VettaFi recently sat down with Jeff Jewell, CFO of DT Midstream (DTM). Jewell discussed the company’s midstream businesses, growth opportunities for the company, financial guidance, and the outlook for U.S. natural gas demand.
VettaFi: Can you briefly explain for our readers what type of midstream businesses DT Midstream operates and where?
Jewell: DTM is a pure play natural gas midstream C-Corp, headquartered here in Detroit, Michigan. We’re expecting about $1 billion dollars of EBITDA in 2025. We’re investment grade [per] Fitch; we’ve got a positive outlook by Moody’s.And we’ve got a market cap over $8 billion.
We own and operate integrated natural gas pipeline, storage, and gathering systems. Geographically, our assets are strategically located across the southern, northeastern and midwestern U.S. and Canada. Our assets serve the premier basins of the Marcellus and Utica in the Northeast and Midwest, and the Louisiana Haynesville, which serves the growing LNG export and industrial corridors.
We have close to 100 BCF of natural gas storage in Michigan, which serves the Northeast and Midwest. We have an emerging energy transition platform where we are advancing carbon capture and clean fuel projects. Our customers for our services include utilities, power plants, marketers, large industrials and energy producers, with over 85% of them being investment grade.
VettaFi: The Marcellus and Utica have historically been pipeline constrained. What advantages do your assets there provide?
Jewell: For DTM, we have not been constrained in this region like others, as our integrated assets have achieved very strong growth.
The reason we are able to do this is because our integrated assets can provide a pathway out of the basin into the growing markets of Michigan, Canada, Chicago, and the Midwest.
There are a couple examples of why we’ve been able to grow despite constraints in the basin. One example is related to our NEXUS pipeline, which transports southwest Marcellus supply into the Midwest and on to Ontario, and it is a pipe where we have been adding incremental capacity through operational optimization and have been successful with recontracting at higher rates and longer tenures.
Another example is our Stonewall system down in the southwest Marcellus, where we’ve been able to do expansions and we’ve been able to add new customers. We’ve announced a new project, through which we will provide access to the Mid-Atlantic market.
Lastly, we are very excited about a new system development in the Ohio Utica, where we have recently placed into service the initial infrastructure to serve a large-cap producer that has a sizable economic acreage position, which has many years of drillable inventory.
VettaFi: What is your outlook for U.S. natural gas demand and where do you see growth opportunities for your business?
Jewell: We’re very positive on the overall outlook over the long term and medium term related to natural gas demand for decades to come. There are really two main drivers for the natural gas demand growth, and that is related to LNG exports and this power and data center demand that has recently come on.
Related to the LNG side of the equation, there’s currently about 9 billion cubic feet per day (Bcf/d) of LNG export facilities that are under construction in the Gulf Coast, which will create opportunities for more natural gas infrastructure in a spot where we already have a strong position. That position includes our Blue Union and our LEAP assets that are sitting right there in Louisiana, meeting that demand.
Our Haynesville system currently has approximately 3.5 Bcf/d of interconnectivity to the LNG corridor, serving four terminals already. Those current terminals are Sabine Pass, Cameron, Calcasieu Pass, and Plaquemines.
Beyond LNG, the power sector, including the data centers, is something that has really emerged over this past year and is expected to provide a significant increase in the domestic natural gas demand to supply electric generation. Again, that’s nationwide, but there are going to be lots of different sectors and locations across the U.S. that are going to see that.
Electricity demand is set to grow at a level that we haven’t seen in over two decades, and natural gas fired generation will be needed to reliably serve this load. We foresee an additional 5 to 10 Bcf/d of demand to serve the power and the data center market by the end of this decade, and a lot of this demand will be located in the Midwest and Northeast regions where our assets are currently located.
We are in active discussions with developers on around six data center facilities regarding constructing new pipeline laterals to serve the generation needs of these sites. Now it’s still early days, but we are seeing a lot of commercial interest on this front, and we are very positive about these developments.
VettaFi: What are your expectations for EBITDA and dividend growth?
Jewell: For us, this has been a consistent message related to our investment thesis. Our plan is to grow our EBITDA by five to seven percent, and then also to grow the dividend in line with the growth of that EBITDA.
Our EBITDA growth is underpinned by a backlog of approximately $1.3 billion in organic growth projects, and unlike many of our peers in this space, we do not need to execute M&A to be able to deliver on that level of growth.
Regarding our dividend, we view it as a sacred item. So we will continue to grow that while maintaining a greater than two times distributable cash flow coverage ratio. On the topic of the dividend, just as a reminder, we are a C-Corp, so therefore we issue a 1099, and do not issue a K-1.
VettaFi: Are there parts of the DT Midstream story that the market may be overlooking?
Jewell: I think there might be a couple of places. Since we’re a mid-cap company that has only been a standalone company for over three years now, it seems that people often overlook the reach and the scale of our integrated network.
We have opportunities to transport gas from the wellhead to the market across our footprint, whether it’s serving major market demand centers and LNG terminals in the Gulf, or utilities and power generators in the Northeast and Midwest.
This is all supported by contracts that are unique in the midstream sector because of the high level of minimum volume commitments and/or demand charges that we have built into our financial portfolio.
Especially now that we have been upgraded to investment grade, we encourage investors to take a hard look at the quality of our business, which is one that has no commodity exposure or marketing. If you stack us up against any of the large caps, you’ll see that there’s a differentiator regarding our quality. [Our business] is fully underpinned by these long-term contracts, with over 85% of our customers being investment grade or higher, and there are these fixed demand based contracts.
We stack up very well against any of the other peers in the sector. So again, we think DTM is a premier investment opportunity for people.
DT Midstream is a holding in the $193 million Alerian Energy Infrastructure ETF (ENFR ), comprising 5.4% of the fund by weight as of October 15.
ENFR tracks the Alerian Midstream Energy Select Index (AMEI). The index includes North American midstream energy infrastructure companies, comprising MLPs (25%) and corporations (75%).
For more news, information, and analysis, visit the Energy Infrastructure Channel.
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