Q3 2023 DT Midstream Inc Earnings Call
Welcome to the D T midstream third quarter of 2023 earnings call.
Now turn it over to our speaker today toddler woman director of Investor Relations. Thank you. Please go ahead.
Good morning, and welcome everyone.
Before we get started.
I'd like to remind you to read the safe Harbor statements 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 reconciliation the gap contained in the appendix.
Joining me this morning, or David later, President and C E O N G.
Jeff Jewel Executive Vice President and C F O.
I will now turn it over to David to start that call.
Thanks, Dot and good morning, everyone and thank you for joining.
During today's call will touch on our financial results provided an update on construction of our growth projects and latest commercial activity.
Oh, then close with some commentary on the current 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 their full year plan.
Giving us confidence in our full year adjusted EBITDA guidance for 2023 and early outlook for 2024, we are reaffirming our 2023 adjusted EBITDA guidance mid point of $915 million in narrowing the range to $905 million to $925 million.
Reflecting the solid business performance to date.
Our construction team continues to make great progress on our growth projects.
And I wanted to commend them for all their hard work this year is it.
Over came many supply chain and whether challenges.
In late August we play a start leap phase one expansion in service.
Which was well ahead of schedule and on budget.
[noise] expansion capacity immediately filled up and has it been running flat out since the in service state.
The team has quickly turned his attention to our phase two expansion, which remains on track for at Q1, 2024 and service and will be followed by her phase three expansion in Q3 2024.
We remain in active discussions for elite face for expansion and.
In the recent successful completion of her face one expansion demonstrates our ability to serve our customers in a timely and efficient manner and important consideration for producers seeking to reach the attractive Gulf coast LNG markets as well as those customers seeking fee gas supply certainty.
As you know lead to strategically located to serve growing demand on the Gulf coast.
And we are excited to announce that we are building a new one b C. F. A day interconnect with the Gillis access project.
This will provide further direct access to the Louisiana industrial and LNG corridor.
Following the expected Q1 2024 in service of our new give us access interconnect leap.
<unk> will be directly connected to approximately six b C. F. A day of expected new LNG export demand growth.
Further strengthening our competitive position.
Upstream of leaf on Blue Union, we are building, a new 400 million cubic feet per day supply interconnect with a third party processing plant in the Carthage area.
Which will add incremental supply to our network and continue to diversify our customer base.
Last quarter, we announced a final investment decision on a new greenfield gathering opportunity and the Ohio in Utica.
Construction is progressing on budget and ahead of schedule.
With the project now expected to go in service and early Q1 2024.
As a reminder, we expect volumes to ramp over an 18 to 24 month period is.
As our customer execute taunts development plan and delineate this emerging play.
And our revenues are fully protected under a take or pay contract structure.
This is another great example of the excellent work from our construction team and their ability to execute on short cycle investments.
On Nexis, we recently added 50 million cubic feet, a day of new capacity through an amendment to our Texas Eastern lease.
Which feeds the next is mainline.
<unk> volumes have been running your all time highs and we continued to see a strong demand pole.
Take away capacity from Appalachia.
Our expansion of the Appalachia gathering system is expected to be in service by the end of the year, which also directly feeds nexis.
So there is definitely a lot of positive momentum building for this asset is it offers critical egress capacity to strong growing and durable markets in the Midwest and Eastern Canada.
Turning to our energy transition platform and R. C C S project in Louisiana.
Currently working through our class five well permit with the Louisiana, dinar, which will allow us to drill a characterization well.
Assuming the test well results confirm are favorable view on the geology, we would seek to reach final investment decision in the first half of 2024.
Finally, I wanted to take a moment to address the natural gas market fundamentals and producer activity across our assets.
It's been a lot of focus on the short term price of natural gas is here.
Which is certainly impacted producer activity and a portion of our asset portfolio.
The resulting impact whoever is one of timing a deferral of drilling and completion activity aware.
When not if decision by producers waiting on the right price signal.
Store surplus, which has fueled we cash prices experienced a steady decline this summer driven by strong power generation demand.
And that has resulted in a more balanced market in the short term.
Longterm Ford pricing and the 350 to four dollar range in 2024, and 2025 is supportive of U S domestic production activity and growth.
Domestic natural gas demand continues to grow and demonstrate its durability and important to our economy, especially in the power generation sector and.
We are seeing this firsthand across our pipeline portfolio.
Stable and reliable U S source Alan G is also in high demand across the world.
As a U S continues to grow its export capabilities, primarily on the Gulf Coast.
These long term fundamentals are very supportive of her assets and the future growth prospects for the company.
This is reflected in our deep backlog of organic growth investment opportunities, enabling us to deliver distinctive gross for many years to come.
Todd Lohrmann: Welcome to the DT Midstream 3rd quarter, 2023 earnings call. I'll now turn it over to our speaker today. Todd Lohrmann, Director of Investor Relations.
I'll now pass it over to Jeff to walk you through our quarterly financials and outlook.
Thanks, David and good morning, everyone.
In the third quarter, we delivered overall adjusted EBITDA 236 million.
Todd Lohrmann: 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 statement. Our presentation also includes references to non-gap financial measures. Please refer to the reconciliation to Gap, contained in the appendix.
Representing a 12 million increase from the prior quarter.
A pipeline segment results were up 6 million from the second quarter.
Reflecting the impact of the early in service of our leap phase one expansion.
Gathering segment results were 6 million greater than the second quarter, reflecting higher revenues on Blue Union and lower overall O&M.
Todd Lohrmann: Joining me this morning are David Slater, President and CEO and Jeff Jewel, Executive Vice President and CFO.
Operationally total gathering volumes across the Haynesville Ann northeast averaged approximately 3 billion cubic for you today in the third quarter.
David Slater: I'll now turn it over to David to start the call. Thanks, Todd and good morning everyone and thank you for joining. During today's call, I'll touch on our financial results, provide an update on construction of our growth projects and latest commercial activity. I'll then close with some commentary on the current 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, giving us confidence in our full year adjusted EBITDA guidance for 2023 and early outlook for 2024.
Up close to 100 million cubic feet a day from the prior quarter.
And the Haynesville volumes were up compared to the prior quarter.
Driven by the return to full operational capacity following the maintenance outages observed in the second quarter.
In the northeast volumes were in line with the second quarter.
As David previously mentioned, we are reaffirming our 2023 adjusted EBITDA guidance Bitcoin of 915 million.
And narrowing the range to 905, the $925 million.
David Slater: We are reaffirming our 2023 adjusted EBITDA guidance midpoint of 915 million and narrowing the range to 905 million to 925 million, reflecting the solid business performance to date. Our construction team continues to make great progress on our growth projects and I wanted to commend them for all their hard work this year. As they overcame many supply chain and weather challenges. In late August, we placed our leap phase one expansion in service, which was well ahead of schedule and on budget.
Reflecting the strong year to date business performance.
We're also raising our distributable cash flow guidance range to 652.
675 million.
Amid point increase of approximately 13 million.
Due to favourable distributions from our pipeline joint ventures.
Are committed capital over 2023, and 2024 of approximately 800 million remains unchanged.
With approximately 100 million committed in 2024.
Providing the opportunity for excess free cash flow allocation next year.
David Slater: The expansion capacity immediately filled up and has been running flat out since the in service state. The team has quickly turned its attention to our phase two expansion, which remains on track for a key one 2024 in service and will be followed by our phase three expansion in Q3 2024. We remain in active discussions for a leap phase four expansion and the recent successful completion of our phase one expansion demonstrates our ability to serve our customers in a timely and efficient manner.
If growth investments do not reach F. I D. For 2024, we will evaluate the most accretive options for excess cash flow.
With our current view that it will likely be deployed towards debt reduction.
We are committed to preserving the strength of our balance sheet and achieving an investment grade credit rating.
We expect to end 2024, with and on balance sheet leverage ratio of 3.6 times or below.
David Slater: An important consideration for producers seeking to reach the attractive Gulf Coast LNG markets as well as those customers seeking feed gas supply certainty. As you know, leap is strategically located to serve growing demand on the Gulf Coast. And we are excited to announce that we are building a new one BCF a day interconnect with the Gillis access project. This will provide further direct access to the Louisiana industrial and LNG corridor. Following the expected Q1 2024 in service of our new Gillis access interconnect, we will be directly connected to approximately six BCF a day of expected new LNG export demand growth.
And four times are below including are proportional share of dead at our joint ventures.
Over the course of the five year plan, we expect delever to the low threes with are on balance sheet desk into the mid three's assuming proportional consolidation.
Finally.
Today, We also announced the declaration of our fourth quarter dividend of 69 cents per share and.
And we are committed to growing the dividend in line with cash flow.
I'll now pass it back over to David for closing remarks.
Thanks, Jeff.
So in summary, we were feeling confident in our full year guidance for 2023 and early outlook range for 2024.
David Slater: Further strengthening our competitive position. Upstream of leap on Blue Union, we are building a new 400 million cubic feet per day supply interconnect with a third-party processing plant in the Carthage area, which will add incremental supply to our network and continue to diversify our customer base. Last quarter, we announced a final investment decision on a new Greenfield gathering opportunity in the Ohio Utica. Construction is progressing on budget and ahead of schedule with the project now expected to go into service in early Q1 2024.
A short cycle growth investments continue to back on budget and on schedule with some projects running ahead of schedule.
<unk> and meaningful growth contributions and 2024 and 2025.
Our approach to capital allocation remains thoughtful and disciplined.
With our focus on spending within cash flow over the balance of our five year plan and.
And achieving an investment great credit rating.
As we look across the portfolio, we continue to see significant growth opportunity, but they are integrated at strategically located at the foot for building torque.
David Slater: As a reminder, we expect volumes to ramp over an 18 to 24 month period as our customer executes on development plan and delineates this emerging play. In our revenues are fully protected under a ticket pay contract structure. This is another great example of the excellent work from our construction team and their ability to execute on short cycle investments. On Nexus, we recently added 50 million cubic feet a day of new capacity through an amendment to our Texas eastern lease, which feeds the Nexus mainline.
Capital investment program laying a strong foundation to build upon.
We can now open up the line for questions.
Thank you if you would like to ask a question. Please press Star then one on your telephone keypad again, that's star one to ask a question.
The first question is room, Jeremy turned out with J P. Morgan Your line is open.
Hey, good morning, Guy assisted forgotten ready on for Jeremy for My first one just wanted to ask him to project backlog you guys are able to provide any color on the incremental interconnects announced this quarter.
David Slater: Nexus volumes have been running near all time highs and we continue to see a strong demand pull for pipeline takeaway capacity from Appalachia. Our expansion of the Appalachia gathering system is expected to be in service by the end of the year, which also directly feeds Nexus. So there is definitely a lot of positive momentum building for this asset as it offers critical egress capacity to strong growing and durable markets in the Midwest and Eastern Canada.
And maybe just kind of what that means for capex all for it.
Good morning, this is David <unk>.
That capex related to those Interconnects was contemplated in our current commit a capital guidance. So there's no incremental capital associated with that in our capital guidance.
Got it and for the next one I guess just wanted to get your thoughts on B T M's competitive positioning within the Haynesville and ability to got grabbed new volumes. If you could just speak broadly to your thoughts or that'd be great.
David Slater: Turning to our energy transition platform and our CCS project in Louisiana, we are currently working through our class five well permit with the Louisiana DNR, with well allow us to drill a characterization well. Assuming the test well results confirm our favorable view on the geology, we would seek to reach final investment decision in the first half of 2024.
Sure so.
So both of those items that we just talked about further enhances our competitive position I think as I look at what's coming in the next two to three years.
Clarity on.
Project execution and timing is critical for new customers, obviously, a competitive rate is important.
David Slater: Finally, I want to take a moment to address the natural gas market fundamentals and produce reactivity across our assets. There has been a lot of focus on the short term price of natural gas this year, which has certainly impacted producer activity and portion of our asset portfolio. The resulting impact, however, is one of timing, a deferral of drilling and completion activity, a when, not if, decision by producers waiting on the right price signal.
And price transparency is also important so as I think about leaps competitive position.
We we score very well on all those criteria.
And is there.
This new give us access project is built in in service.
Ventured global is the primary underwriter of that expansion so.
We all know what they're throwing their LNG export capacity significantly in the next couple of years.
David Slater: Storage surplus, which has fueled wheat cash prices, experienced a steady decline this summer termed by strong power generation demand, and has resulted in a more balanced market in the short term. Long term forward pricing in the $350 to $4 range in 2024 and 2025 is supportive of US domestic production activity and growth. The domestic natural gas demand continues to grow and demonstrate its durability and importance to our economy, especially in the power generation.
So <unk> is now very well connected and will be even better connected to all the LNG export facilities by the time that project complete so we're in a very strong competitive position just like the earlier round of expansions, we did very well.
I fully expect in the next round of expansion.
We're we're in a really good spot to deliver high quality service for any <unk>.
<unk> looking to egress, the haynesville and and.
David Slater: Secretary, and we are seeing this first hand across our pipeline portfolio. Stable and reliable U.S, source LNG is also in high demand across the world, as the U.S, continues to grow its export capabilities primarily on the Gulf Coast. These long-term fundamentals are very supportive of our assets and the future growth prospects for the company. This is reflected in our deep backlog of organic growth investment opportunities, enabling us to deliver distinctive growth for many years to come.
Serve these markets as well as providing supply security uncertainty to these new export facilities that need to reach back and fix your supply out of the Haynesville.
Great. Thanks for all the color.
The next question is room, Michael Bloom with Wells Fargo. Your line is open.
Thanks, Good morning, everyone.
So I realize you're you're not providing 24 capex guidance, but just wanted to make sure I'm understanding correctly, what you've said so far so you have about 100 million committed and so far 24, and you're saying that he you'll get to 3.6 times leverage our better by the end of two.
Jeff Jewel: I'll now pass it over to Jeff to walk you through our quarterly financials and outlook. Thanks David and good morning everyone. In the third quarter we delivered overall adjusted EBITDA a 236 million, representing a 12 million increase from the prior quarter. Our pipeline segment results were up 6 million from the second quarter, reflecting the impact of the early in-service of our leap phase one expansion. Gathering segment results were 6 million greater than the second quarter, reflecting higher revenues on blue union and lower overall on M. Operationally, total gathering volumes across the Hainesville and Northeast averaged approximately 3 billion cubic feet a day in the third quarter, up close to 100 million cubic feet a day from the prior quarter.
34, but does that that assumes that those other like that number doesn't change for 24 inches of capex or you'll get there regardless.
Yeah, Great question. So it's we sit here today.
You know the committee capital is what we said for 2024 and you know the simple math is 400 $450 million free cash flow after dividend. So there's a significant amount of uncommitted capital for 2024, we're obviously working on projects as we speak we expect we will be successful.
Some of those projects.
So you'll will provide a.
Clearer update on the ear and call us to how much of that will be committed in 2000 to 44, but as I sit here today.
Jeff Jewel: In the Hainesville, volumes were up compared to the prior quarter, driven by the return to full operational capacity following the maintenance outages observed in the second quarter, and the Northeast volumes were in line with the second quarter.
Best view of 24 as I expect there will be some excess free cash flow is Jeff alluded to in his comments.
And again as we sit here today that likely goes to debt reduction.
Jeff Jewel: As David previously mentioned, we are reaffirming our 2023 adjusted EBITDA guidance midpoint of 915 million and narrowing the range to 905 to 925 million, reflecting the strong year-to-date business performance. We are also raising our Distributable Cash Flow Guidance range to 650 to 675 million. A midpoint increase of approximately 13 million due to favorable distributions from our pipeline joint ventures. Our committed capital over 2023 and 2024 of approximately 800 million remains unchanged, with approximately 100 million committed in 2024, providing the opportunity for excess free cash flow allocation next year.
For 2024.
Okay got it and then.
I'm sure you're well aware of a recent press articles talking about millennium pipeline.
The piece you don't own being in the mix for sale.
So hate to beat a dead horse, but since it's back in the news I figured I'd I'd ask you to just come in again, how you. How you were thinking about that since it seems like maybe it's back in play.
Yeah. Thanks for that question.
[laughter], Yeah, I don't I don't really have any comment on that I mean, we've talked about this from many quarters and most of the year [noise].
From our perspective, nothing has changed I think.
Our partner has a very full plate of activities that are in front of them and.
Wish them the best with that.
Jeff Jewel: If gross investments do not reach FID for 2024, we will evaluate the most accretive options for excess cash flow. With our current view that it will likely be deployed towards debt reduction, we are committed to preserving the strength of our balance sheet and achieving an investment grade credit rating. We expect to end 2024 with an on-balance sheet leverage ratio of 3.6 times or below, and four times or below, including our proportional share of debt at our joint ventures.
Our view hasn't changed we're very happy with the acid, we're very happy that we're the majority owner of the asset.
The acid is performed exceptionally well this year you know beyond pro forma when we acquired.
Grids interest a year ago.
And.
Again, I I I'm not going to add any comments that I've made previously on this topic and I think this is probably a question really for T C.
Got it understood. Thank you.
The next question is from John Mccain with Goldman Sachs. Your line is open.
Jeff Jewel: Partners. Over the course of the five-year plan, we expect to deliver to the low threes with our on-balance sheet debt and to the mid-threes assuming proportional consolidation.
Hey, good morning, everyone thinks the time wanted to just pick up on on maybe two things for the EBITDA Guide for 23, and 24 third quarter was kind of better than we expected, but we had you know you guys kind of narrowed the range, but didn't got is higher on twenty-three are there any kind of offsets for fourth.
Jeff Jewel: Finally, today we also announced the declaration of our fourth quarter dividend of 69 cents per share and we are committed to growing the dividend in line with cash flow.
Quarter that we should pick about versus your current run rate and then for twenty-four you guys have kind of added a few projects pulled forward a few projects, but that number is also unchanged swilling I'm wondering if you can just kind of bridge the gap on both of those.
David Slater: I'll now pass it back over to David for closing remarks. Thanks, Jeff. So in summary, we are feeling confident in our full-year guidance for 2023 and early outlook range for 2024. Our short-cycle growth investments continue to back on budget and on schedule with some projects running ahead of schedule, resulting in meaningful growth contributions in 2024 and 2025. Our approach to capital allocation remains thoughtful and disciplined with our focus on spending within cash flow over the balance of our five-year plan and achieving an investment-grade credit rating.
Sure Good morning, John Great questions.
So I'll talk twenty-three and yeah, we had a really strong quarter here in two three which will set us up with high high confidence for delivering.
Delivering the year. This year, we narrowed the ban just kind of reflecting what I'll call the water under the bridge so far this year.
As you know we like to deliver strong here. So I'll just leave it at that.
In terms of looking at Q4.
David Slater: As we look across the portfolio, we continue to see significant growth opportunity with our integrated and strategically located asset foot port building torque and our capital investment program laying a strong foundation to build upon.
And you know I'm I'm inferring from the way you asked the question you know how how does a gathering side of the business look in queue for I'll refer you back to my comments my fundamental comments in my opening remarks.
We've all heard from a lot of the public producers that there's been a deferral and a delay of some of the completion activity is a derivative of the low prices that they experienced this summer and the earlier in the fall. So that's gonna play through it'll play through but again. This is a very short term phenomenon.
Todd Lohrmann: We can now open up the line for questions. Thank you. If you would like to ask a question, please press star then one on your telephone keypad. Again, that's star one to ask a question.
Jeremy Tonet: The first question is from Jeremy Tonette with JP Morgan. Your line is open. Hey, good morning guys. This is one just wanted to ask on the project backlog. Are you guys able to provide any color on the incremental interconnects announced this quarter? And maybe just kind of what that means for CapEx? Good morning. This is David. That CapEx related to those interconnects was contemplated in our current committed capital guidance. So there's no incremental capital associated with that inner capital guidance.
It's it's.
[noise] it doesn't change their longterm plan and how they expect to use the system long term. So it's timing issue. So I'll I'll leave it at that for comments on the balance of this year.
In terms of next year, it's our practice to refresh and update the prompt here on the ear and call and [noise] will digest all of the puts and takes across the portfolio and play that through for 24, and 425 and it has been our practice to always give.
Jeremy Tonet: Got it. And for the next one, I guess just want to get your thoughts on DTM's competitive positioning within the Haynesville and ability to grab new volumes. If you could just speak broadly to your thoughts, there that'd be great. Sure. So both those items that we just talked about further enhances our competitive position. I think as I look at what's coming in the next two to three years, clarity on project execution and timing is critical for new customers.
Early outlook prompt plus a year.
So.
I think we'll just leave leave our comments until the year on call and the reason why we do that John just for everyone's benefit is so that we have high confidence in the guidance that we provide to you is that we wait.
You know as you would expect we get a lot of information from all of our customers that information becomes much better crisper and more reliable as you get to the end of the year and in the January timeframe. When they are locking down on their plans.
Jeremy Tonet: Obviously a competitive rate is important and price transparency is also important. So as I think about Leap's competitive position, we score very well on all those criteria. And as this new Gilles Access project is built and in service, you know, Ventored Global is the primary underwriter of that expansion. So and as we all know, they're growing their LMG export capacity significantly in the next couple of years. Partners. So, Leap is now very well connected and will be even better connected to all the LNG-X4 facilities by the time that project complete.
So that gives us high confidence in the guidance that we provide for the the prop year and gives us a lot of confidence in the prompt plus year as well so.
You.
You know a lot of the focus it will have on 24, it's gonna be on the gathering side of our business. The pipeline side as we've talked about all year has been performing just outstanding performance on the pipeline side of our business and as you know that's the largest portion of our business sets about two thirds of our business.
So we've seen some really strong fundamentals playing out both in the south around leap asset as well across all of our pipeline assets in the north and that gives us tremendous confidence for for the year and for the years ahead. So.
Jeremy Tonet: So, we're at a very strong competitive position. Just like the earlier round of expansions, we did very well. I fully expect in the next round of expansion, you know, we're in a really good spot to deliver high-quality service for any shipper looking to egress the Haynesville and serve these markets as well as providing supply security and certainty to these new export facilities that need to reach back and secure supply out of the Haynesville.
That's great appreciate it all that detail there maybe.
Maybe just looking in quickly the interconnect following up with an earlier question I.
I guess, just curious from our side.
Are are you expecting this to bring on kind of.
You know material incremental volumes onto leap above what you were expecting or is this kind of more about adding flexibility for your existing shippers and kind of existing flows.
David Slater: Great, thanks for all the color.
Michael Blum: The next question is from Michael Blum with Wells Fargo, your line is open. Thanks, good morning everyone. So, I realize you're not providing 24 CAPX guidance yet, but just want to make sure I'm understanding correctly what you said so far. So, you have about 100 million committed and so far in 24, and you're saying that you'll get to 3.6 times the leverage are better by the end of 24.
I think it's all of the above John I mean the.
The interconnect with the give us access project I think is very strategic longterm and puts us in a really strong competitive position to serve that growing demand, adding supply to the blue Union system just.
Put more more product on the system more customers on the system Diversifies our customer base.
Jeff Jewel: But does that assume that those other, like that number doesn't change for 24 in terms of CAPX, or you'll get there regardless? Yeah, great question. So, as we sit here today, you know, the committee capital is what we've said for 2024. And, you know, the simple math is, you know, 400, 450 million of free cash flow after dividend. So, there's a significant amount of uncommitted capital for 2024. We're obviously working on projects as we speak. We expect we will be successful on some of those projects.
And all of that strengthens their competitive position of the entire Ah haynesville asset footprint.
And gives us tremendous flexibility to offer lots of different services to the different customers.
So it's.
I expect it is going to be positive in the short term, but it's also going to be very positive in the long term in terms of making this network of very attractive network when people have.
Have choices as to how they want to move their gas.
Process and treat their gas and ultimately deliver their gas to the different market hub delivery points out of the basin.
Jeff Jewel: So, you'll, we'll provide a clearer update on the year and call as to how much of that will be committed in 20 to 24. But as I sit here today, best view of 24 is I expect there'll be some excess free cash flow as Jeff alluded to in his comments. And again, as we sit here today, that likely goes to debt reduction for 2024. Okay, got it.
Alright, that's great appreciate the time today.
The next question is from Spiro do this with city. Your line is open.
<unk> morning, David and Jeff Uhm, Let me go back quickly could it hey, guys. Just got back quickly to the Haynesville gathering volumes Uhm <unk>, a little bit is gonna put a finer point on it so I'm I'm kind of bounce back <unk> versus the maintenance and <unk>. The curious as we go forward you were thinking about that cadence.
David Slater: And then, I'm sure you're well aware of recent press articles talking about Millennium Pipeline, the the piece you don't own being in the mix for sale.
From here is these leaf pages come online is that gonna draw incremental gathering volumes in or you sort of moving them off other systems and to lead.
David Slater: So, hate to be to debt horse, but since it's back in the news, figured I'd ask you to just comment again how you're, how you're thinking about that since it seems like maybe it's back in play. Yeah, thanks for that question. Yeah, I don't, I don't really have any comment on that. I mean, we've talked about this for many quarters and most of the year. From our perspective, nothing has changed. I think our partner has a very full plate of activities that are in front of them.
Yeah, Great question, that's gonna do both it's gonna drawing in incremental volumes onto the network.
And it's going to have volumes that are currently being delivered to other third party pipes likely stay on the network in the future. So it actually does both spiro.
Okay, and I think he had mentioned that crazy I'm kind of came on and it fell quickly based on what you just said it sounds like the next phases, you're expecting something somewhere there as well.
David Slater: And wish them the best with that. But our view hasn't changed. We're very happy with the asset. We're very happy that we're the majority owner of the asset, and the asset has performed exceptionally well this year, you know, beyond pro-former when we acquired Grids Interest a year ago. And, again, I'm not going to add to any comments that I've made previously on the topic, and I think this is probably a question really for TC.
Were highly optimistic.
David Slater: Got it, understood. Thank you.
So the answer is yes, and okay got it you know.
Yeah.
The how quickly that first phase shield.
Was it even I think even that surprised us a little bit how strong the demand pull was.
And if you look at the pricing in the market, you'll see that that price signal.
Being broadcast in the market the pricing signal is saying, we need more gas and yellows.
So fundamentally that's very encouraging for phase two in phase three.
John Mackay: The next question is from John Mackay with Goldman Sachs, Irlandis Open. Hey, good morning, everyone. Thanks for the time.
Great and then just a second question day are you talking about the right price Sydney for producers and.
Jeff Jewel: I wanted to just pick up on maybe two things for the EBITDA guide for 23 and 24. Third quarter was kind of better than we expected, but we had, you know, you guys kind of narrowed the range, but didn't guide us higher on 23. Are there any kind of offsets for fourth quarter that we should think about versus your current run rate? And then for 24, you guys have kind of added a few projects, pulled forward a few projects, but that number is also unchanged, willing, you know, wondering if you can just kind of bridge the gap on both of those. Thanks.
Sure there's no magic number, but you're also talking about this range looking forward in kind of a 350 to 425 range is supportive.
<unk> kind of the pricing of range that we should be thinking about and if that's already prevalent I guess what are we waiting for her to see produced restart the mobile out here.
Yeah, I I think that is the price of band that is going to trigger what I'll say producers kind of getting back on the gas pedal so to speak.
You know all of that is premised on a a balanced market fundamentally you know supporting that price.
Jeff Jewel: Sure. Good morning, John. Great questions. So, I'll talk 23, and yeah, we had a really strong quarter here and two, three, which will set us up with high-high confidence for delivering the year this year. Now, we narrowed the ban just kind of reflecting what I'll call the water under the bridge so far this year. As you know, we like to deliver strong years, so I'll just leave it at that. In terms of looking at Q4, and, you know, I'm inferring from the way you asked the question, you know, how does the gathering side of the business look in Q4?
I'd say just like there is a delay on producer a reaction to that to that low two dollar price that showed up in February timeframe.
I expect there'll also be a delay on the uptick in the pickup I think producers are going to want to see.
The durability of the current pricing.
And.
This is just my opinion and I'm sure I would ask this question to the public producers as well, but I suspect they're going to want to see a couple of months of that price sticking in the market.
Jeff Jewel: I'll refer you back to my comments, my fundamental comments, and my opening remarks. You know, we've all heard from a lot of the public producers that there's been a deferral and delay of some of the completion activity as a derivative of the little prices that they experienced this summer and earlier in the fall. So, that's going to play through. It'll play through, but again, this is a very short-term phenomenon. It doesn't change their long-term plan and how they expect to use the system long-term. So, it's a timing issue. So, I'll leave it at that for, you know, comments on the balance of this year.
Before they sort of poor more capital into the drill bit.
But that's just my opinion, I think there'll be a bit of a lag before we see that ramp up in the pick up of activity.
And like I said in my opening comments I think this is a very short term phenomenon.
It's.
It's not an if question it's a one question.
And you know whether that pickup happens in November or in January you.
You know it it doesn't have a material impact on our long term view on our long term outlook.
Oh, Hello colors always makes those sound good.
Jeff Jewel: In terms of next year, it's our practice to refresh and update the prompt year on the year-end call, and we'll digest all the puts and takes across the portfolio and play that through for 24 and for 25, and it has been our practice to always give an early outlook prompt plus a year. So, I think we'll just leave our comments until the year-end call, and the reason why we do that, John, just for everyone's benefit, is so that we have high confidence in the guidance that we provide to you, is that we wait as, you know, as you would expect.
You're welcome.
Again, that's star one to ask a question. The next question is from keeps Stanley with Wolf Research. Your line is open.
Hi, Good morning, just some questions on the C. C S project.
If you were to F. I D. The project with the bulk of the capital spending B in 2024 or more likely in 2025 on the current plan.
And then can you remind us on <unk>.
How this ties to eventually paying more than in cash taxes. When when you would expect to start paying more in cash taxes, and how that aligns with the startup of the C. C. S project.
Jeff Jewel: We get a lot of information from all of our customers. That information becomes much better, crisper, and more reliable, as you get to the end of the year and in the January timeframe when they're locking down, and their plans. So that gives us high confidence in the guidance that we provide for the prompt year and gives us a lot of confidence in the prompt plus year as well. So, you know, a lot of the focus that we'll have on 24 is going to be on the gathering side of our business, the pipeline side, as we've talked about all year has been performing, just outstanding performance on the pipeline side of our business.
Sure Keith [noise].
Good question so.
Assuming we F I D C C as in 2024.
You are correct the capital will be spread out over likely a multiyear.
Timeframe like 24 25 timeframe.
So it will not all hit in one year, which again is I think why we're telegraphing.
Early view that we likely will have uncommitted free cash flow and 2024 again based on the information that we have today.
Jeff do you want to address the Oh, yeah, they're part of that question. Yeah. Sure thought is around the cash taxes will start increasing probably around.
Jeff Jewel: And as you know, that's the largest portion of our business that's about two-thirds of our business. So, we've seen some really strong fundamentals playing out both in the south around our lead basket as well across all of our pipeline assets in the north. And that gives us tremendous confidence for the year and for years ahead. So, that's great.
John Mackay: I appreciate all the detail there.
The back part of the five year plan you know we're talking.
26, 27, and then depending on.
Final rulings around how the 45 she was gonna get played out as the direct pay or various other things that you know that sort of factor into our cats taxes also but again.
The increase in cash taxes is is not gonna be material.
John Mackay: Maybe just looking in quickly at the interconnects following up on the earlier question. I guess just curious from our side, are you expecting this to bring on kind of, you know, material incremental volumes onto leap above what do you are expecting? Or is this kind of more about adding flexibility for your existing shippers and kind of existing flows?
For us.
So that's our current view around now.
Thank you.
We have no further questions at this time will turn it over to David Slater for any closing remarks.
Well. Thank you very much for your interest in D. T M and we appreciate all the support and have a great day.
David Slater: I think it's all of the above, John. I mean, the interconnect with the Gillis access project, I think, is very strategic long term and puts us in a really strong competitive position to serve that growing demand. Adding supply to the Blue Union system just puts, you know, more product on the system, more customers on the system diversifies our customer base. And all of that strengthens the competitive position of the entire Haynes of the last footprint. And gives us tremendous flexibility to offer lots of different services to the different customers.
This concludes today's conference call. Thank you for for participating you may know disconnect.
David Slater: So, it's, you know, I expect it's going to be positive in the short term, but it's also going to be very positive in the long term in terms of making this network a very attractive network when people have choices as to how they want to move their gas process and treat their gas and ultimately deliver their gas to the different market hub delivery points out of the basin.
Please wait the conference will begin shortly.
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Okay.
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Spiro Dounis: All right, let's just go back to the Haynesville gathering volumes. You can just a little bit of this.
David Slater: We want to put a finer point on it. So, I'll then kind of bounce back in 3Q versus the main instance 2Q. The curious is to go forward here thinking about that cadence from here as these lead phases come online. Is that going to draw incremental gathering volumes in, or are you sort of moving forward? I'm going to go back to the other systems on to lead. Yeah, great question. It's going to be both.
David Slater: It's going to draw in incremental volumes onto the network, and it's going to have volumes that are currently being delivered to other third-party pipes, likely stay on the network in the future. So it actually does both, Spiro. Okay, and I think you'd mention that phase one kind of came on and it filled quickly based on what you just said. It sounds like these next phases are expecting something similar there as well.
David Slater: We're highly optimistic, so the answer is yes. How quickly that first phase filled was, I think it even surprised us a little bit, how strong the demand pool was. And if you look at the pricing in the market, you'll see that price signal being broadcast in the market. That the pricing signal is saying we need more gas and yellows. So fundamentally that's very encouraging for phase two and phase three.
David Slater: Great, and then just a second question. David, you talked about the right price signal for producers. I'm sure there's no magic number, but you also talked about this range looking forward in kind of the 350 to 425 ranges supportive. I guess is that kind of the price signal range that we should be thinking about? And if that's already prevalent, I guess what are we waiting for to see producer starting mobile out here?
David Slater: Yeah, I think that is the price ban that is going to trigger what I'll say producers are kind of getting back on the gas pedal, so to speak. You know, all of that is premised on a balanced market fundamentally, you know, supporting that price. But I'd say just like there is a delay on producer reaction to that low $2 price that showed up in February timeframe. I expect there also be a delay on the uptick and the pickup. I think producers are going to want to see the durability of the current pricing.
John Mackay: And this is just my opinion, and I'm sure I would ask this question to a public producer as well, but I suspect they're going to want to see a couple months of that price sticking in the market before they sort of pour more capital into the drill bit. But that's just my opinion. I think there'll be a bit of a lag before we see that ramp up and the pickup of activity.
John Mackay: And like I said in my opening comments, I think this is a very short term phenomenon. It's not an if question, it's a when question. And whether that pickup happens in November or in January, you know, it doesn't have a material impact on our long term view and our long term outlook. A couple of colors always. Thanks for the time, guys. You're welcome. Again, that's star one to ask a question.
Keith Stanley: The next question is from Keith Stanley with the Wolf Research here.
Jeff Jewel: Let us open. Hi. Good morning, just some questions on the CCS project. If you were to FID the project, would the bulk of the capital spending be in 2024 or more likely in 2025 on the current plan? and then can you remind us on how this ties to eventually paying more in cash taxes when you would expect to start paying more in cash taxes and how that aligns with the start-up of the CCS project?
Jeff Jewel: Sure, Keith. Good questions, so assuming we FID CCS in 2024, your capital will be spread out over likely a multi-year timeframe, like 24, 25 timeframe. So it will not all hit in one year, which again is I think why we're telegraphing our early view that we likely will have uncommitted free cash flow in 2024, again based on the information that we have today. Jeff, do you want to address the other part of that question?
Jeff Jewel: Yeah, sure. What our thought is is around the cash taxes will start increasing probably around, you know, the back part of the five-year plan, you know, we're talking 26, 27, and then depending on final rulings around how the 45Q is going to get played out as the direct pay or various other things, that you know, that will sort of factor into our cash taxes also. But again, the increase in cash taxes is not going to be the material for us, so that's our current view around that.
Keith Stanley: Thank you.
Todd Lohrmann: We have no further questions at this time.
David Slater: I'll turn it over to David Slater for any closing remarks. Well, thank you very much for your interest in DTM, and we appreciate all the support and have a great day.
Todd Lohrmann: This concludes this conference call. Thank you for participating. You may not disconnect. Please wait.
Operator: The conference will begin shortly.