DT Midstream(DTM) - 2022 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements This section presents the unaudited consolidated financial statements for Q2 2022, showing a net income of $94 million and total assets of $8.29 billion Consolidated Statements of Operations (Unaudited) | | Three Months Ended June 30, | Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | (In millions, except per share amounts) | 2022 | 2021 | 2022 | 2021 | | Operating revenues | $227 | $208 | $442 | $405 | | Operating Income | $137 | $86 | $241 | $186 | | Income Before Income Taxes | $127 | $92 | $236 | $202 | | Net Income | $94 | $71 | $178 | $152 | | Net Income Attributable to DT Midstream | $91 | $68 | $172 | $146 | | Diluted Earnings per Common Share | $0.93 | $0.70 | $1.77 | $1.51 | Consolidated Balance Sheet Highlights (Unaudited) | (In millions) | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $345 | $132 | | Total Current Assets | $515 | $360 | | Property, plant, and equipment, net | $3,500 | $3,490 | | Total Assets | $8,290 | $8,166 | | Total Current Liabilities | $180 | $177 | | Long-Term Debt | $3,057 | $3,036 | | Total Liabilities | $4,219 | $4,145 | | Total Equity | $4,071 | $4,021 | Consolidated Statements of Cash Flows Highlights (Unaudited) | (In millions) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $379 | $328 | | Net cash (used for)/from investing activities | ($31) | $201 | | Net cash used for financing activities | ($135) | ($534) | | Net Increase (Decrease) in Cash | $213 | ($5) | Note 1 — Description of the Business and Basis of Presentation DT Midstream operates an integrated portfolio of natural gas midstream assets, divided into Pipeline and Gathering segments, becoming an independent public company on July 1, 2021 - DT Midstream operates through two segments: Pipeline (interstate/intrastate pipelines, storage) and Gathering (gathering systems)[37] - The company completed its separation from DTE Energy on July 1, 2021, becoming an independent public company trading on the NYSE under the symbol 'DTM'[40] - Financial statements for periods prior to the separation were prepared on a carve-out basis from DTE Energy's records and include allocated corporate expenses[41][46] Note 4 — Revenue Revenue is primarily from natural gas gathering, transportation, and storage, totaling $442 million for the six months ended June 30, 2022, with $401 million in remaining performance obligations Disaggregation of Revenue by Segment (in millions) | Segment | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Pipeline | $83 | $160 | | Gathering | $144 | $282 | | Total | $227 | $442 | - As of June 30, 2022, the company had contract liabilities of $27 million, representing customer prepayments for services not yet rendered[83] - The total value of transaction price allocated to remaining performance obligations (future revenue from existing contracts) was $401 million as of June 30, 2022[87] Note 5 — Earnings Per Share and Dividends Basic and diluted earnings per share for Q2 2022 were $0.93, with the company declaring a quarterly cash dividend of $0.64 per share for Q1 and Q2 2022 Earnings Per Share (EPS) Reconciliation | (In millions, except per share) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net Income Attributable to DT Midstream | $91 | $172 | | Average shares outstanding - basic | 96.7 | 96.7 | | Average shares outstanding - diluted | 97.1 | 97.0 | | Basic EPS | $0.93 | $1.78 | | Diluted EPS | $0.93 | $1.77 | Declared Cash Dividends | Quarter Ended | Quarterly Dividend (per-share) | Total (millions) | | :--- | :--- | :--- | | March 31, 2022 | $0.64 | $62 | | June 30, 2022 | $0.64 | $62 | Note 8 — Debt In April 2022, DT Midstream issued $600 million in 4.300% senior secured notes, repaying its Term Loan Facility, with total long-term debt at $3.1 billion as of June 30, 2022 - In April 2022, the company issued $600 million in 4.300% senior secured notes due 2032[105] - Net proceeds of $593 million from the new notes were used to partially repay the existing Term Loan Facility, which eliminated required quarterly principal payments on the facility[106] - As of June 30, 2022, the company had net availability of $719 million under its $750 million Revolving Credit Facility[111] - The company was in compliance with its financial covenants, with a consolidated net leverage ratio of 3.5 to 1 (maximum allowed is 5 to 1)[112] Note 10 — Segment and Related Information This note details financial performance by segment, with the Pipeline segment generating $100 million and the Gathering segment $72 million in net income attributable to DT Midstream for the six months ended June 30, 2022 Operating Revenues by Segment (in millions) | Segment | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Pipeline | $83 | $160 | | Gathering | $144 | $282 | | Total | $227 | $442 | Net Income Attributable to DT Midstream by Segment (in millions) | Segment | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Pipeline | $52 | $100 | | Gathering | $39 | $72 | | Total | $91 | $172 | Note 11 — Subsequent Events Subsequent to quarter-end, Pennsylvania enacted a corporate income tax rate reduction, expected to favorably impact earnings, and a quarterly dividend of $0.64 per share was declared - On July 8, 2022, Pennsylvania enacted a corporate income tax rate reduction from 9.99% to 4.99% (phased in over nine years), which is expected to favorably impact future earnings[125] - On August 3, 2022, the Board of Directors declared a quarterly dividend of $0.64 per share[126] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results, highlighting revenue and net income growth in both Pipeline and Gathering segments, supported by strong liquidity and disciplined capital deployment Financial Highlights Comparison (in millions, except per share) | | Three Months Ended June 30, 2022 | Three Months Ended March 31, 2022 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Operating revenues | $227 | $215 | $442 | $405 | | Net Income Attributable to DT Midstream | $91 | $81 | $172 | $146 | | Diluted EPS | $0.93 | $0.84 | $1.77 | $1.51 | - The company's strategy is focused on disciplined capital deployment, capitalizing on asset integration, growing cash flows with long-term contracts, and developing low-carbon business opportunities with a goal of net-zero carbon emissions by 2050[151] - Anticipated total capital expenditures for 2022 are approximately $350 million to $400 million[152] Results of Operations Net income attributable to DT Midstream for Q2 2022 was $91 million, driven by increased volumes in Pipeline and higher revenues and asset gains in the Gathering segment - Pipeline segment Q2 2022 operating revenues increased by $6 million sequentially, primarily due to higher volumes on Stonewall Gas Gathering and LEAP[138] - Gathering segment Q2 2022 operating revenues increased by $6 million sequentially due to higher revenues on Blue Union and the Appalachia Gathering System[144] - Asset gains for the six months ended June 30, 2022 were driven by a $17 million gain on the sale of Utica shale assets, compared to a $19 million loss on the same assets in the prior year period[146] Capital Resources and Liquidity The company maintains robust liquidity of approximately $1.1 billion, primarily from operating cash flow and its revolving credit facility, following recent debt refinancing activities - Net cash from operating activities increased by $51 million for the six months ended June 30, 2022, compared to the same period in 2021[158] - As of June 30, 2022, the company had approximately $1.1 billion of available liquidity, comprising cash, cash equivalents, and available borrowings under its Revolving Credit Facility[170] - The company expects to pay regular cash dividends, targeting a payout ratio consistent with pure-play midstream companies[171] Quantitative and Qualitative Disclosures About Market Risk The company identifies market price, credit, and interest rate risks, with limited commodity price exposure due to long-term contracts and $399 million in floating-rate debt - The company's operations and cash flows have limited direct exposure to commodity price risk due to the use of long-term storage, gathering, and transportation contracts[183] - The company is exposed to credit risk from key customers, including sub-investment grade customers Southwestern Energy and Antero Resources[185][186] - As of June 30, 2022, the company had $399 million of floating-rate debt, representing 13% of its total debt, exposing it to interest rate risk from changes in LIBOR[187] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes in internal control over financial reporting - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2022[192] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[193] PART II — OTHER INFORMATION Legal Proceedings This section refers to Note 9 of the Consolidated Financial Statements for information on legal proceedings, which are not expected to have a material adverse effect - For information on legal proceedings, the report refers to Note 9, "Commitments and Contingencies" in the financial statements[195] Risk Factors This section directs the reader to the company's 2021 Annual Report on Form 10-K for a comprehensive discussion of significant business risks - A detailed discussion of significant risk factors is provided in Part 1, Item 1A of DT Midstream's 2021 Annual Report on Form 10-K[196] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, debt indentures, and CEO/CFO certifications - Exhibits filed include the Amended and Restated Certificate of Incorporation and Bylaws, debt indentures, and certifications by the CEO and CFO as required by the Sarbanes-Oxley Act[198]