DT Midstream, Inc. (NYSE: DTM) today announced that it has reached
an agreement to acquire a portfolio of three FERC-regulated natural
gas transmission pipelines from ONEOK, Inc. (NYSE: OKE) for $1.2
billion. The pipelines have a total capacity of more than 3.7 Bcf/d
with approximately 1,300 miles across seven states in the
attractive Midwest market region which is expected to experience
continued growth in power demand. The acquisition price represents
an approximately 10.5x 2025 EBITDA multiple.
Under the terms of the agreement, DT Midstream will acquire 100%
operating ownership in Guardian Pipeline, Midwestern Gas
Transmission and Viking Gas Transmission.
Guardian Pipeline, L.L.C. is an approximately 260-mile
interstate pipeline which is interconnected to DT Midstream’s
Vector Pipeline, the Chicago Hub and serves key Wisconsin demand
centers.
Midwestern Gas Transmission is an approximately 400-mile
bi-directional interstate pipeline which connects Appalachia supply
to the Midwest market region between Tennessee and the Chicago Hub.
The pipeline has an interconnection with Guardian Pipeline.
Viking Gas Transmission is an approximately 675-mile interstate
pipeline which connects key utility customers in Minnesota,
Wisconsin and North Dakota to Canadian supply at Emerson,
Manitoba.
“Expanding our scale through this bolt-on natural gas pipeline
acquisition fully aligns with our pure play natural gas strategy.
This transaction also increases the revenue contribution from our
pipeline segment, supported by take-or-pay contracts with strong
credit quality utility customers” said David Slater, President and
CEO. “We look forward to welcoming the team members that support
these premier assets, both in field operations and in DT
Midstream’s new Tulsa office,” added Slater.
Jeff Jewell, Executive Vice President and CFO of DT Midstream,
said “This transaction will be immediately accretive to
Distributable Cash Flow, improves our business profile, and adds to
the backlog of future growth opportunities.”
Transaction Details
- Transaction
consideration: $1.2 billion in cash (debt free)
- Transaction
multiple: ~10.5x 2025 Adjusted EBITDA
- Transaction
financing: Approximately $900 million in debt and approximately
$300 million in common equity
Strategic Rationale
The acquisition directly aligns with DT Midstream’s strategy of
owning natural gas assets connecting premier supply basins with key
demand centers and market regions, and with revenues supported by
take-or-pay contracts with creditworthy and diverse customers. The
transaction is expected to increase DT Midstream’s pipeline segment
to approximately 70% of Adjusted EBITDA in 2025 and will increase
the backlog of organic growth projects. Overall, the acquired
portfolio has an approximately 90% demand-pull customer base with
approximately 85% of revenues from investment-grade customers.
Closing Details
The transaction has been approved by DT Midstream's Board of
Directors and is expected to close in late 2024 or early 2025,
subject to regulatory approvals, including the expiration or
termination of the waiting period under the Hart-Scott-Rodino Act,
and other customary closing conditions.
Advisors
Barclays is serving as financial advisor and provided committed
financing in support of the acquisition, and Weil, Gotshal &
Manges LLP is serving as legal counsel to DT Midstream.
Conference Call
DT Midstream has scheduled a conference call to discuss the
transaction for 9:30 a.m. ET (8:30 a.m. CT) on Wednesday, November
20. Investors, the news media and the public may listen to a live
internet broadcast of the call at this link. The participant
toll-free telephone dial-in number in the U.S. and Canada is
800.715.9871, and the toll number is 646.307.1963; the passcode is
6629199. International access numbers are available here.
About DT Midstream
DT Midstream (NYSE: DTM) is an owner, operator and developer of
natural gas interstate and intrastate pipelines, storage and
gathering systems, compression, treatment and surface facilities.
The company transports clean natural gas for utilities, power
plants, marketers, large industrial customers and energy producers
across the Southern, Northeastern and Midwestern United States and
Canada. The Detroit-based company offers a comprehensive,
wellhead-to-market array of services, including natural gas
transportation, storage and gathering. DT Midstream is
transitioning towards net zero greenhouse gas emissions by 2050,
including a goal of achieving 30% of its carbon emissions reduction
by 2030.
Why DT Midstream Uses Adjusted EBITDA and Distributable
Cash Flow
Adjusted EBITDA is defined as GAAP net income attributable to DT
Midstream before expenses for interest, taxes, depreciation and
amortization, and loss from financing activities, further adjusted
to include the proportional share of net income from equity method
investees (excluding interest, taxes, depreciation and
amortization), and to exclude certain items the company considers
non-routine. DT Midstream believes Adjusted EBITDA is useful to the
company and external users of DT Midstream’s financial statements
in understanding operating results and the ongoing performance of
the underlying business because it allows management and investors
to have a better understanding of actual operating performance
unaffected by the impact of interest, taxes, depreciation,
amortization and non-routine charges noted in the table below. We
believe the presentation of Adjusted EBITDA is meaningful to
investors because it is frequently used by analysts, investors and
other interested parties in the midstream industry to evaluate a
company’s operating performance without regard to items excluded
from the calculation of such measure, which can vary substantially
from company to company depending on accounting methods, book value
of assets, capital structure and the method by which assets were
acquired, among other factors. DT Midstream uses Adjusted EBITDA to
assess the company’s performance by reportable segment and as a
basis for strategic planning and forecasting.
Distributable Cash Flow (DCF) is calculated by deducting
earnings from equity method investees, depreciation and
amortization attributable to noncontrolling interests, cash
interest expense, maintenance capital investment (as defined
below), and cash taxes from, and adding interest expense, income
tax expense, depreciation and amortization, certain items we
consider non-routine and dividends and distributions from equity
method investees to, Net Income Attributable to DT Midstream.
Maintenance capital investment is defined as the total capital
expenditures used to maintain or preserve assets or fulfill
contractual obligations that do not generate incremental earnings.
We believe DCF is a meaningful performance measurement because it
is useful to us and external users of our financial statements in
estimating the ability of our assets to generate cash earnings
after servicing our debt, paying cash taxes and making maintenance
capital investments, which could be used for discretionary purposes
such as common stock dividends, retirement of debt or expansion
capital expenditures.
DT Midstream does not forecast net income as it cannot, without
unreasonable efforts, estimate or predict with certainty the
components of net income. These components, net of tax, may
include, but are not limited to, impairments of assets and other
charges, divestiture costs, acquisition costs, or changes in
accounting principles. All of these components could significantly
impact such financial measures. At this time, DT Midstream is not
able to estimate the aggregate impact, if any, of these items on
future period reported earnings. Accordingly, DT Midstream is not
able to provide a corresponding GAAP equivalent for Adjusted
EBITDA.
Forward-looking Statements
This release contains statements which, to the extent they are
not statements of historical or present fact, constitute
“forward-looking statements” under the securities laws. These
forward-looking statements are intended to provide management’s
current expectations or plans for our future operating and
financial performance, business prospects, outcomes of regulatory
proceedings, market conditions, and other matters, based on what we
believe to be reasonable assumptions and on information currently
available to us.
Forward-looking statements can be identified by the use of words
such as “believe,” “expect,” “expectations,” “plans,” “strategy,”
“prospects,” “estimate,” “project,” “target,” “anticipate,” “will,”
“should,” “see,” “guidance,” “outlook,” “confident” and other words
of similar meaning. The absence of such words, expressions or
statements, however, does not mean that the statements are not
forward-looking. In particular, express or implied statements
relating to future earnings, cash flow, results of operations, uses
of cash, tax rates and other measures of financial performance,
future actions, conditions or events, potential future plans,
strategies or transactions of DT Midstream, and other statements
that are not historical facts, are forward-looking statements.
Forward-looking statements are not guarantees of future results
and conditions, but rather are subject to numerous assumptions,
risks, and uncertainties that may cause actual future results to be
materially different from those contemplated, projected, estimated,
or budgeted. Many factors may impact forward-looking statements of
DT Midstream including, but not limited to, the following: changes
in general economic conditions, including increases in interest
rates and associated Federal Reserve policies, a potential economic
recession, and the impact of inflation on our business; industry
changes, including the impact of consolidations, alternative energy
sources, technological advances, infrastructure constraints and
changes in competition; global supply chain disruptions; actions
taken by third-party operators, processors, transporters and
gatherers; changes in expected production from Expand Energy and
other third parties in our areas of operation; demand for natural
gas gathering, transmission, storage, transportation and water
services; the availability and price of natural gas to the consumer
compared to the price of alternative and competing fuels; our
ability to successfully and timely implement our business plan; our
ability to complete organic growth projects on time and on budget;
our ability to finance, complete, or successfully integrate
acquisitions; the price and availability of debt and equity
financing; our ability to close the pending transaction described
herein (the “Pending Transaction”), the anticipated timing and
terms of the Pending Transaction, our ability to realize the
anticipated benefits of the Pending Transaction, and our ability to
manage the risks of the Pending Transaction; restrictions in our
existing and any future credit facilities and indentures; the
effectiveness of our information technology and operational
technology systems and practices to detect and defend against
evolving cyber attacks on United States critical infrastructure;
changing laws regarding cybersecurity and data privacy, and any
cybersecurity threat or event; operating hazards, environmental
risks, and other risks incidental to gathering, storing and
transporting natural gas; geologic and reservoir risks and
considerations; natural disasters, adverse weather conditions,
casualty losses and other matters beyond our control; the impact of
outbreaks of illnesses, epidemics and pandemics, and any related
economic effects; the impacts of geopolitical events, including the
conflicts in Ukraine and the Middle East; labor relations and
markets, including the ability to attract, hire and retain key
employee and contract personnel; large customer defaults; changes
in tax status, as well as changes in tax rates and regulations; the
effects and associated cost of compliance with existing and future
laws and governmental regulations, such as the Inflation Reduction
Act; changes in environmental laws, regulations or enforcement
policies, including laws and regulations relating to climate change
and greenhouse gas emissions; ability to develop low carbon
business opportunities and deploy greenhouse gas reducing
technologies; changes in insurance markets impacting costs and the
level and types of coverage available; the timing and extent of
changes in commodity prices; the success of our risk management
strategies; the suspension, reduction or termination of our
customers’ obligations under our commercial agreements; disruptions
due to equipment interruption or failure at our facilities, or
third-party facilities on which our business is dependent; the
effects of future litigation; and the risks described in our Annual
Report on Form 10-K for the year ended December 31, 2023 and our
reports and registration statements filed from time to time with
the SEC.
The above list of factors is not exhaustive. New factors emerge
from time to time. We cannot predict what factors may arise or how
such factors may cause actual results to vary materially from those
stated in forward-looking statements, see the discussion under the
section entitled “Risk Factors” in our Annual Report for the year
ended December 31, 2023, filed with the SEC on Form 10-K and any
other reports filed with the SEC. Given the uncertainties and risk
factors that could cause our actual results to differ materially
from those contained in any forward-looking statement, you should
not put undue reliance on any forward-looking statements.
Any forward-looking statements speak only as of the date on
which such statements are made. We are under no obligation to, and
expressly disclaim any obligation to, update or alter our
forward-looking statements, whether as a result of new information,
subsequent events or otherwise.
Investor Relations
Todd Lohrmann, DT Midstream, 313.774.2424
investor_relations@dtmidstream.com
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