DT Midstream, Inc. 2026 Q3 Earnings Call

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, Chairman and CEO, Chris Zona, President and COO, and Jeff Jewell, Executive Vice President and CFO. With that, I'll go ahead and turn the call over to David.

Thanks, Todd, and good morning everyone, and thank you for joining. During today's call, I'll highlight our key accomplishments for the quarter and discuss the constructive market fundamentals driving demand across our footprint. I'll then turn it over to Chris and Jeff to review our commercial activity, project execution, financial performance, and outlook. With that, we delivered another strong quarter, and our year-to-date performance is enabling us to raise our 2026 adjusted EBITDA guidance, representing a 7% year-over-year growth at the midpoint. We are also reaffirming our 2027 adjusted EBITDA early outlook range. We continue to execute our pure-play natural gas-focused strategy, commercializing organic growth opportunities supported by strong customer demand. During the quarter, we reached FID on three new projects in our pipelines segment, increasing our total committed capital to approximately $2.4 billion, which represents 70% of our five-year organic project backlog.

Putting this in perspective, our total committed capital is approximately two times this year's adjusted EBITDA guidance and has increased by 50% within the last nine months. While we will formally update our backlog on our 2026 year-end call, the strength of demand across our footprint and our strong competitive positioning gives us confidence in the depth and durability of our organic growth opportunities. Turning to the market, the fundamentals supporting our long-term growth outlook remain very constructive. Natural gas remains a reliable, affordable, and abundant domestic energy source available at scale. Recent third-party forecasts project U.S. natural gas demand to grow by more than 25 Bcf per day through 2030, driven by growing LNG exports and increasing power demand as new generation is needed to replace retiring coal capacity and serve growing data center load. We see this demand growth extending well into the next decade.

On the LNG side, the ongoing geopolitical tension in the Middle East appears to be driving a long-lasting shift of global LNG sourcing towards the U.S., which will continue to add demand on the U.S. Gulf Coast. Moving to power demand, recent regulatory filings in the upper Midwest contemplate meaningful new natural gas generation in the early to mid-2030s. These fundamentals reinforce the need for additional natural gas infrastructure, and our strategically located gas pipeline footprint is well-positioned to serve this growth across the Midwest, Northeast, and Gulf Coast. As the need for new energy infrastructure continues to grow, we are encouraged by the bipartisan progress on permitting reform, including the recently introduced bipartisan American Affordability and Jobs Act, and we look forward to seeing continued progress following the elections towards a more efficient and predictable permitting process for our critical energy infrastructure.

We've also been monitoring the growing public and political debate surrounding the pace and impact of data center development. We have observed that the utilities we are contracting with are taking a thoughtful, long-term approach to engaging with local communities and ensuring reliability and affordability benefits for their existing customers. I'll now turn it over to Chris to walk you through our commercial activity and construction projects, which provide tangible evidence of how these demand fundamentals are translating into growth across our footprint.

Thanks, David, and good morning, everyone. As David indicated, the third quarter was another active quarter for us commercially, and we are announcing today that we've reached FID on approximately $0.4 billion of new organic growth projects. Unpacking the new projects, first is the MIST Southbound Phase 1 or MIST S1 expansion on Midwestern, which will serve incremental power generation demand in Southern Indiana. MIST S1 increases Midwestern's capacity by approximately 300 MMcf per day, which represents a 20% increase in the pipeline's total capacity and is supported by investment-grade utilities under 20-year negotiated rate contracts. The expansion involves a combination of incremental compression and looping and has an expected in-service date of Q4 2029. In addition to the mainline expansion, we have also reached FID on a pipeline lateral serving a new 900-megawatt power plant that is under development.

The lateral has a 20-year demand-based contract to serve a utility offtaker and is expected to be in service in the first half of 2028. Together, these projects demonstrate our ability to leverage the strategic location of our Midwestern pipeline to capture growth through both mainline and lateral investments, providing timely, competitive solutions for growing power demand while securing durable long-term contracted growth with high-quality customers. MIST S1 represents the latest milestone in the commercialization of the broader MIST opportunity. As a reminder, our initial non-binding open season was oversubscribed and gave us greater visibility into where and when customer demand is developing. We subsequently conducted a binding open season for the demand requiring capacity in 2029, which has led to today's FID announcement.

Our perspective on the broader MIST opportunity and the magnitude of potential investment has not changed, and we are now actively progressing the next phases to serve customer needs in the 2030 and 2031 timeframe. The next project we are moving forward with is the second phase of modernization on Guardian, which reflects the continued investment opportunities we see across our interstate pipelines to ensure reliability, and is expected to be in service in Q3 of 2030. The first phases of Guardian, Midwestern, and Viking modernization are advancing as planned, including the recent FERC approval of our Guardian rate case settlement, which provides recovery for Guardian's phase one modernization investment starting in mid-2027. Looking ahead, we continue to see meaningful future expansion opportunities across our footprint.

On Millennium, we recently launched an open season for the Ramapo Enhancement project, which is designed to provide additional capacity to serve growing demand in the Northeast, with a targeted in-service date in the fourth quarter of 2028. We are also progressing a broad set of other opportunities, such as the Vector 2030 expansion, the Guardian G4 expansion, and Haynesville system expansions, and we will keep you updated as they move forward. Turning to project execution, our Guardian G3 expansion project continues to advance on plan through the FERC certificate process, with an order expected in mid-2027. All of our other in-flight growth investments remain on track and on budget. Finally, operationally for the quarter, total gathering volumes were in line with our expectations, with the Haynesville averaging 2.17 Bcf per day and the Northeast averaging 1.25 Bcf per day.

Looking ahead to the fourth quarter, we expect Haynesville volumes to be in line with the third quarter and the Northeast volumes to be lower due to producer curtailments in October and the impact of downstream outages. With that, I will now pass it over to Jeff to walk you through our quarterly financials and outlook.

Thanks, Chris, and good morning, everyone. In the third quarter, we delivered adjusted EBITDA of $301 million, representing a $4 million decrease from the prior quarter. Our pipeline segment results were $2 million higher than the second quarter, driven by higher revenue from our joint venture pipelines. Gathering segment results were $6 million lower than the prior quarter, reflecting lower Northeast volumes. Looking to the remainder of the year, we expect the fourth quarter to be lower than the third quarter, driven by offline capacity and incremental expenses on Stonewall and, as Chris noted, lower Northeast volumes driven by producer curtailments. As David stated in his opening remarks, following our strong year-to-date performance and considering our expectations for the fourth quarter, we are raising our 2026 adjusted EBITDA guidance midpoint and narrowing the range to $1.185 billion-$1.225 billion.

In addition, we are reaffirming our 2027 adjusted EBITDA early outlook and plan to provide our formal 2027 guidance and 2028 early outlook on our year-end call. We are also raising our distributable cash flow guidance range to $860 million-$890 million. On the capital front, due to capital efficiency, we are reducing our 2026 growth capital range to $375 million-$425 million, which represents more than a 10% reduction to the midpoint of our range. With the stronger distributable cash flow and reduced capital expenditures, we expect year-end leverage to be approximately 2.8 times for on-balance sheet and approximately 3.4 times for proportionate. As Chris mentioned, DTM has approved investments in the MIST S1 pipeline expansion and a new power plant lateral, and we expect total investment to be $275 million-$325 million for these projects related to Midwestern at an attractive build multiple.

DTM has also approved investment in the phase 2 Guardian Pipeline modernization project, where we expect to invest $130 million-$150 million. We have increased our committed capital to reflect these new investments. 2027 is approximately $610 million, and total committed capital over 2026 and 2027 is approximately $1 billion. Finally, today we also announced that our board of directors approved our third-quarter dividend of $0.88 per share, unchanged from the prior quarter, and we remain committed to grow the dividend in line with adjusted EBITDA. I will now pass it back over to David for closing remarks.