DT Midstream, Inc. — 2023 Form 10-K
Business and reporting period. DT Midstream owns, operates, and develops natural gas gathering, pipeline, and storage assets, reported in Pipeline and Gathering segments. This filing covers the fiscal year ended December 31, 2023; it is an annual report, not a standalone fourth-quarter results release.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Operating revenue | $922 million | $920 million | Up $2 million |
| Operating income | $471 million | $478 million | Down $7 million |
| Net income attributable to DT Midstream | $384 million | $370 million | Up $14 million |
| Diluted earnings per share | $3.94 | $3.81 | Up $0.13 |
| Operating cash flow | $798 million | $725 million | Up $73 million |
| Plant and equipment expenditures | $772 million | $338 million | Up $434 million |
Operating margin was approximately 51.1%, versus 52.0% in 2022; net income attributable to the company as a share of revenue was approximately 41.6%, versus 40.2%. Cash flow from operations less plant and equipment expenditures was approximately $26 million, before other investing activity and distributions.
Segment results: Pipeline revenue rose to $377 million from $339 million, and attributable net income increased to $278 million from $228 million. Gathering revenue fell to $545 million from $581 million, and attributable net income declined to $106 million from $142 million. The Michigan System’s conversion from gathering to dry-gas transmission service shifted its 2023 results to Pipeline; prior-year segment presentation was not revised.
Balance sheet and liquidity: At year-end, cash was $56 million; current assets were $272 million and current liabilities $434 million. Long-term debt, net, was $3.065 billion, with $165 million of Revolving Credit Facility borrowings classified as short-term. Debt principal totaled $3.099 billion, comprising $2.1 billion of unsecured notes, $600 million of secured notes, and a $399 million term loan. The company reported approximately $875 million of available liquidity, including cash and available revolver capacity. It reported compliance with its debt covenants.
Material changes, outlook, and commentary
- Revenue was broadly flat, while attributable earnings and operating cash flow increased. Higher Pipeline revenue and equity-method earnings helped offset lower Gathering revenue.
- Blue Union Gathering revenue declined by $50 million, mainly from lower deficiency fees, production-cost recoveries, rates, and volumes. Appalachia Gathering revenue increased by $21 million, primarily from new expansion-related contracts.
- A $371 million net distribution from NEXUS followed its issuance of $750 million of notes; DT Midstream used the distribution to repay revolver borrowings. Equity-method investment balances declined to $1.762 billion from $2.200 billion.
- Capital expenditures, including contributions to equity-method investees, were $779 million in 2023. Management expects approximately $350 million to $435 million in 2024.
- Management expects long-term dividend growth of 5% to 7%, subject to board approval, cash flows, capital needs, financial condition, and covenant requirements. A quarterly dividend of $0.735 per share was declared in February 2024.
- Growth activity included LEAP expansions, Appalachia and Blue Union projects, Ohio Utica Gathering facilities, and a new LEAP interconnect expected in the second quarter of 2024. Management also cited carbon-capture, hydrogen, and other emissions-reduction opportunities; its stated goals include a 30% Scope 1 emissions reduction from the 2021 baseline by 2030 and net-zero carbon emissions by 2050.
Risks, contingencies, and unusual items
- Southwestern Energy represented approximately 60% of operating revenue in 2023. Reduced production, customer credit deterioration, or failure to renew contracts could materially affect results.
- Other key risks include natural-gas supply and demand changes, execution and cost risks on projects, third-party pipeline disruptions, aging infrastructure, interest-rate exposure, cyberattacks, and evolving pipeline-safety, environmental, and climate regulation. The company had $564 million of floating-rate debt at year-end.
- The company recorded a $6 million reduction in its slope-restoration liability and operating expense; the remaining accrual was $13 million. It reported no guarantees of other parties’ obligations and said reasonably possible losses from legal matters were not expected to materially adversely affect the business. Maximum potential indemnification under surety bonds was $32 million; a $53 million Vector credit-facility payout was considered remote.
- No goodwill impairment was identified in the 2023 annual test. The 2022 comparison included a $17 million gain on sale of Utica assets and $13 million of debt-extinguishment and modification losses; these items affect year-over-year comparisons.
- The auditor issued an unqualified opinion on the financial statements and internal control over financial reporting. The company reported no material cybersecurity incident in 2023.
Important facts for investors to verify
- How Southwestern Energy’s financial condition, production plans, and contract commitments affect DT Midstream’s concentrated revenue exposure.
- Whether 2024 capital spending stays within the $350 million–$435 million outlook and projects enter service on schedule and within budget.
- Whether lower Blue Union revenues persist, and how Gathering expansion contracts and utilization develop.
- How interest rates and debt refinancing needs affect interest expense, liquidity, and dividend capacity.
- Whether announced emissions-reduction and carbon-capture initiatives require additional capital or face permitting, regulatory, or execution constraints.