Business Overview and History
DT Midstream, Inc. (NYSE: DTM) is a leading owner, operator, and developer of an integrated portfolio of natural gas midstream assets. The company provides a comprehensive array of services, including natural gas transportation, storage, and gathering, serving a diverse customer base that includes utilities, power plants, marketers, large industrial customers, and energy producers across the Southern, Northeastern, and Midwestern United States and Canada.
DT Midstream was founded in 2021 when it was spun off from DTE Energy Company, positioning the company as a pure-play natural gas midstream infrastructure provider. The company's operations are organized into two main business segments: Pipeline and Gathering. The Pipeline segment encompasses interstate pipelines, intrastate pipelines, storage systems, and gathering lateral pipelines, as well as equity method investments in joint ventures that own and operate interstate pipelines. The Gathering segment focuses on owning and operating natural gas gathering systems, including related treatment plants, compression, and surface facilities.
In its early years as an independent public company, DT Midstream concentrated on integrating its diverse asset base and optimizing operations. The company successfully navigated initial challenges, including the impacts of the COVID-19 pandemic and volatility in natural gas prices, while maintaining a strong financial position and continuing to invest in organic growth projects to expand and modernize its pipeline and gathering infrastructure.
The company's origins date back to the 1990s when it began building its pipeline and gathering system assets in the Appalachian Basin. Over the years, DT Midstream has strategically expanded its footprint through both organic growth projects and strategic acquisitions, establishing itself as a critical link in the natural gas value chain.
In 2024, DT Midstream made a significant move by acquiring a portfolio of three FERC-regulated natural gas transmission pipelines from ONEOK, Inc. (NYSE: OKE) for $1.2 billion. This bolt-on acquisition, which closed at the end of 2024, expanded the company's presence in the Midwest, adding more than 3.7 Bcf/d of total capacity to its asset base. The acquired pipelines, which include the Guardian, Midwestern, and Viking Gas Transmission systems, are well-integrated with DT Midstream's existing network, providing enhanced connectivity and synergies.
Financial Snapshot
DT Midstream's financial performance has been consistently strong, with the company delivering record results in 2024. For the full year, the company reported adjusted EBITDA of $969 million, representing a 5% increase over the prior year. This growth was driven primarily by the company's Pipeline segment, which saw a 7% year-over-year increase in earnings, supported by new expansion projects and higher storage revenues.
The company's revenue for the fiscal year 2024 reached $732 million, with a net income of $291 million. Operating cash flow (OCF) for the year stood at $611 million, while free cash flow (FCF) was $203 million. In the most recent quarter (Q4 2024), DT Midstream reported revenue of $248 million, net income of $73 million, OCF of $152 million, and FCF of $62 million.
DT Midstream has achieved impressive growth since its spin-off in 2021, with a 10% compounded annual growth rate in adjusted EBITDA. This growth trajectory is expected to continue, with the company providing guidance for 2025 adjusted EBITDA in the range of $1.95 billion to $2.155 billion, representing an 18% increase from their 2024 original guidance.
Liquidity
In terms of liquidity, DT Midstream maintains a robust balance sheet, with a debt-to-EBITDA ratio of 3.1x as of the end of 2024. The company's disciplined capital allocation strategy and focus on maintaining a strong financial position has enabled it to secure an investment-grade credit rating, further bolstering its access to capital markets.
As of the latest reporting period, DT Midstream had $77 million in cash and $984 million available under its Revolving Credit Facility. The company's debt-to-equity ratio stands at 0.7609, while both its current ratio and quick ratio are 0.7277. DT Midstream expects to be upgraded to an investment-grade credit rating in 2025, with a projected year-end on-balance sheet leverage of 3.1x and proportional leverage of 3.9x.
Organic Growth Initiatives and Expansion Opportunities
DT Midstream's growth strategy is centered around capitalizing on the strong fundamentals in the natural gas midstream sector, leveraging its strategic asset footprint and customer relationships to identify and execute on organic expansion projects.
One of the company's key growth initiatives is the ongoing expansion of its Haynesville System, particularly the Louisiana Energy Access Project (LEAP) gathering system. DT Midstream has been steadily increasing the system's connectivity to both supply and demand markets, winning its fair share of the growing Haynesville production and serving the surge in Gulf Coast LNG export demand.
In addition to the Haynesville, DT Midstream is also focused on expanding its presence in the Appalachian Basin, where it continues to invest in projects such as the Stonewall and Appalachian Gathering System (AGS) expansions. These efforts allow the company to provide critical transportation and gathering services to producers in the prolific Marcellus and Utica shale plays.
Furthermore, DT Midstream is actively pursuing opportunities to serve the growing demand for natural gas-fired power generation, both in its Midwest and Appalachian footprint. The company recently announced two new projects to serve utility-scale power plants, demonstrating its ability to capitalize on the energy transition and the increasing role of natural gas in the power sector.
Balanced Portfolio and Diversified Customer Base
DT Midstream's asset portfolio is strategically balanced, with a mix of interstate pipelines, intrastate pipelines, and gathering systems. This diversification not only provides the company with exposure to various natural gas supply and demand centers but also serves to mitigate risk and enhance the stability of its cash flows.
The company's customer base is also well-diversified, with a mix of utilities, power generators, industrial users, and energy producers. No single customer accounts for more than 20% of DT Midstream's total revenue, reducing its exposure to any individual counterparty risk.
Risks and Challenges
While DT Midstream's outlook remains positive, the company faces a range of risks and challenges common to the midstream industry. These include regulatory and legislative changes, commodity price volatility, competition from other midstream providers, and the potential for operational disruptions or accidents.
The company's exposure to the natural gas market, particularly the potential for changes in production levels, demand patterns, and pricing, could also impact its financial performance. DT Midstream's ability to successfully execute on its growth projects and integrate acquired assets will also be critical to its long-term success.
Outlook and Guidance
DT Midstream has provided a positive outlook for 2025 and beyond, guiding for adjusted EBITDA growth of 18% in 2025 compared to the company's 2024 original guidance. This growth is expected to be driven by the incremental contributions from the company's recent Midwest pipeline acquisition, as well as continued activity from its major customers.
For 2026, DT Midstream has provided an early outlook range for adjusted EBITDA of $2.155 billion to $2.225 billion, with the midpoint representing a 6% increase over the 2025 guidance midpoint. The company's 2025 growth capital guidance is $400 million to $460 million, with expectations for similar levels of growth investments in 2026.
Looking further ahead, DT Midstream has a robust organic project backlog totaling $2.3 billion, which the company expects will support long-term annual adjusted EBITDA growth of 5% to 7%. This backlog includes a mix of pipeline and gathering system expansions, as well as new projects to serve the growing demand for natural gas-fired power generation.
In a show of confidence in its future prospects, DT Midstream's board declared a quarterly dividend increase to $0.82 per share, representing a 12% increase.
Segment Performance
DT Midstream's Pipeline segment has shown strong performance, with operating revenues increasing 3% for the three months ended September 30, 2024, compared to the prior quarter. This growth was primarily driven by new contracts and the expansion of the Haynesville System LEAP gathering lateral. For the nine-month period, operating revenues in this segment increased 21% year-over-year, fueled by new LEAP contracts and volumes, higher Stonewall volumes, and increased storage contracting rates at the Washington 10 Storage Complex.
The Gathering segment, while facing some challenges, has remained relatively stable. Gathering segment operating revenues increased 1% for the third quarter but decreased 1% for the nine-month period compared to the respective prior year periods. The quarterly increase was driven by higher recovery of production-related operating expenses on the Blue Union Gathering system, while the nine-month decline was primarily due to lower volumes and recovery of production costs on Blue Union Gathering, as well as lower throughput on the Susquehanna Gathering system.
Geographic Markets
DT Midstream's operations are focused on the Midwestern U.S., Eastern Canada, Northeastern U.S. regions, and the Gulf Coast region. This geographic diversity allows the company to tap into various natural gas production basins and serve key demand centers across these regions.
Conclusion
DT Midstream's strategic focus on natural gas midstream infrastructure, combined with its track record of successful organic growth and strategic acquisitions, positions the company for continued success in the years ahead. The company's diversified asset base, strong customer relationships, and disciplined financial management provide a solid foundation for future value creation. As the natural gas market continues to evolve, DT Midstream is poised to capitalize on the opportunities presented by the energy transition and the growing demand for reliable, affordable, and clean-burning natural gas.