Q2 2021 DT Midstream Inc Earnings Call

August 6, 2021

Welcome to the DT Midstream second quarter 2021 earnings conference call. At this time, all participants are in a listen only mode. After the speaker presentation. There will be a question and answer session to ask a question. During the session you will need to press star 1 of your telephone please be.

Advised that today's conference is being recorded if you were quiet you need further assistance. Please press star Zero I will now turn it all of the speaker today, Todd Lohrmann director of Investor Relations. Thank you. Please go ahead.

Yeah.

Todd Lohrmann: 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.

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.

And the CEO and Jeff <unk>.

Executive Vice President and CFO.

Now I'll turn it over to David to start the call.

David Slater: Thanks, Todd. Good morning, thanks, everyone, for joining us today. I'm very excited to be hosting our inaugural quarterly earnings call after a successful spin-off from DTE. We have been operating as a standalone company for just over a month now, and I am pleased to see our business continue its strong performance. I could not be happier with the job the team has done getting us to this point today. I'd like to personally thank the many people involved in our successful spin, including the employees of both DTM and DTE, the boards of both companies, and research analysts, along with debt and equity investors. Because of your contributions, we are well-positioned for continued success. Let's start on slide 3.

Thanks, Todd good morning, and thanks, everyone for joining us today I'm very excited to be hosting our inaugural quarterly earnings call. After a successful spin off from <unk>, we have been operating as a standalone company for just over a month now and I am pleased to see our business continue its strong performance.

Could not be happier with the job the team has done getting us to this point today.

I'd like to personally thank the many people involved in our successful spin, including the employees of both DPM and DTE the boards of both companies and.

And research analysts along with debt and equity investors.

Because of your contributions we are well positioned for continued success.

Let's start on slide 3.

David Slater: For the first half of the year, we delivered strong growth across both business segments and are on track to achieve our 2021 Adjusted EBITDA and operating earnings guidance with a bias to the upper end of both ranges. Our board of directors is officially in place, and yesterday approved our first quarterly dividend of $0.60 per share, which will be paid in the Q4 of this year. DTM announced dividend, when combined with that of DTE Energy, is delivering the higher combined dividend that we described pre-spin. We are also highly confident in our growth trajectory beyond 2021. We are affirming our 2022 early outlook for Adjusted EBITDA and increasing our 2022 early outlook for operating earnings. Let's turn to slide 4. As a standalone C corp, DTM offers a unique opportunity for investors.

For the first half of the year, we delivered strong growth across both business segments.

And are on track to achieve our 2021, adjusted EBITDA and operating earnings guidance with a bias to the upper end of both ranges. Our board of directors has officially in place and yesterday approved our first quarterly dividend of <unk> 60 per share, which will be paid in the fourth quarter of this year.

Announced dividend when combined with that of DTE energy is delivering the higher combined dividend that we described pre spin.

We are also highly confident in our growth trajectory beyond 2021, we are affirming our 'twenty 2 early outlook for adjusted EBITDA and increasing our 2022 early outlook for operating earnings.

Yes.

Let's turn to slide 4.

As a Standalone C Corp, <unk> offers a unique opportunity for investors.

David Slater: Our asset platforms are well-positioned to serve key markets from the two premier dry gas basins in the country, providing wellhead-to-market services. We have a clean balance sheet with low leverage and no significant maturities for 7 years, supporting our self-funded growth agenda. Our strong cash flow generation is underpinned by long-term take-or-pay contracts, and we are committed to a best-in-class ESG program with leading C corp governance and net zero carbon emissions by 2050. I'll now pass it over to Jeff, who will cover our financial results.

Our asset platforms are well positioned to serve key markets from the 2 premier dry gas basins in the country, providing wellhead to market services.

We have a clean balance sheet with low leverage and no significant maturities for 7 years.

Supporting our self funded growth agenda.

Our strong cash flow generation is underpinned by long term take or pay of contracts.

And we are committed to a best in class ESG program with leading C Corp, governance, and net zero carbon emissions by 2050.

I'll now pass it over to Jeff who will cover our financial results.

Jeff Jewell: Thanks, David. Good morning, everyone. I'll start on slide 5. We continue to deliver strong results from both business segments. Our first half 2021 Adjusted EBITDA of $384 million, which was $43 million higher year-over-year, roughly 50/50 between pipeline and gathering. Pipeline Adjusted EBITDA was $199 million, and gathering Adjusted EBITDA was $185 million. Our first half 2021 operating earnings were $174 million, which was $32 million higher year-over-year. The year-over-year increases in Adjusted EBITDA and operating earnings were driven by the in-service of LEAP gathering lateral pipeline and higher gathering volumes. Now let's turn to slide 6 and discuss the full year 2021.

Thanks, David and good morning, everyone I'll start on slide 5.

We continued to deliver strong results from both business segments. Our first half 2021, adjusted EBITDA of $384 million, which was $43 million higher year over year.

And was split roughly 50.50 between pipeline and gathering.

Pipeline adjusted EBITDA was $199 million.

And gathering adjusted EBITDA was $185 million.

Our first half of 2021 operating earnings were $174 million, which was $32 million higher year over year.

The year over year increases in adjusted EBITDA and operating earnings were driven by the in service of the leap of gathering lateral pipeline and higher gathering volumes.

Now, let's turn to slide 6 and discuss the full year 2021.

Jeff Jewell: Based on our strong year-to-date performance, we are reaffirming both our 2021 Adjusted EBITDA and operating earnings guidance, with the potential to be at the higher end of both guidance ranges. This year-over-year growth is driven by strong operational performance across our portfolio and includes offsetting a half year of new public company expenses. Moving to slide seven. Year-to-date distributable cash flow is driven by strong performance across both segments. We are revising our 2021 capital guidance range to be $205 million to $230 million, due to cost efficiency and a small amount of project timing. Our five-year growth agenda of $1.2 billion to $1.7 billion remains unchanged. We have significant financial flexibility with our cash flows, and we will allocate to maximize value for our shareholders. Moving on to the next slide to talk about 2022.

Based on our strong year to date performance, we are reaffirming both our 2021 adjusted EBITDA and operating earnings guidance with the potential to be at the higher end of both guidance ranges. This year over year of growth is driven by strong operational performance across our portfolio.

It includes offsetting a half year of new public company expenses.

Moving to slide 7.

Year to date distributable cash flow was driven by strong performance across both segments.

We are revising our 2021 capital guidance range to be $205 million to $230 million.

Due to cost efficiencies and a small amount of project timing.

Our 5 year growth agenda of $1.2 billion to $1.7 billion remains unchanged.

We have significant financial flexibility with our cash flows.

And we will allocate to maximize value for our shareholders.

Moving on to the next slide to talk about 2022.

Jeff Jewell: Looking ahead to 2022, we are highly confident in achieving our growth targets. We expect 2022 Adjusted EBITDA to be between $755 million and $795 million, representing 5% to 7% growth from 2021 guidance, which includes offsetting a full year of public company costs. We now expect 2022 operating earnings to grow in line with Adjusted EBITDA, driven by interest expense favorability. Therefore, we are raising our outlook for 2022 operating earnings to $314 million to $330 million. I'll now turn it back over to David.

Looking ahead to 2022, we are highly confident in achieving our growth targets.

We expect 2022, adjusted EBITDA to be between $755 million and $795 million.

Representing 5% to 7% growth from 2021 guidance.

Which includes offsetting a full year of public company costs.

We now expect 2022 operating earnings to grow in line with adjusted EBITDA driven by interest expense favorability.

Therefore, we are raising our outlook for 2022 operating earnings to $314 million to $330 million.

I'll now turn it back over to David.

David Slater: Thanks, Jeff. Moving on to slide 9. In Q2 2021, we gathered over 2.5 Bcfd of production volumes, representing 3% overall growth from the prior quarter. Growth in the Haynesville was driven by higher production volumes on Blue Union, and the system recently hit a record high for volumes during the month of July. In the Northeast, we saw strong volume growth on the Appalachia Gathering System, which offset declines in other gathering areas. As you know, our portfolio has high contributions from contracted take-or-pay agreements, which minimize the impact of volumes on results. Let's turn to slide 10, and I'll discuss why we are so confident in our 2022 growth.

Thanks, Jeff moving on to slide 9.

The second quarter of 2021 would gathered over 2.5 Bcf a day of production volumes, representing 3% overall growth from the prior quarter.

In the Haynesville was driven by higher production volumes on Blue Union.

And the system recently hit a record high for volumes during the month of July.

In the North East, we saw strong volume growth on the Appalachia gathering system, which offset declines in other gathering areas.

As you know our portfolio of has high contributions from contracted take or pay agreements, which minimize the impact of volumes on results.

Let's turn to slide 10, and I'll discuss why we are so confident in our 2022 gross.

David Slater: We continue to see strong organic growth into 2022, and the number of assets are delivering highly accretive growth, including contracted growth on LEAP, and higher rates and longer contract terms on NEXUS. Also, we continue to support growing production from our producer base with contract expansions on Appalachia Gathering, contracted treating and gathering expansions on Blue Union, and new third-party expansions. In summary, we are highly confident in our 2022 growth. Moving to slide 11. Looking beyond 2022, our commercial team has been busy developing and executing multiple transactions to solidify accretive growth. We have made significant progress in achieving our strategic priorities, which includes adding new counterparties to enhance portfolio diversification, extending the portfolio contract tenor across both segments, and increasing contract rates. At Blue Union, we have executed agreements with 4 new counterparties.

We continue to see strong organic growth into 2022.

And the number of assets are delivering highly accretive growth, including contracted gross on leap and higher rates on longer contract terms on nexus.

Also we continue to support growing production from our producer base.

With contracted expansions on Appalachia gathering contracts of treating and gathering expansions on Blue Union.

And new third party expansions.

In summary, we are highly confident in our 22 growth.

Moving to slide 11.

Looking beyond 2022 of our commercial team has been busy developing and executing multiple transactions to solidify accretive growth.

We have made significant progress on achieving our strategic priorities, which includes.

Adding new counterparties to enhance the portfolio diversification.

Extending the portfolio of contract tenure across both segments and.

An increase in contract rates.

I believe the Union, we have executed agreements with 4 new Counterparties.

David Slater: A strong supply and demand fundamentals in the Haynesville and Gulf Coast improve the value of our assets. We continue to extend contract tenors across the portfolio. At our Appalachia Gathering System, we extended about one-third of the capacity for five years with two shippers. Emerging constraints in Appalachia have led to improved Nexus rates and contract tenors. Millennium has also benefited with contract renewals. Nexus has also completed two new market lateral connections. In Michigan, we received a positive regulatory ruling to convert and expand a portion of our gathering assets to serve DTE Gas. Now let's turn to slide 12, and I'll wrap up the call. In summary, we are on track for a strong 2021. We delivered great first half results and expect to be at the upper end of our Adjusted EBITDA and operating earnings guidance ranges.

Strong supply and demand fundamentals in the Haynesville and Gulf coast improve the value of our assets.

We continue to extend the contract tenders across the portfolio.

At our Appalachia gathering system, we extended about 1 third of the capacity for 5 years with 2 shippers.

The emerging constraints in Appalachia have led to improved nexus rates and contract tenders and millennium has also benefited with contract renewals.

Nexus is also completed 2 new market lateral connections.

In Michigan, we received a positive regulatory ruling to convert and expand a portion of our gathering assets serve DTE gas.

Now, let's turn to slide 12, and I'll wrap up the call.

In summary, we are on track for a strong 2021, we.

We delivered a great first half results and expect to be at the upper end of our adjusted EBITDA and operating earnings guidance ranges.

David Slater: We are also well positioned for continued distinctive growth into 2022. With that, we can now open up the line for questions.

We are also well positioned for continued distinctive growth into 2022.

And with that we can now open up the line for questions.

Rachel Smith: As a reminder, to ask a question, you will need to press star one on your telephone. Again, that is star one to ask a question, and we'll pause for a moment to compile the Q&A roster. Our first question comes from the line of Jeremy Tonet of JPMorgan.

And as a reminder to ask a question you will need to press star 1 of your telephone again by the Star 1 to ask a question on we'll pause for a moment to compile the Q&A roster.

Operator: As a reminder, to ask a question, you will need to press star one on your telephone. Again, that is star one to ask a question, and we'll pause for a moment to compile the Q&A roster. Our first question comes from the line of Jeremy Tonet of JPMorgan.

And your first question comes from the line of Jeremy Tonet of Jpmorgan.

Jeff Jewell: Hi, good morning.

Hi, good morning.

David Slater: Good morning, Jeremy.

Good morning, Jeremy.

Jeremy Tonet: ... I just wanted to start off kind of, you know, given the recent move up in gas prices, I'm wondering if you could provide a bit more detail on your producer-customer conversations and, you know, what reactions you might see, maybe not this year, but in, you know, going into 2022, response to these kind of higher prices, if producers are looking to drill a bit more in your footprint or what you're hearing?

Just wanted to start off kind of.

Given the recent move up in gas prices I'm wondering if you could provide a bit more detail on your producer customer conversations in what reactions you might see maybe not this year, but in it you know going into 2022 response to these kind of higher prices. If the producers are looking to drill.

A bit more on your footprint of what you're hearing.

Sure Jeremy let me provide some color around that.

David Slater: Sure, Jeremy, let me provide some color around that. I'll start off at, at the highest level. This higher price environment is supportive to all of our producer customers, and is going to, you know, increase their cash flow and improve their balance sheets. We've been watching the Q2 announcements, probably just like y- your team has been, and we're definitely seeing for the publics, you know, this continued disciplined approach to them deploying capital, ensuring that they have positive free cash flow and a continued trend to improve their balance sheets. We think that's very favorable for the sector. That provides a stronger foundation in the sector. It certainly improves our, our, our customers' financial position and financial rating over time, so we view that as very positive.

So I'll start off at the highest level this higher price environment is supportive to all of her.

Producer customers and is going to increase their cash flow and improve their balance sheets.

We've been watching the Q2 announcements probably just like your team has been and.

We're definitely seeing for the publics.

The discontinued disciplined approach to them deploying capital.

Ensuring that they have.

Positive free cash flow and a continued trend to improve their balance sheets, we think thats very favorable for the sector of that provides a stronger foundation in the sector. It certainly improve.

Improves our customers' financial position and financials.

Rating overtime, so we view that as very positive.

David Slater: We continue to see growth in our portfolio in the public sector, and that's what I'll call a disciplined growth, Jeremy. The private side of our business is a little different. I think we see more activity happening inside our portfolio on the private side, and some of that, you know, we've talked about here on the call already, in terms of some of the new contracting that we've done. There seems to be a little bit of a different behavioral response on the private side. They seem to be more inclined to accelerate activity into this stronger price deck. We view this very favorably and believe this will be very supportive for our business longer term.

We continue to see gross in our portfolio in the public sector and <unk>.

And that's what I'll call of disciplined growth on Jeremy.

The private side of our business is a little different.

We see more.

Activity happening inside of our portfolio on the private side and some of that we've talked about here on the call already in terms of some of the new contracting that we've done but there seems to be a little bit of of different behavior of response on the private side they seem to be more inclined to.

Accelerate activity into this stronger price deck, but we view.

We view this very favorably and believe this will be very supportive for our business longer term.

Jeremy Tonet: Got it. That's very helpful there. Then just wanted to kind of pivot towards capital allocation philosophy, and this being kind of the first call, just wanted to have you guys walk us through how you think about, you know, a CapEx versus, you know, return to shareholders versus deleveraging. How do you see these different, you know, competing asks on capital?

Got it that's very helpful. There and then.

Just wanted to kind of pivot towards capital allocation philosophy, and this being kind of the first call. Just wanted to have you guys could walk us through how you think about.

You know capex versus.

We returned to shareholders versus deleveraging how do you see these different <unk>.

Competing.

Asked on capital.

David Slater: Yeah, great question, Jeremy. You know, we have a really robust growth agenda in front of us right now, and it's coming primarily from organic opportunities on and around our existing footprint. You know, we're in a really good spot in terms of having a clean balance sheet and have a clear line of sight around growth that'll be self-funded with our cash flow, which naturally will de-lever us over time. So, you know, we feel really positive right now about deploying capital to growth projects that meet that very disciplined, you know, investment criteria that we've talked to you about in the past. To the extent that projects don't meet that criteria, we will look at deploying that capital in other ways to maximize shareholder value.

Yeah, Great question Jeremy.

We have a really robust.

Growth agenda in front of US right now and it's coming primarily from <unk>.

Organic on opportunities on and around our existing footprint.

We're in a really good spot in terms of having a clean balance sheet.

And have a clear line of sight around gross that'll be self funded with our cash flow, which naturally will delever us over time.

So we feel really positive right now about deploying capital to growth projects that meet the.

That very disciplined.

Investment criteria that we've talked to you about in the past.

To the extent debt projects don't meet that criteria.

We will look at deploying that capital in other ways to maximize shareholder value and those options are either true.

David Slater: You know, those options are, you know, either through an accelerated delevering or through a mechanism to return more cash to the shareholders. Again, we're always going to look at this to maximize shareholder value in the long term. We feel very blessed and fortunate that we have a really robust portfolio of opportunities in front of us that we believe will deliver returns that'll be very favorable for the shareholders.

On an accelerated delevering or through a mechanism to return more cash to the shareholders. So again, we're always going to look at this to maximize shareholder value in the long term.

And we feel very blessed and fortunate that we have of really.

Robust portfolio of opportunities in front of us that we believe will deliver.

Returns that'll be very favorable for the shareholders.

Got it that's helpful. It seems like that.

Jeremy Tonet: Got it. That's helpful. Seems like that lends itself to continued deleveraging as well, given the retained cash flow, so helpful there. Just wanted to see, I guess, the last one real quick. The amine treaters that you guys have in the Haynesville, seems like that might lend itself towards some CCS opportunities there. Wondering if you might be able to talk about that a bit.

Lends itself to continue deleveraging as well given the retained cash flow so helpful. There.

Just wanted to see I guess, the last 1 real quick on the amine trader treaters that you guys have in the Haynesville. It seems like that might lend itself towards some ccs opportunities. There I'm wondering if you might be able to talk about that a bit.

Yes, sure Ken Jeremy.

David Slater: Yeah, sure can, Jeremy. You know, I think as we've said previously, we are very actively pursuing, you know, investment opportunities in what I'll call a lower carbon future. Our situation in the Haynesville with the amine treaters, I think puts us in a very good position to develop a CCS project down in the Haynesville. We're actively working on that. It's probably too early to get into the specifics, but, you know, we view that as an area of focus here over the next 6 to 12 months to get a project like that off the ground. We are also looking at projects up in Michigan, sort of a similar structured project around CCS.

I think as we said previously we are very actively pursuing.

The investment opportunities in what I'll call of lower carbon future.

<unk>.

Yes, our situation in the Haynesville with the aiming treaters.

I think puts us on a very.

Good position too.

Develop the Ccs project down in the Haynesville, we're actively working on that it's probably too early to get into the specifics but.

We view that as.

As an area of focus.

Here over the next 6 to 12 months to get a project like that off the ground. We are also looking at projects up in Michigan.

Sort of a similar structured project.

Around Ccs so.

David Slater: That is an area that is getting a lot of attention inside our organization right now, and I feel that it aligns a lot of our natural assets and competencies. It's right in our geographic footprint, and it's right inside our competencies in terms of being able to capture CO2, pipe it, and store it. More to come on that, Jeremy, as the project advances, but definitely an area of focus for us.

That is an area that debt is getting a lot of attention inside of our organization right now and.

I feel that it aligns a lot of our natural.

Assets on competencies, it's great in our geographic footprint and it's right inside of our competencies in terms of.

Being able to capture Cotwo and stored.

So more to come on that Jeremy as the project advances, but definitely an area of focus for us.

Jeremy Tonet: Got it. That's very helpful. I'll leave it there. Thank you.

Got it that's very helpful. I'll leave it there. Thank you.

Rachel Smith: Your next question comes from the line of Fabrio Nunes of Credit Suisse.

And your next question comes from the line of snap on.

Operator: Your next question comes from the line of Fabrio Nunes of Credit Suisse.

Credit Suisse.

[Analyst] (DT Midstream): Hey, morning, team. Congrats on the spin-out. David or Jeff, maybe just want to start with growth CapEx. Took a pretty meaningful reduction this Q1 out. Yet you were still able to maintain that 2022 EBITDA growth target. Just curious, yeah, I know you mentioned optimization and some timing there, but maybe a little more color on the exact nature of that reduction and how you're able to still maintain the growth outlook.

Hey, good morning team and congrats on the spin out.

David of Jeff, maybe just to start with the growth Capex took a pretty meaningful reduction in this first quarter out.

You were still able to maintain net 2022 EBITDA growth target. So just curious I know you mentioned optimization and some timing there, but maybe a little more color on the exact nature of that reduction and how you're able to still maintain the growth outlook.

David Slater: Yeah, sure, Ken. You know, it, it was a very modest reduction. I think we, we pulled it back around $40 million or so. It's really real simple. It's just some timing, and some of the projects are coming in under budget right now and still delivering the EBITDA. You know, I think, I think the way I look at it is, you know, we're delivering really strong EBITDA growth next year with a very accretive deployment of capital to generate that.

Yes sure Ken.

It was a very modest reduction I think we've pulled it back around $40 million or so.

It's really real simple, it's just some timing and some of the projects are coming in the under under budget right now and still delivering the EBITDA. So.

I think I think the way I look at it is we're delivering really strong EBIT growth next year.

The very accretive deployment of capital.

To generate debt.

[Analyst] (DT Midstream): Perfect. Second one, sticking with the CapEx theme, looking out the, the sort of five-year range of $1.2 to 1.7 billion. Two-part question here. First, what's going to determine the high or low end of that range? Second, when you think about what that range represents, are these projects that are in sort of various stages of development that are very visible to you, or are these more aspirational in nature? Is this a target you think you need to hit to develop and grow at a certain rate?

Perfect second 1 sticking with the Capex theme, but looking at the sort of 5 year range of $1.2 to $1.7 billion. A 2 part question here. So first what's kind of determine the higher low end of that range and then second when you think about what that range represents are these projects that aren't sort of various stages of <unk>.

<unk> made of very visible to you or are these more aspirational in nature or is this the target you think you need to hit to develop and grow at a certain rate.

David Slater: Yeah, I'd say the projects that are very visible to us right now, which, you know, probably play out over the first three or four years of that five-year plan, would be LEAP expansion, which, you know, we're in very active conversations around a LEAP expansion. We continue to see expansions in a number of our gathering platforms, both in the Haynesville and in Appalachia. We continue to see really robust, you know, inbound inquiries on lateral expansions across our pipeline network, you know, particularly up in the north. I think we, we, we referenced a few in the deck where, you know, NEXUS is bringing and building two more connections to markets, connections.

Yes, I would say the projects that are very visible to us right now, which probably play out over the first 3 or 4 years of that 5 year plan would be leap expansion, which.

We're in very active conversations around the leap expansion.

We continue to see.

Expansions in a number of our gathering platforms, both in the Haynesville and in Appalachia.

And we continue to see really robust.

Hi.

Inbound inquiries on lateral expansions across our pipeline network.

Particularly up in the north and I.

I think we referenced a few.

In the deck.

<unk> is bringing a building to more connections to the market connections, but we continue to see a really strong.

David Slater: We continue to see a really strong lateral business developing around our asset footprint in the north. You know, much like the Birdsboro project that's currently in the portfolio. Those, I'd say, are the three areas that are very visible to us, and we're very active in the development cycle, that will absorb, you know, large portions of that capital agenda. Yeah, I'm just trying to give you a little color here to directly answer your question, but those are the areas that we will deploy capital around.

The lateral business developing.

Round of our asset footprint in the north much like the <unk> project is currently in the portfolio.

And so those I'd say those are the 3 areas that are very visible to us and we're very active in the development cycle that will absorb.

Large portions of that capital agenda.

<unk>.

Yes, I'm just trying to give you a little color here.

Directly answer your question, but those are the areas that we will deploy capital around.

[Analyst] (DT Midstream): Great. That's helpful color. I'll leave it there. Have a good weekend, guys.

Great.

The color I'll leave it there having the weekend guys.

David Slater: Great. Thank you.

Great. Thank you.

Rachel Smith: Your next question comes from the line of Robert Moskow from Mizuho.

Operator: Your next question comes from the line of Robert Moskow from Mizuho.

Your next question comes from the line of Robert Moskow from Mizuho.

Robert Moskow: Hi, everyone. Thanks for taking my question. Just on those newly executed Blue Union agreements, were any of those signed in QQ? Is there anything you can provide in the way of volume expectations or perhaps the potential to route those volumes onto LEAP eventually?

Hi, everyone. Thanks for taking my question.

Just on those newly executed Blue Union agreements, where any of those signed in <unk> and is there anything you can provide in the way of volume expectations of perhaps the potential to route those volumes on to leap eventually.

David Slater: Yeah, Rob, great question. Yeah, those, those agreements are very hot off the press. In aggregate, there's 150 million a day of commitments amongst those counterparties. The Diversified piece is just a allocation of capacity from Indigo to Diversified. The three others that are, what I'll call truly incremental, represent about 150 million a day of capacity. Yes, we expect, at least in the near term, much of those volumes, if not all of those volumes, to flow on LEAP.

Yeah, Rob Great question, Yes, those of those agreements are very hot off the press.

In aggregate Theres 150 million of day of.

Commitments.

Those counterparties the diversified piece is just the allocation of capacity from indigo to diversified so the 3 others that are.

What I'll call truly incremental represent about 150 million a day of.

The capacity in and yes, we expect at least in the near term.

Sure.

Much of those volumes, if not all of those volumes to flow on the leap.

Robert Moskow: Got it. Okay, that's, that's helpful. Then on the- with respect to the shift that you're seeing in some of the Northeast gathering volumes, just curious to hear what's driving the growth in Appalachia and presumably, decline on Susquehanna. Is that just producers electing to shift production to more NGL-rich areas? Anything you can provide would, would be helpful.

Got it okay. That's helpful.

And then on the with respect to the shift that Youre seeing in some of the northeast gathering volumes just curious to hear what's driving the growth in Appalachia and presumably the decline on Susquehanna is that just producers electing the ship production to more NGL rich areas.

Provide would be helpful.

David Slater: Yeah, I think it's more just timing. Timing of how people's growth plans have played out over the year. We're definitely seeing growth on AGS, and AGS is a dry system, so it's, it's dry Appalachia production. Susquehanna is probably going to be flat. I'm gonna, you know, say flat this year. Swinn will be holding production there. In the other gathering assets in the north, so the Michigan assets, Tioga, we did see some declines there, and that's sort of why Appalachia in aggregate was relatively flat when you kind of put all those numbers together. We're seeing really, you know, really encouraging growth in the Haynesville. The Haynesville system, we hit a high this month on the, on the Haynesville, the Blue Union system, which is very encouraging.

Yes, I think it's more just timing timing of how people's drill plans of played out over the.

Over the year. So we're definitely seeing gross on Ags and Ags's of dry system. So it's dry Appalachia production.

Susquehanna is probably going to be flat say flat this year, when we'll be holding production there.

And then in the other gathering assets in the north so the Michigan assets Tioga, we did see some declines there and thats sort of why Appalachia in aggregate was relatively flat.

When you kind of put all of those numbers together and then we're seeing really really encouraging growth in the haynesville.

The Haynesville system.

We hit a high this month on the on the Haynesville to book the Union system, which is very encouraging.

David Slater: you know, we're very, very happy with the gathering results we're seeing. We're running ahead of plan in both segments, both the pipeline segment and the gathering segment.

And.

David Slater: you know, we're very, very happy with the gathering results we're seeing. We're running ahead of plan in both segments, both the pipeline segment and the gathering segment.

We're very happy with the gathering results we're seeing.

And we're running ahead of plan in both segments of both the pipeline segment net of the gathering segment.

Robert Moskow: Okay, great. Yeah, and that's all the questions I had. Thank you.

Okay, great yes.

All the questions I had thank you.

Rachel Smith: Your next question comes from the line of Jean Salisbury of Bernstein.

Operator: Your next question comes from the line of Jean Salisbury of Bernstein.

Your next question comes from the line of Jean Ann Salisbury of Bernstein.

Jean Ann Salisbury: Hi, good morning. Just a couple about your assets. Appreciate the Haynesville kind of 1.23 Bcfd, gathering volume that, that you disclosed. I think that you've said that the capacity of that gathering system is 2 Bcfd. I guess my question is, is the way to think about it, that you can basically grow another 0.8 Bcfd with, with very little CapEx, maybe some well connect CapEx, but other than that, the backbone's already there?

Hi, Good morning, just a couple of about your asset. So I appreciate the Haynesville kind of 1.3 bcf the gathering volume that you disclosed.

I think that you said that the capacity of that gathering system is to the cfd. Thank you.

The question of kitchen is the way to think about it that you can basically grow another 8 Bcf D with very little Capex, maybe some well connect capex, but other than that the backbones already day.

David Slater: Yeah, good morning, Jean. I, the, the Blue Union system is, is a complex gathering system, so I, I, I wouldn't simplify it the way you described it. What I will say is that we're always looking to make sure that we optimize all of our systems such that, you know, they're creating the maximum accretion possible, to the company. As that system gets built out, there certainly is open runway, in, in pockets and, and areas in that system that we expect, Indigo or, or Swin, to be utilizing as, as they continue to drill, the acreage.

Yes, good morning gene.

The Blue Union system is a complex gathering system so I.

I Wouldnt simplify it the way you described it well.

What I will say is that we're always looking to make sure that we optimize all of our systems such debt.

They are creating the maximum of accretion possible to the company.

As that system gets built out.

There certainly is open runway.

In pockets in areas in that system that we expect indigo or swim.

To be utilizing as they continue to drill the acreage, but I do expect we will continue to see expansions.

David Slater: I do expect we will continue to see expansions in Blue Union, especially in some of the areas, the most economic resource areas where, you know, if, you know, if, if you, you know, rationally are deploying capital, you would tend to deploy at first, the very best rock. Those areas of the system will attract a lot of drilling attention, and as such, may require expansions over time.

In Blue Union, especially in some of the areas.

The most economic resource areas, where.

Yes.

Were actually are deploying capital you would tend to deploy it first the very best rock.

And those areas of the system will attract a lot of drilling attention.

<unk>.

And as such May require expansions over time.

Jean Ann Salisbury: Okay. That makes sense. Then just wanted to ask about the new contracts for the 165 on Nexus. My understanding on Nexus was that it was originally built to be 1.5 Bcfd, but then you could only flow 1.2 Bcfd because you didn't have enough market demand. Is this 165 kind of incremental to that 1.2, so because of the market connections that you discussed, so it'd sort of be flowing like over 1.3, between 1.3 and 1.4? Is that the right way to think about it, or is it like some of the 1.2 rolled off and got replaced by the 165?

Okay that makes sense.

And then just wanted to ask about the on the new contracts for the 165 on Nexus.

Spending on <unk> was that it was originally built to be 1.5 bcf. The but then you can only flow 1.2 bcf a day you didnt have enough market demand is this 165 kind of incremental to that 1 too because of the market connections that you discussed the sort of equally like everyone..3 equivalent of my grandson play Alright, that's the right way to think about it or is it like kind of the 1 point.

The road mapping our placement of sites.

David Slater: Yeah, let me help with that. First off, just let's just level set what the capacity is on NEXUS. The 1.5 that you are referencing was the original capacity design early in the project life cycle. We elected not to construct one of the compressor stations.

Yes, let me help with us.

First off just.

Let's just level set what the capacity is on Nexus. So the 1.5 that you were referencing was the original capacity design early in the project lifecycle, we elected not to.

Construct 1 of the compressor stations so the actual net the actual nameplate capacity on the <unk>, 1.3 and change.

Jean Ann Salisbury: Okay.

David Slater: The actual nameplate capacity on Nexus is 1.3 and change. That, you know, that's just kind of point number one. I'd say point number two on the incremental 165, we're really encouraged by that contracting activity that's occurred over the last couple months. We're seeing strong price signals coming out of Appalachia. We're seeing, you know, rate expansions on all those longer term contracts. There's a nice suite of customers that are primarily investment-grade customers that stepped into that capacity.

So that's just kind of point number 1 I'd say point number 2 on the incremental 165. So we're really encouraged by that contracting activity. That's occurred over the last couple of months.

It's a strong well.

We're seeing strong price signals coming out of the Appalachia, we're seeing.

Rate expansions on all of those longer term contracts.

And there is a nice suite of customers that are primarily investment grade customers the stepped into that capacity.

David Slater: The way to think about it is, that portion of the capacity that we didn't sell long term with anchor agreements that we have been selling seasonally and annually, we're simply taking those agreements and extending those out long term and reducing the amount of capacity that we've been managing in the, in the, you know, annual market. The fundamentals that are playing out will, I expect the team will continue to contract and extend the contract term at favorable rates, just given the dynamics of the market right now. We're seeing tremendous inbound interest on that NEXUS capacity. I'd say we are probably the only exit pipe in Appalachia that has material capacity to offer the market right now.

So the way to think about it is that portion of the capacity that we didn't sell long term with anchor agreements that we have been selling seasonally and annually.

Simply taking those agreements and extending those over the long term and reducing the amount of capacity that we've been managing in the in the annual market.

And.

The fundamentals that are playing out.

Will.

I expect the team will continue to.

Contract and extend the contract term at favorable rates just given the dynamics of the market right now we're seeing tremendous inbound interest on that in excess of capacity I'd say, we are probably the only.

Type in Appalachia that has the material capacity it off of the market right now.

Jean Ann Salisbury: Okay. On this 165, that's not really incremental, like, flows, it's just replacing seasonal with, with contracted, which I agree is, is very good, but there's still more that you could add if there was a market for it by adding a compressor station in the future. Is that the right way to think about it?

Okay. So on this 165, that's not really incremental like flow just replacing the seasonal lift in fact of it which I agree it's very good but there's still more that you could add there with the market for it by adding of compressor station in the future.

Got it yeah, that's exactly how to think about it.

David Slater: Yeah, that's exactly how to think about it. You know, that station that we chose not to build, we could certainly build it and create incremental capacity out of the basin. That certainly is something that the team is looking at and evaluating continuously, so.

So that station that we chose not to.

Build we could certainly build it and create incremental capacity out of the basin.

And that certainly is something that the team is looking at and evaluating continuously.

Continuously so.

Jean Ann Salisbury: Perfect. Thank you so much for talking to me.

Okay. Thank you so much of the company.

Rachel Smith: As a reminder, to ask a question, you will need to press star one. Your next question comes from the line of Sunil Sibal of Seaport Global.

And as a reminder to ask a question you will need to press star 1.

Operator: As a reminder, to ask a question, you will need to press star one. Your next question comes from the line of Sunil Sibal of Seaport Global.

And your next question comes from the line of Sunil Sibal of Seaport Global.

Sunil Sibal: Yeah, hi, good morning, everybody, and thanks for the color. I just had a couple of follow-ups from previous questions. First, on the recent contract that was signed in Haynesville, could you give us a sense of, you know, what kind of rates you're seeing on these new contracts versus what you had previously?

Yes, hi, good morning, everybody and thanks for the color. So I just had a couple of follow ups from previous questions. So first on the recent contract that the same.

In the in Haynesville could you give us a sense of.

What kind of.

You are seeing on these new contracts versus what you have.

Previously.

David Slater: Yeah. Maybe I'll just keep it at a high level. Number 1, we're really encouraged by bringing those new third parties onto the system. That was one of our strategic priorities and opportunities that we saw when we did the acquisition, you know, over 2 years ago. With, with the activity that's in the Haynesville right now, you know, 55 rigs running in the Haynesville, we're seeing a lot of robust activity. At this time, we, we, we will not be providing more public information on the details around those contracts, just given the nature of the competitive environment in Haynesville. As I said earlier, you know, the, the, the contract MDQs in aggregate are 150 million a day.

Yes.

Maybe I'll just keep it at a high level. So number 1 we're really encouraged by bringing those new third parties onto the system that was 1 of our strategic.

Priorities and opportunities that we saw when we did the acquisition.

Over 2 years ago.

With the activity that's in the Haynesville right now.

55 rigs running in the Haynesville, we're seeing a lot of robust activity. So at this time, we will not be providing more public information on the details around those contracts just given the nature of the competitive environment in the Haynesville.

But as I said earlier the.

The contract empty accused in aggregate are 150 million of day and.

David Slater: Those three incremental parties, Rockcliff, Comstock, and Tellurian, are all actively growing, and I think have been public about their growth aspirations. We're very happy to have them as customers, and certainly want to work closely with them as their plans solidify and grow over time.

Those 3 incremental parties.

Rock Cliff.

Comstock and Clarion are all actively growing and I think have been public about their growth aspirations. So we're very happy to have them as customers.

And certainly want to work closely with them as their plans solidify and grow over time.

Yeah.

Sunil Sibal: Understood. Just pivoting to their ESG goals. I realize that, you know, you've got some existing assets which fit, fit well with the CCS technology. I was just kind of curious if you had, you know, looked at some other alternative kind of technologies in addition to amine treating, in terms of taking out CO2 from the gas stream and, if you have any thoughts there?

Understood.

Then just pivoting to the ESG goals.

Realized debt you've got some of existing assets.

With the <unk>.

Yes.

The technology I was just kind of curious.

We had looked at some of the alternative.

The kind of technologies.

I mean trading in terms of taking out the C.

You're too from the gas stream and can you talk to the.

David Slater: You know, as we think about, you know, I guess I'm gonna just back up one second here. When we think about our aspirations to be net zero by 2050, and look across our footprint, you know, where our emissions are, certainly the emissions in the Haynesville are, is an area of focus, and thus why there's great, there's a great opportunity there for CCS for us, and that's gonna be our primary area of focus. You know, there's lots of other opportunities across our portfolio to reduce our footprint, you know, both, you know, when we look at pipeline expansions using electric compression and making sure we have a clean source of electricity to power that electric compression. That's certainly something that we're evaluating very closely across our footprint.

As we think of boats.

I guess I'm going to just back up 1 second here when we think about our aspirations to be net zero by 2050 and look across our footprint.

Where our emissions are certainly the the emissions on the Haynesville or is an area of focus and Thats why there is great.

There is of great opportunity there for Ccs force and Thats going to be on primary area of focus.

But there's lots of other opportunities across our portfolio to reduce our footprint.

Both when we look at.

Pipeline expansion using electric compression and making sure we have a clean source of electricity to power of that electric compression.

Thats certainly something that we're evaluating very closely across your footprint.

David Slater: We're also having lots of conversations with different parties related to hydrogen and how hydrogen can be used inside the current footprint, as well as with some of our large industrial customers, their desire to explore a hydrogen blend for their feedstock. We've got a lot of different areas that we're exploring right now. It's early days, but, you know, it's a very exciting development. You know, we wanna be part of that in North America, and we, you know, I really want DTM to establish a position in what I'll call utilizing our assets around a lower carbon footprint in the future. A very exciting developing area. There's gonna be lots of new technologies, I think, that, that come around.

We're also having lots of conversations with different parties related to hydrogen.

And how hydrogen can be used inside of the current footprint as.

As well as the some of our large industrial customers their desire to explore of hydrogen blend for their feedstock.

So we've got a lot of different areas that we're exploring right now it's early days, but.

It's a very exciting development.

We want to be part of that in North America, and I really want <unk> to establish a.

Our position in what I'll call utilizing our assets around the lower carbon footprint in the future. So very exciting developing area of theres going to be lots of new technologies I think come around my perspective on this from a strategic perspective is.

David Slater: My perspective on this from a strategic perspective is, you know, we wanna use proven technology that exists today, so we don't carry large amounts of technological risk as we deploy capital. Again, that's why some of our priorities are really around what I'll call proven technology, and CCS is one of those areas.

We want to use proven technology debt.

That exists today, so we don't carry large amounts of technological risk.

As we deploy capital on again, that's why some of our priorities are really around what I'll call proven technology in Ccs is 1 of those areas.

Sunil Sibal: Understood. One kind of follow-up on that. The capital outlay, that $1.2 to 1.7 billion that they have laid out, could you give us a sense of, you know, how much of these ESG evaluations that you're doing are a component of that, or is it a potential or meaningful upsize on that capital spend if some of these things that you're evaluating would get to FID?

Understood 1 kind of follow up on that so the capital outlay of debt $1..2 parts of that 1 billion net laid out could you give us a sense of.

You know how much of these ESG evaluations that you are doing of the component of that potential.

Good day meaningful upside is on that capital spend if some of these things that you're evaluating.

Get to if I D.

David Slater: Yeah, the way I would think about it, in terms of that capital agenda, I would think about it that some of that capital agenda will get deployed into these new emerging areas, and it's. At this point, I wouldn't describe it as incremental per se. You know, I think as we get a little further along and start to move these projects forward and firm them up, we will certainly be updating you on our thinking around that. Yeah, that's a great question. You know, how much of that will go towards what I'll call this new platform? It's just a little early to really provide detailed guidance on that, but as we mature, we'll definitely be providing that to the investors.

Yes, the way I would think about it in terms of that capital agenda, I would think about it debt some of that capital agenda will get deployed into these new emerging areas and it's at this point I wouldn't describe it as incremental per se.

I think as we get a little further along.

And start.

The start to move these projects forward in firm them up.

We will certainly be updating you on our thinking around that.

But yeah, that's a great question.

How much of that will go towards what I'll call. This new platform.

And it's just a little early to really provide detailed guidance on that but.

As we mature we will definitely be providing that to the investors.

Sunil Sibal: All right. We'll stay tuned. Thanks for taking my questions.

Alright, we will stay tuned thanks for taking my questions.

David Slater: Thank you. Appreciate that.

Thank you I appreciate that.

Rachel Smith: There are no further questions at this time.

And there are no further questions at this time.

Operator: There are no further questions at this time.

David Slater: Well, thank you. Just wanna thank everybody for joining us today, and please stay safe and have a great weekend.

Well, thank you and.

Just want to thank everybody for joining us today and please stay safe and have a great weekend.

Rachel Smith: This concludes today's conference call. Thank you for participating. You may now disconnect.

And this concludes today's conference call. Thank you for participating you may now disconnect.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

Yeah.

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