DT Midstream, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. DT Midstream operates natural gas pipeline, storage and gathering assets, plus interests in pipeline joint ventures. It became an independent public company on July 1, 2021; Q1 2021 results are presented on a pre-separation carve-out basis and include DTE Energy allocations.
Financial performance and position
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Operating revenue | $215 million | $197 million |
| Operating income | $104 million | $100 million |
| Net income attributable to DT Midstream | $81 million | $78 million |
| Diluted EPS | $0.84 | $0.80 |
| Net cash from operating activities | $234 million | $163 million |
| Plant and equipment expenditures | $20 million | $27 million |
- Revenue grew $18 million year over year, with Gathering revenue up $16 million to $138 million and Pipeline revenue up $2 million to $77 million.
- Net income attributable to the company rose $3 million. Pipeline segment net income increased to $48 million from $42 million; Gathering segment net income declined to $33 million from $36 million.
- Operating cash flow increased $71 million, driven mainly by working-capital changes and higher dividends from equity-method investees. Investing cash outflow was $17 million; financing cash outflow was $68 million. Cash increased $149 million to $281 million.
- At March 31, total debt principal was $3.092 billion, comprising $2.1 billion of senior notes and a $992 million variable-rate term loan. The balance-sheet carrying amount of long-term debt, net of current portion, was $3.033 billion.
- Liquidity was approximately $1 billion: $281 million cash and $742 million net revolver availability. The $750 million revolving facility had no borrowings and $8 million of letters of credit outstanding.
- Declared dividend was $0.64 per share for Q1, or $62 million; it was payable in April. The company paid $0.60 per share during Q1 for the prior quarter.
Changes, outlook and risks
- Compared with Q1 2021, revenue growth reflected higher Gathering volumes and production-related revenue, particularly at Blue Union. Gathering operating and maintenance expense rose, including from higher volumes, variable operating costs and planned maintenance. The prior-year quarter included about $10 million of separation-related costs within operating and maintenance, versus lower separation costs in Q1 2022.
- Compared with Q4 2021, revenue fell $8 million and net income attributable to DT Midstream fell $6 million. Management attributed the revenue decline to both segments, including reduced short-term Stonewall contracts and lower Blue Union and Susquehanna production-related revenue.
- Management expects 2022 operating cash flow of approximately $605–$655 million and capital expenditures, including equity-method contributions, of approximately $350–$400 million. It expects to continue regular dividends, subject to board approval, results, cash needs and covenant compliance. No full-year earnings or revenue guidance is provided in the filing.
- Management cites long-term customer agreements and asset connectivity as support for growth, and identifies potential expansions involving LEAP, Blue Union, Stonewall and Appalachia Gathering. The company also states a goal of net-zero carbon emissions by 2050.
- On April 11, 2022, after quarter-end, the company issued $600 million of 4.300% senior secured notes due 2032 and used net proceeds to partially repay the term loan, reducing floating-rate exposure. At quarter-end, the variable-rate term loan was $992 million, about 33% of total debt; the company reported compliance with its debt covenants.
- Key risks include dependence on production and volumes from significant customers, including non-investment-grade Southwestern and Antero; customer credit and counterparty risk; interest-rate exposure; operating and environmental liabilities; access to capital; and execution of expansion projects. Management states that reasonably possible losses from current legal matters are not expected to materially adversely affect the company. A $20 million accrual covers estimated pipeline slope-restoration costs; payment under assumed guarantees and a potential Vector credit facility draw were considered remote.
Important facts for investors to verify
- Whether operating cash flow and planned 2022 capital spending develop within management’s stated ranges, and how much cash is available after dividends and debt service.
- Customer production, gathered volumes, contract renewals and credit protection, particularly for key Haynesville and Marcellus/Utica customers.
- The effect of the 2032 notes issuance and term-loan repayment on debt levels, interest expense, floating-rate exposure and covenant headroom.
- Progress, cost and timing of announced expansion opportunities, alongside environmental compliance and slope-restoration spending.
- Comparability of year-over-year results: Q1 2021 was a pre-separation carve-out period and included DTE allocations, so reported changes do not reflect identical standalone cost structures.