one for me. Just I apologize if I missed this, but have you declared the dividend for the first quarter?

We have not but we expect that will be coming shortly. We have a board meeting later this week. So stay tuned on that one.

Your next question comes from Robert Mosca with Mizuho.

So I was just wondering if you could provide any additional color on those two producers you signed up in the Haynesville. And then also, I think a couple of years back, you announced some contracts with new customers on Blue Union. Just wondering if you could update us with respect to, I guess, the tenure and bond commitments on those or expectations, and could that be a potential headwind to Haynesville volume in the short term?

So we did, we signed up two new customers. And I think, as you know, over the last couple of years, it was one of our strategic objectives as we wanted to bring on more new customers on to the Haynesville platform and start to diversify that platform a little bit. So these two new customers, I can't get into the details other than I'll just characterize the type of producers they are. They're both smaller private producers. They're long term contracts with dedications to our network. I think what was really encouraging for me to observe as a commercial team has been working this is the value that these new customers see in our network, we have a wellhead to market network in the Haynesville. I'll call it a wellhead to water network to the LNG give us procurement location. So they really saw a lot of value in that where they could deal with one company, just plug into the network and they're ready to go, so to speak. So we expect those two customers to come on towards the end of the year. But yes, just encouraged by the efforts of the team to be able to do that and we just continue to add counterparties to the network and diversify the network and grow the network.

And maybe just on those contract that you’d signed a couple of years back, I'm not sure if those were kind of more short term offload agreements, or were those long term contracts as well?

Those customers are still on the system and they're actually growing their volume on the system. I'm just recalling in my mind right now, Rob, what we disclosed on those customers. But yes, I would characterize them as longer term customers on the system.

And then maybe for that 20% of committee CapEx that is in derisk, so to speak. I mean which projects -- could you talk about which projects those relate to specifically, and whether you're seeing anything above or below what you initially modeled in that $800 million budget?

So let's just start at the highest level. We're very confident in our capital costs on all of our projects, both in the north and in the south. And 80% of that capital, as you just pointed out, has been derisked/locked in. I'd say the open portion, the 20% that’s open, is primarily related to the install cost. So it's, what I'll call, labor and the mechanical of putting it together, so to speak. And all the projects are running on schedule. So as I called out in my opening remarks, I think our construction team has done a fabulous job in a very difficult environment with significant cost pressures coming from all sides and delivery schedule pressures coming from all sides to hold the budget and hold the schedule for our customers so that we can deliver these products on time for our customers. So I feel really good about the derisking on the capital side. And maybe just some additional commentary on why we feel good about our guidance for this year, so just to remind everybody, the gathering side of our business now only represents about 35% of our business. So I'll just start there. But all the wells that need to be drilled and brought online to support the expansion work that we're doing here in 2023, 75% of those wells have either been drilled and completed and are waiting on the facilities or are being drilled as we speak. So it gives us a lot of confidence in that portion of our business, which is just one piece of our total business in terms of what we're going to deliver here in 2023.

[Operator Instructions] Your next question comes from Alex Kania with Wolfe Research.

Maybe two questions. First, just hopefully a quick one. A lot of talk on Haynesville activities, but just is there any kind of changes in tone that you're hearing from your Appalachian producer counterparties there in the gas environment? And the second one, maybe just with respect to CCS. Can you remind us just what the time line may end up being right now just with respect to the federal EPA process or maybe how you see the primacy discussions moving forward on Louisiana, just to maybe get a sense of maybe when you could potentially get to an FID timing decision?

I'll start with Appalachia. Those percentages that I just quoted previously in terms of the activity we're seeing that supports our growth this year, that covers our total gathering business. So it reflects both Appalachia and Haynesville. So we continue to see our customers performing what we would expect them to perform in terms of our expansions in Appalachia. But a more general comment about Appalachia, we continue to see the activity. You've heard some of the public, there's a moderation occurring in Appalachia but probably not to the same extent that we're seeing in the Haynesville. My sense is it's primarily related to costs. There's a lot more inflationary cost pressure in the Haynesville than there was in Appalachia. And I think -- and this is just my view is that I think producers are sending a little signal into the service sector in the Haynesville right now that they need to bring their cost in line. And I expect that will play out here over the summer that there'll be a cost acknowledgment and adjustment that will support continued drilling in the back half of the year. And I also sense that market fundamentals -- I think, the ship will ride itself towards the back end of the year here, the second half of the year. We certainly still see pretty strong price signals in [CAL-24, CAL-25]. I think it's upward $3 in ‘24 and low $4 in 25, pretty healthy numbers in either basin for producers to drill into. So that's kind of what we're hearing at a high level in the market, and I hope that's helpful. Your second question related to CCS in Louisiana, we've kind of publicly said the timing for us is sort of the back end of 2025. And just to remind everybody for our project, our project involves in the capture or capturing emissions from our own facilities in the Haynesville, we will pipe it and we will sequester it. So we're doing all three components in this project. We've been working hand-in-hand with both the Louisiana Department of Natural Resources and the EPA with the expectation that, at some point, the primacy would shift to Louisiana. So both parties have been sort of in the tent with us from day one and fully aware of all the work that has been done and that we're planning to do to support the application. So we're encouraged by the letter last week. We know that Louisiana is very supportive of CCS within the state to support both their industrial base and their resource base in the state and we look forward to working with state, assuming the primacy to ship.

Your next question comes from Robert Mosca with Mizuho.

Just a quick follow-up here. Just wondering if you could address the decline in Haynesville volumes quarter-over-quarter, what drove that?

Yes, Rob, it wasn't anything more than just the timing of well completions. I think we had a similar phenomenon last year. I think we kind of -- the first half of the year tends to be a little lower, and we tend to see the ramps in the second half of the year. That seems to be the pattern of our largest customer. And again, it was fully contemplated in our plan and in our guidance. So we're very happy with Q1. We are on track for our full year guidance based on our Q1 results.

There are no further questions at this time. David Slater, I turn the call back over to you.

Well, thanks, everybody, for joining us today. And we certainly appreciate your support and interest, and I look forward to seeing many of you later in the month at EIC. Have a great day.

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