DT Midstream, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. DT Midstream owns and operates natural gas pipeline, storage, and gathering assets, reported in Pipeline and Gathering segments. The filing is unaudited and should be read with the company’s 2022 Form 10-K.
Financial performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Operating revenue | $220 million | $215 million |
| Operating income | $110 million | $104 million |
| Net income attributable to DT Midstream | $81 million | $81 million |
| Diluted EPS | $0.84 | $0.84 |
| Cash from operating activities | $244 million | $234 million |
| Plant and equipment expenditures | $228 million | $20 million |
Revenue increased about 2% year over year, while attributable net income and diluted EPS were unchanged. Operating income rose $6 million. Interest expense increased to $38 million from $31 million, and income tax expense rose to $39 million from $25 million; the interim effective tax rate increased to 32% from 23%, primarily due to state deferred-tax remeasurements and apportionment changes.
Segment revenue was $85 million for Pipeline (up from $77 million) and $135 million for Gathering (down from $138 million). Segment net income attributable to DT Midstream was $57 million for Pipeline versus $48 million, and $24 million for Gathering versus $33 million.
Cash, debt, and liquidity
- Cash and cash equivalents were $95 million at March 31, 2023, compared with $61 million at December 31, 2022.
- Investing cash outflow was $216 million, principally reflecting higher spending on expansions at LEAP, Blue Union, and the Appalachia Gathering System. Operating cash flow less plant and equipment expenditures was approximately $16 million; this simple measure excludes other investing and financing items.
- Debt included $410 million of revolving-credit borrowings and $3.061 billion of long-term debt carrying value ($3.099 billion principal). Revolving-credit availability was $551 million after borrowings and letters of credit; reported total available liquidity, including cash, was approximately $646 million.
- Financial covenants were met: debt-service coverage 6.9x, net leverage 3.7x, and interest coverage 6.0x. No scheduled debt maturities were reported before 2028.
Material changes, outlook, and risks
- Michigan Gathering System conversion was completed, and the system began providing service under a new long-term dry-gas transmission contract; its results are now reported in Pipeline, while prior-period activity was not reclassified.
- Management estimated 2023 capital expenditures, including contributions to equity-method investees, of approximately $605 million to $690 million. No specific earnings or revenue guidance was provided.
- On April 28, 2023, NEXUS closed a $750 million senior unsecured notes offering. DT Midstream expected a $375 million distribution, less fees and expenses, by mid-May, intended for organic growth and repayment of revolver borrowings.
- Management described a strategy of disciplined capital investment, long-term contracted cash flows, and development of low-carbon opportunities; it targets net-zero carbon emissions by 2050. The company expects to pay regular dividends, subject to Board approval and financial conditions. The Q1 dividend declared was $0.69 per share.
- Key risks include dependence on customer production and demand, including Southwestern Energy; potential customer credit issues; interest-rate exposure; access to financing; environmental and operating hazards; and possible goodwill impairment if market or projected cash-flow assumptions weaken. The filing identifies no legal or environmental matter expected to materially adversely affect results; it records $19 million for future slope-restoration costs.
Investor verification points
- Confirm receipt and use of the expected $375 million NEXUS distribution and subsequent revolver balances.
- Track the pace and funding of the $605–$690 million 2023 capital program and returns from expansion projects.
- Assess whether Gathering revenue and earnings stabilize after lower Blue Union volumes and expense recoveries.
- Monitor the higher effective tax rate, interest costs, floating-rate debt, and covenant headroom.
- Review customer concentration and production trends, environmental obligations, and goodwill impairment assumptions.