DT Midstream, Inc. — 2021 Form 10-K
Business context and reporting period. This annual report covers the fiscal year ended December 31, 2021. DT Midstream owns and operates natural-gas pipelines, storage and gathering assets, with two reportable segments: Pipeline and Gathering. The company became an independent, NYSE-listed company on July 1, 2021, following its spin-off from DTE Energy. Pre-separation results are carve-out financials based on DTE Energy’s records and allocations, and may not reflect costs or results as a standalone company. The filing reports annual figures, not separate fourth-quarter results.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Operating revenue | $840 million | $754 million |
| Operating income | $402 million | $414 million |
| Net income attributable to DT Midstream | $307 million | $312 million |
| Diluted earnings per share | $3.16 | $3.23 |
| Cash from operating activities | $572 million | $597 million |
| Capital expenditures | $140 million | $518 million |
| Cash and cash equivalents at year-end | $132 million | $42 million |
| Total assets | $8.17 billion | $8.34 billion |
Revenue grew approximately 11%, while operating income and net income attributable to the company fell approximately 3% and 2%, respectively. Operating margin was approximately 48%, compared with 55% in 2020; net margin was approximately 37%, compared with 41%. These margins are calculated from reported revenue and income.
Pipeline revenue was $307 million, up $41 million, and segment net income attributable to DT Midstream was $178 million, up $23 million. Gathering revenue was $534 million, up $45 million, while segment net income fell $28 million to $129 million. Gathering operating costs rose, and the segment recorded $17 million of net asset losses and impairments, including a $19 million loss on a Utica-region note receivable.
Net cash used in financing was $605 million. Investing activities generated $123 million, primarily reflecting collection of a $263 million DTE Energy receivable, alongside $140 million of capital spending. These separation-related and working-capital movements affect interpretation of cash-flow comparisons.
Debt, liquidity and shareholder returns
At December 31, 2021, debt principal was $3.095 billion: $2.1 billion of senior notes due 2029 and 2031 and a $995 million term loan due 2028. The notes bear fixed rates of 4.125% and 4.375%; the term loan is floating-rate at LIBOR plus 2.00%, subject to a 0.50% LIBOR floor. Reported long-term debt, net of discounts, issuance costs and current portion, was $3.036 billion. Cash was $132 million.
The $750 million revolving credit facility had no borrowings and $8 million of letters of credit outstanding, leaving $742 million available; reported total available liquidity, including cash, was approximately $874 million. The company reported compliance with debt covenants, with net leverage of 3.9x, debt-service coverage of 5.9x and interest coverage of 6.0x. Cash dividends declared were $1.20 per share for 2021; a $0.64-per-share dividend was declared in February 2022, payable in April.
Material changes and management outlook
- The spin-off shifted the company from DTE Energy cash management and short-term related-party borrowings to standalone debt and a revolving facility. It issued $2.1 billion of notes and entered a $1.0 billion term loan in June 2021; proceeds funded repayment of DTE borrowings and a $501 million special dividend to DTE Energy.
- 2021 revenue growth reflected a full year of LEAP operations and higher Blue Union and Appalachia Gathering System revenues. Pipeline earnings benefited from stronger equity-method investee earnings. Gathering earnings declined amid increased operating costs and the Utica note-receivable impairment.
- Management expected 2022 operating cash flow of $605–$655 million and capital expenditures, including equity-method contributions, of $350–$400 million. It cited future growth opportunities in Haynesville expansions, Stonewall, Appalachia and equity-method investments, without providing earnings or revenue guidance.
- Management’s strategy emphasizes long-term firm contracts, disciplined capital spending and growth in natural-gas infrastructure. It also announced a net-zero carbon emissions goal by 2050, a targeted 30% reduction in the next decade, and plans involving carbon capture, hydrogen and methane monitoring.
Risks, contingencies and unusual items
- Customer concentration is material: Southwestern represented approximately 67% and Antero 10% of 2021 operating revenue. Their production, creditworthiness, contract renewals and ability to meet obligations may affect volumes and cash flows.
- Risks include natural-gas production and demand changes, commodity-price effects on customers, pipeline outages and aging infrastructure, third-party interconnect dependence, construction and permitting delays, tighter safety and environmental rules, climate-related transition and physical risks, cyber incidents, inflation, interest rates and access to capital.
- Debt and dividend restrictions, variable-rate exposure, and potential indemnification obligations under the tax matters agreement following the spin-off could constrain financial and strategic flexibility. The filing warns that a change in ownership within the relevant period could threaten tax-free treatment and trigger indemnification exposure.
- The company accrued $20 million for future slope restoration work. It assumed guarantees valued at $7 million, with payment considered remote, and disclosed a potential Vector Pipeline credit-facility commitment of up to $55 million, drawable only for a catastrophic event and considered remote. Management said reasonably possible legal losses were not expected to materially affect results.
- The independent auditor issued an unqualified opinion. Its critical audit matter concerned accounting for the NEXUS equity-method investment, carried at $1.348 billion. The company reported no goodwill impairment and no material COVID-19 financial-statement adjustments for 2021.
Most important facts for investors to verify
- Whether the high revenue concentration in Southwestern and Antero is supported by durable contracts, minimum-volume commitments and adequate credit protections.
- Whether reported 2021 cash flow and earnings are representative after accounting for the spin-off, DTE allocations and one-time separation-related cash movements and costs.
- Whether planned 2022 capital spending and expansion projects can be completed on time and within budget, and generate contracted returns.
- How floating-rate debt, refinancing needs, covenant headroom and dividend restrictions may affect cash available for growth and shareholder distributions.
- Whether the $19 million Utica note-receivable loss signals additional credit or production risk, and whether pipeline safety, environmental and climate-related compliance costs could exceed current expectations.