DT Midstream, Inc.

Good morning. My name is Chris, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the DT Midstream fourth quarter 2021 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. And to withdraw your question, please press star one again. Thank you. Todd Lorman, Director of Investor Relations. You may begin. Todd Lorman, Director of Investor Relations. You may begin.

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 reconciliation to GAAP contained in the appendix. Joining me this morning are David Slater, President and CEO, and Jeff Jewell, Executive Vice President and CFO. I'll now turn it over to David to start the call.

Thanks, Todd. Good morning, and thanks everyone for taking the time to join us today. I'll start on slide three. We had an excellent year in 2021. which marked our transition to a new independent public company. Looking back on the accomplishments throughout the year, I could not be more proud of the team, and I'd like to thank them for the job they've done. First, we executed the spinoff from DTE Energy with a successful debt raise and equity trading debut. We delivered strong financial performance with industry-leading organic growth that exceeded our revised guidance ranges and delivered distinctive total shareholder return for our investors. Our commercial team did a great job advancing our five-year investment plan. We've added new customers in both our pipeline and gathering segments. Then, just before the end of the year, we executed new agreements for the first phase of our Hainesville Wellhead to Water system expansion. As of today, approximately 50% of our five-year investment plan has been committed to organic growth opportunities across our asset portfolio. We also continue to advance our best-in-class ESG initiatives, and we're the first company in North America to offer a carbon-neutral pipeline system expansion. We made great progress advancing our carbon capture and storage opportunity in Louisiana and announced a new strategic partnership to advance hydrogen development projects with Mitsubishi. DTM, as of the new year, is now fully separated and operating independently from DTE under a strong C-Corp governance framework. Let's turn to slide four. Moving forward, the company is well positioned for continued success. We expect to maintain our strong financial performance and are increasing our 2022 adjusted EBITDA guidance, delivering 8% growth from our 2021 original guidance midpoint. Our primary focus is now on 23 and beyond, so we are providing our 23 early outlook for adjusted EBITDA, which reflects continued organic growth and confidence in our core businesses. We are increasing our quarterly dividend by 7%, reflecting our strong financial performance, and we plan to continue to grow our dividend in line with cash flows long term. As I mentioned earlier, 50% of our $1.2 to $1.7 billion five-year investment plan is committed to organic projects that achieve attractive returns. We remain focused on our disciplined investment criteria and will only invest in projects that create shareholder value. Looking forward at our ESG initiatives, we will continue executing on our net zero by 2050 goals. Key areas of focus for us include carbon capture and storage, hydrogen, and offering our customers low carbon service options. Our goal is to integrate all aspects of our ESG initiatives into the everyday operations of the company. Finally, we look forward to publishing our inaugural sustainability report in the second quarter of this year. I'll now pass it over to Jeff, who will cover financial results and guidance. Thanks, David. Good morning, everyone. I'll start on slide five. Our well-positioned assets and strong contracts continue to deliver premium growth. In 2021, adjusted EBITDA was $768 million, which was $58 million higher than the prior year. representing 12% growth versus our 2020 original guidance midpoint. Operating earnings were $336 million in 2021, which was $36 million higher than the prior year. 2021 marks the second year in a row of exceeding guidance for both adjusted EBITDA and operating earnings. Let's turn to slide six to talk more about our 2021 results. Our 2021 growth in both adjusted EBITDA and operating earnings were primarily driven by the performance in our pipeline segment, which included the benefit of a full year of leap in service and increased earnings from our interstate pipeline joint ventures. In 2021, the pipeline segment comprised 53% of our business mix, an increase from 49% in 2020. Additionally, strong volumes contributed to our performance in the gathering segment in 2021. with volume growth of approximately 20% throughout the year. Let's now turn to slide 7 to discuss our updated 2022 guidance. We are increasing both our adjusted EBITDA and operating earnings guidance for 2022. The increased 2022 adjusted EBITDA guidance range is $770 to $810 million, and the midpoint represents 80% growth over our 2021 original guidance midpoint. Our increased 2022 operating earnings guidance range is $319 to $335 million. And these guidance ranges include the impact of a full year of new interest expense and public company costs. Let's turn to slide eight to discuss our dividend increase. In addition to delivering strong earnings growth, we are also increasing our quarterly dividend by 7% to $0.64 per share, which equates to an annualized dividend of $2.56. This dividend increase is in line with our financial policy of maintaining at least a two times coverage ratio floor, and our current coverage ratio stands at approximately 2.4 times. Due to our long-term contracted cash flows, we were able to support a durable dividend, and we plan to continue to grow our dividend in line with cash flows long-term. Let's turn to slide nine, and I'll discuss our 2023 early outlook. As David discussed, given our high confidence in our business and its future growth, we are providing an early outlook for 2023 adjusted EBITDA. which we expect to be between $810 and $850 million. This outlook is supported by accretive growth coming from organic investment opportunities that are underpinned by long-term contracts in both the Hainesville and Appalachia and across both our pipeline and gathering segments. David will provide more detail on these growth investments later in the call. Let's now turn to slide 10 to talk about our strong cash flow generation. PT Midstream's strong cash flow provides multiple pathways to maximize value for our shareholders. We expect distributable cash flow to be between $575 and $625 million for 2022, which provides significant flexibility in the ways we create value. We believe the most effective way to create value is through highly accretive organic growth investments that align with our core business. We have a substantial set of growth opportunities in front of us, which we will evaluate to ensure they meet our disciplined investment criteria. Another key component of our value creation for shareholders is delivering a reliable and durable dividend that grows in line with cash flows. And the final piece of our value creation plan is ensuring that our balance sheet is well positioned with respect to our investment plans and changing market cycles. Our financial policy for leverage is to maintain a debt to adjusted EBITDA ratio of less than four times, which is enabled by our self-funded growth investment plan and the natural deleveraging that occurs as our adjusted EBITDA grows. I'll now turn it back over to David to provide more details on our growth investments. Thanks, Jeff. Over the course of the past year, we have made significant progress solidifying our growth investment plan. Our 2022 capital guidance reflects this progress, and we expect total CapEx to be between $350 and $400 million, with $320 to $360 million being deployed towards accretive growth projects. Touching on some of our recently executed and upcoming growth investments, in 2021, we placed into service the Vector Blue Water Energy Center Lateral. We executed on expansions of our Blue Union system in the Haynesville, which included a treating plant expansion and connections with three new customers. In 2022, we are investing in expansions of surveyors of growing Appalachian production, including the Stonewall Pipeline and the Appalachian Gathering System. In Michigan, we are converting a submitted portion of our gathering system to an intrastate pipeline, which is supported by a 20-year utility contract. Finally, we have executed new agreements for a phase one expansion of our Hainesville Gathering System, which will result in a multi-year investment to connecting increasing Hainesville supply to growing LNG export demand. Turn to slide 12 and I'll discuss in greater detail our newly announced Hainesville system expansion. The fundamentals around our Hainesville system continue to be strong, with expected growth in both production and LNG exports. I'm excited to announce that we have executed agreements with the largest Hainesville producer, Southwestern Energy, that will expand the system over a multi-year timeline. The expansion includes $500 million a day of gathering, $400 million a day of incremental treating, and $300 million a day of additional leak capacity that will utilize electric compression. This expansion preserves the option for a certified, carbon-neutral, well-head-to-water pathway for our customer. The second phase of the expansion is in advanced development, and we are currently in active discussions with multiple counterparties. we will update you on phase two as it evolves. Let's turn to slide 13 now. Looking ahead at our organic growth opportunity set, we are highly confident in our commercial ability to continue advancing projects. In the pipeline segment, we remain highly focused on our phase two Gainesville expansion and continued commercial discussions with participants in the recent Nexus Open season. On Millennium, we are focused on renewing our anchorship or contracts And we recently executed approximately $400 million a day of long-term capacity renewals with these customers. In the gathering segment, we looked to build upon the success we had and continue to grow and add new third parties to our Blue Union system. We are also working on new opportunities in Appalachia on our Appalachian Gathering and Tioga Gathering systems. Finally, we are very excited about developments in our emerging third platform, which represents accretive energy transition investments. We continue to advance our Louisiana carbon capture and storage project towards the EPA class six permanent application filing and continue to work with our strategic partner on evaluating and advancing multiple hydrogen project development opportunities. Let's turn to slide 14, and I'd like to discuss aspects of our ESG program in more detail. DCAM continues to focus on developing an industry-leading ESG program. I've already addressed our environmental focus, so I'd like to touch on social and governance dimensions. On the social front, we've established a $4 million community charitable fund. This along with our employee volunteerism program, will enable DTM to be a highly engaged community partner across our entire operational footprint. We believe this is a hallmark of successful companies. Additionally, we implemented a new talent management program that improves the way we attract and retain diverse talent. And we continue to strengthen our safety culture, leveraging industry-leading best practices. On the governance side, VTM is set up with strong C-Corp governance led by a highly engaged, independent, and diverse board with an established ESG subcommittee. Our management team's long-term incentive plan is tied to total shareholder return, so our success and our shareholder success are firmly linked. Finally, as I mentioned earlier, we will be publishing our inaugural sustainability report in the second quarter of this year. That will provide a complete picture of all these important elements. Let's now turn to slide 15 and I'll wrap up the presentation. In summary, we had a great first year and are firmly on track to deliver accretive growth in 2022 and 2023. We have a focused strategy and a robust set of development opportunities that positions us for distinctive performance over the long term. And with that, we can now open up the line for questions.