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DT Midstream CEO details growth, decarbonization targets

DT Midstream management aims for a clean and transparent business structure.

➤ Growth plans will focus on building out existing Haynesville and Appalachia systems.

➤ Carbon capture and sequestration is a "very viable" opportunity.

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DT Midstream CEO David Slater

Source: DT Midstream Inc.

On July 1, DT Midstream Inc. completed its spinoff from multi-utility DTE Energy Co. and created a new pure-play natural gas midstream company with a portfolio that includes 900 miles of regulated interstate gas pipelines, 290 miles of intrastate lateral pipelines, more than 1,000 miles of gathering lines and 94 Bcf of regulated gas storage capacity in Michigan.

S&P Global Market Intelligence spoke with DT Midstream CEO David Slater about the firm's plans for expansion and decarbonization. Slater said carbon capture and sequestration are primary focuses. The following conversation is edited for length and clarity.

S&P Global Market Intelligence: The public midstream sector has not seen many new entrants in recent years. Why was this the right time for a spinoff?

David Slater: The strategic rationale for the spin is fairly simple: We wanted to create two pure-play companies. One of the distinctive things about DT Midstream is we are growing last year to this year, and we're going to grow again this year to next year, and that is a function of the quality of the portfolio that we have. Our assets really connect the world-class Appalachia and Haynesville basins to high-quality markets like LNG export facilities on the Gulf Coast and a lot of the strong, durable markets in the northern part of the country.

What differentiates DT Midstream financially from other gas-focused pipeline firms?

We designed the company to have a strong financial position. We have a clean balance sheet, no debt maturities for seven years, strong and visible cash flow and our investment is self-funded. We offer a strong and durable dividend and the ability over time to de-lever the company naturally. Those are some of the distinctive features that set us apart in the sector.

The other one is that we are a C-corp with strong governance versus perhaps a master limited partnership structure. That really didn't fit into our culture of transparency.

The sector has gone through some difficulties in the past two years and has fallen out of favor. We wanted to make the company unique in the space, and we wanted to come out clean and really be attractive to investors with a stable foundation.

DT Midstream is targeting net-zero greenhouse gas emissions by 2050. How does the company plan to tackle that, and would it consider speeding up the process?

We have an interim goal of achieving 30% of those reductions by the end of this decade. I'd say there is a whole series of actions we are taking, but probably one of the most interesting ones — and the one that is percolating to the surface — is carbon capture and sequestration. We see that as very applicable to our Haynesville assets, and it is somewhat of a two-for-one for us where it would significantly move us to that carbon reduction goal that we have and also create an incremental investment opportunity for shareholders. We haven't quite gotten to the point of commercializing it yet, but it feels very viable right now. We are working through a few more details before we can go public with it.

We have very strong ESG positioning coming out of the gate, and that is partially because we're a spinoff of a company that was very mature in that area and we're able to bring that over.

This is a long journey, and what is really positive for the natural gas sector is that there are known technologies today that can move us down that road, whether it's electrifying compression and sourcing that with renewables or making sure that our network can accept lower-carbon fuels like renewable natural gas or hydrogen blends over time.

The company is spinning off from its utility parent as building new pipeline infrastructure in the U.S. becomes increasingly difficult. How does DT Midstream view its potential for growth?

We built NEXUS Gas Transmission LLC [with Enbridge Inc.] three years ago. You can see what's happening to some of the other projects trying to get built of that size and scale today, so I really see incremental additions and expansions on the existing asset base driving our growth versus large, one-off, billion-dollar-type investments.

We are seeing growth across many of our gathering systems, like Blue Union, and in some of our northern transportation pipelines, as well as our Louisiana Energy Access Project pipeline that connects the Haynesville Basin to the Gulf Coast.

Momentum for midstream sector consolidation has ramped up significantly in 2021. Would DT Midstream consider participating in that transaction market?

Our current strategy is focused on organic growth right now. Not to say that we wouldn't be open to M&A, which we've done in the past, but it would be very one-off and specific and would have to meet the return thresholds we set out for capital deployment. It's hard to predict when those opportunities will present themselves.

If there is more [consolidation] on the midstream side, I think it's going to be in those basins that are mature and declining, where companies face more challenges to growth.