Good morning and welcome to DT Midstream 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. [Operator Instructions] As a reminder, 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, increasingly 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…

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 assumes 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…

[Operator Instructions] 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.

Yeah. Thanks for the question, Jeremy. We're really excited about the number of opportunities that we're actually in a commercial dialogue on right now. And you're correct, they're all driven by this incremental power demand that is underpinned predominantly by data center development. But I think there's also just a growing demand for gas fired generation. So a lot of the conversations have been around the data centers recently, but I think there's just an underlying growth and strength in power demand, gas fired power demand in these regions. So I'd love to get into more detail, but Jeremy, we are under some confidentiality agreements with a lot of these conversations, so I'm going to have to just keep it at a high level. I would say that these are predominantly lateral type opportunities into these locations. There could be some incremental opportunity on the mainlines that spawn from this. But we view all of this as very supportive to the whole network in terms of just building new demand and connecting it to the current infrastructure. And -- but I think I'm going to stop there just in terms of the disclosure right now. As I said in my opening remarks, lots of conversations going on. Like always, not all of them will commercialize, but I feel really confident. Our commercial team's batting average on commercialization. So as they progress and as we can be more transparent, we'll certainly provide that color.

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 of the 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 complimentary to our skillset. 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. And good question. It feels as if we're having a bit of a double dip in the short-term price here this summer. We were seeing quite a nice recovery there a month or so ago. We seem to be back down in the trough at the moment, certainly very attuned to what EQT has said publicly on their call earlier. So I think we're just being -- we're taking a very cautious approach to Q3 and the balance of the year, just given how sensitive this market is right now around price, until we see that incremental demand really pick up later this year and next year. As I said in my opening remarks, we're seeing really good early signals of some fee gas showing up on these new facilities. But again, until those facilities are up and running and that demand is locked in, for lack of a better word, I think we're going to be in this choppy short-term market that seems to be trading on the weather forecast as it changes day to day. So we need to get through the summer, get ourselves into the fall, where we see a clear line of sight into the winter, and see these incremental demands picking up on the system here in North America. And that's sort of how we're guiding our results as we see that fourth quarter pickup and then getting into a much more constructive 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 spurring 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.

All right. That's fair. Thank you. Maybe -- and then taking that next step into 2025, as we see this demand finally start to step up. I guess, how much of that incremental call do you think comes from the Haynesville versus supply from elsewhere being able to make its way into the state?

Yeah. I think for us, the interconnectivity that we have with that incremental demand, we're connected, directly connected 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 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 recognize, 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. Keith, the way I would describe it is our long-term growth guide of five to seven. So call it 6% growth rate at the midpoint. That organic backlog of projects fuels that growth rate. We do not require M&A to deliver that growth rate. And if you kind of look at our track record since we spun. We have been fueling that type of a growth rate consistently since we spun through organic opportunities. So we feel highly confident in our ability to hit that growth rate with purely organic activities. So you kind of alluded to it at the end of your question. M&A for us is really option value, and it has the potential to be an accelerant to that underlying growth rate and would have to make a -- clearly make economic sense if those opportunities presented themselves. And that's kind of how we think about it at the highest level.

Thank you.

[Operator Instructions] Our next question comes from Spiro Dounis 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.

Yeah. Spiro, that's an interesting question. I think the fundamentals in the market right now, the way the market has evolved in the last six months with sort of this more robust power demand forecast in front of us, that is driving, everyone expects it's going to drive incremental gas infrastructure. That certainly has the ability over time, if that persists, to create a more robust environment for midstream investments. So I tend to agree with that, that point that you're making, that there could be potential tailwinds in the market here that are developing that could, over time, make that backlog more robust. I think it's early days. I mean, we talked about the opportunities that we're pursuing. We've been around long enough to know that you don't win all the opportunities. But that's a pretty -- we're a moderate size company, and we have a pretty robust opportunity set in that emerging space. I suspect all of the other midstream companies have similar opportunity sets that they're pursuing. So it does feel like there could be a more robust underpinning. Fundamentally, that's entering in this space right now. So I think that's something to watch here over the next six to 12 months, does this persist? Do companies like us and others start to commercialize some of these opportunities and lock them in? But it's certainly an area that we're spending a lot of time focusing on, and again, really is complementary to our skillset and our existing asset base. So it's a very focused area for us right now, 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.

Yeah. That's a great question. So the way those current contracts are structured, they have full access to all of our delivery point flexibility in the entire Haynesville. Predominantly, they're using, in your words, the local delivery points or in basin delivery points, but they also have access to LEAP delivery points that 400 million a day, as they -- as this volume ramps would. If it ended up on primary LEAP delivery points, it would potentially underpin an expansion on 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 skillset, 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. Yeah. So what we've got -- you're right, we've got fall away provisions in our capital structure. And so you're right, it takes some, like two for other rating agencies to get there, for that to start triggering. But, yes, that sort of is the natural path. And we've intentionally sort of set the capital structure to be able to do that cleanly when that occurs. And again, that big part of that's going to be the Chesapeake SWN [ph] merger, because that's what Fitch is sort of tied there with that positive watch and then S&P, or, excuse me, Moody's has got theirs on the positive outlook, which is, again, based around that merger occurred.

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

Yeah. It covers sort of several areas. You're right. The obvious is around financing costs and those things. But you can see where our debt, our debt's trading pretty close to IG now, but still there's that. It also allows you related to -- we've got a little bit of money out there for some collateral. You're able to reclaim that. What it then also helps you with is on the equity side. It opens up your portfolio to investors that are focused on the investment grade sort of portfolio. It also opens us up to potential indexes that are also looking for investment grade. And then also, then from a commercial standpoint, strategically, it provides sort of the halo around investment grade entities. And so again, as a part of the negotiating, commercial activity and those kind of things, there's also a positive halo that you get by being an investment grade. So it's across all of those fronts that we see that as a positive move, and that's why we've been pursuing that for the last several years.

Got it. Thank you very much.

Yeah. You bet.

Our next question comes from Robert Mosca from Mizuho Securities. Please go ahead. Your line is open.

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. And good morning, Robert. Not a problem to squeeze in. So, storage, for us, it really hits. There's multiple opportunities that we view through the lens of our storage portfolio. So, first off, here in Michigan, we've been really happy with the recontracting that we've done this year in that asset. So renewing and extending contracts at higher rates, longer terms in a really strong storage market, which is what is in front of us today. I'd say the other thing, again, from the highest level, is that we have been under investing in storage. When you look at the ratio of working capacity in the country to the demand that we have in the country, we've been lagging behind in terms of making those investments. As more gas fired generation and renewables come on, on the electric side, I think that will start to exasperate that disparity and in my view, drive the fundamental value of storage here in the back half of the decade. So that's sort of fundamentally what we're seeing with storage in the existing portfolio in terms of incremental growth opportunities. We're obviously looking closely at Greenfield opportunities here in Michigan. I'd say that we're not quite at that price level for that to clear the market yet, but we're getting close. And then in the Gulf, many of our customers on the Haynesville System have been inquiring about storage and looking to kind of partner or codevelop storage opportunities. So there's a very clear need, perceived need for more storage to support the LNG expansion that's occurred down in the Gulf. So I think that's a very active file right now for a lot of companies, and we're included in those companies. And again, it's finding the right location with the right geology at the right price, and you got to have the trifecta. And we're working hard on that. And I know other companies are working hard on that, too. So stay tuned. More to come. I think there's a general consensus in the market we need more storage. It's just a matter of clearing -- commercially clearing the market, and finding the right projects that can move forward.

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. End of Q&A:

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.