CORRECTION - DT Midstream Announces $1.2 Billion Acquisition of Strategic Midwest FERC-Regulated Natural Gas Pipelines
DT Midstream (NYSE: DTM) has announced a $1.2 billion acquisition of three FERC-regulated natural gas transmission pipelines from ONEOK. The portfolio includes Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission, with a total capacity exceeding 3.7 Bcf/d across seven Midwest states. The acquisition represents a 10.5x 2025 EBITDA multiple and will be financed through $900 million in debt and $300 million in common equity. The transaction is expected to increase DTM's pipeline segment to approximately 70% of Adjusted EBITDA in 2025, with about 90% demand-pull customer base and 85% of revenues from investment-grade customers. Closing is anticipated in late 2024 or early 2025.
DT Midstream (NYSE: DTM) ha annunciato un acquisizione di 1,2 miliardi di dollari di tre gasdotti regolati dalla FERC da ONEOK. Il portafoglio include Guardian Pipeline, Midwestern Gas Transmission e Viking Gas Transmission, con una capacità totale superiore a 3,7 Bcf/d distribuita in sette stati del Midwest. L'acquisizione rappresenta un multiplo di 10,5 volte l'EBITDA del 2025 e sarà finanziata tramite 900 milioni di dollari in debito e 300 milioni di dollari in equity comune. Si prevede che la transazione aumenterà il segmento di gasdotti di DTM a circa il 70% dell'EBITDA aggiustato nel 2025, con una base di clienti che trae circa il 90% della domanda e l'85% dei ricavi provenienti da clienti con rating di investimento. La chiusura è prevista per la fine del 2024 o all'inizio del 2025.
DT Midstream (NYSE: DTM) ha anunciado una adquisición de 1.200 millones de dólares de tres gasoductos regulados por la FERC de ONEOK. El portafolio incluye Guardian Pipeline, Midwestern Gas Transmission y Viking Gas Transmission, con una capacidad total que supera 3,7 Bcf/d en siete estados del Medio Oeste. La adquisición representa un múltiplo de 10,5 veces el EBITDA de 2025 y se financiará a través de 900 millones de dólares en deuda y 300 millones de dólares en capital común. Se espera que la transacción aumente el segmento de gasoductos de DTM a aproximadamente el 70% del EBITDA ajustado en 2025, con una base de clientes que genera aproximadamente el 90% de la demanda y el 85% de los ingresos provenientes de clientes con grado de inversión. Se anticipa que el cierre ocurra a finales de 2024 o principios de 2025.
DT Midstream (NYSE: DTM)는 ONEOK로부터 세 개의 FERC 규제 천연 가스 전송 파이프라인에 대한 12억 달러 인수를 발표했습니다. 포트폴리오에는 Guardian Pipeline, Midwestern Gas Transmission, Viking Gas Transmission이 포함되어 있으며, 총 용량은 3.7 Bcf/d를 초과하고 있습니다. 인수는 2025년 EBITDA 10.5배에 해당하며, 9억 달러의 부채와 3억 달러의 일반 주식을 통해 자금을 조달할 예정입니다. 이번 거래는 DTM의 파이프라인 부문을 2025년 조정 EBITDA의 약 70%로 증가시킬 것으로 예상되며, 약 90%는 수요 기반 고객이며, 85%의 수익은 투자 등급 고객으로부터 발생합니다. 거래 마감은 2024년 말 또는 2025년 초로 예상됩니다.
DT Midstream (NYSE: DTM) a annoncé une acquisition de 1,2 milliard de dollars de trois pipelines de transmission de gaz naturel régulés par la FERC auprès de ONEOK. Le portefeuille comprend Guardian Pipeline, Midwestern Gas Transmission et Viking Gas Transmission, avec une capacité totale dépassant 3,7 Bcf/d répartie sur sept États du Midwest. L'acquisition représente un multiple de 10,5 fois l'EBITDA 2025 et sera financée par 900 millions de dollars de dettes et 300 millions de dollars en capital commun. La transaction devrait faire grimper le segment des pipelines de DTM à environ 70 % de l'EBITDA ajusté en 2025, avec environ 90 % de la clientèle tirée par la demande et 85 % des revenus provenant de clients de qualité investissement. La clôture est prévue pour la fin 2024 ou le début 2025.
DT Midstream (NYSE: DTM) hat eine Akquisition in Höhe von 1,2 Milliarden Dollar von drei FERC-regulierten Erdgastransmissionspipelines von ONEOK angekündigt. Das Portfolio umfasst Guardian Pipeline, Midwestern Gas Transmission und Viking Gas Transmission, mit einer Gesamtkapazität von über 3,7 Bcf/d in sieben Bundesstaaten des Mittleren Westens. Die Akquisition entspricht einem Multiple von 10,5x des EBITDA von 2025 und wird durch 900 Millionen Dollar an Schulden und 300 Millionen Dollar an Stammaktien finanziert. Es wird erwartet, dass die Transaktion den Pipeline-Segmentanteil von DTM auf etwa 70% des bereinigten EBITDA im Jahr 2025 erhöht, mit einer Kundenbasis, die etwa 90% aus Nachfrage zieht, und 85% der Einnahmen aus Kunden mit Investment-Grade. Der Abschluss wird für Ende 2024 oder Anfang 2025 erwartet.
- Acquisition increases pipeline segment to 70% of Adjusted EBITDA by 2025
- 85% of revenues come from investment-grade customers
- 90% demand-pull customer base provides stable revenue stream
- Transaction will be immediately accretive to Distributable Cash Flow
- Assets include 1,300 miles of pipeline infrastructure across seven states
- Significant debt financing of $900 million required
- Potential shareholder dilution from $300 million equity issuance
- 10.5x EBITDA multiple might be considered relatively high
Insights
This
The transaction will significantly enhance DTM's pipeline segment to
The acquisition of Guardian, Midwestern and Viking pipelines represents a strategic consolidation in the Midwest natural gas infrastructure. These assets' interconnections with DTM's existing Vector Pipeline and Chicago Hub create valuable operational synergies and enhanced market access. The 1,300-mile network across seven states positions DTM to capitalize on growing power demand in the region.
The demand-pull focus of these assets is particularly noteworthy, as it provides more stable revenue streams compared to supply-push assets. The bi-directional capability of Midwestern Gas Transmission adds operational flexibility, allowing DTM to optimize gas flows between Appalachia and Midwest markets, potentially capturing additional value during periods of regional price differentials.
In a release issued under the same headline earlier today by DT Midstream, Inc. (NYSE: DTM), please note that in the "Conference Call" paragraph of the release, the call time should be 9:30 a.m. ET (8:30 a.m. CT) on Wednesday, November 20, rather than 8:00 a.m. ET (7:00 a.m. CT) as previously stated. The corrected release follows:
DT Midstream Announces
- Three regulated natural gas transmission pipelines with total capacity of more than 3.7 Bcf/d across the Upper Midwest
- Premier assets with a high-quality demand-pull customer base
- Connected to DTM’s existing assets and strategically located to take advantage of strong power demand fundamentals
DETROIT, Nov. 19, 2024 (GLOBE NEWSWIRE) -- 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
Under the terms of the agreement, DT Midstream will acquire
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
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
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.
FAQ
What is the value of DT Midstream's pipeline acquisition from ONEOK?
Which pipelines is DT Midstream acquiring in the Midwest transaction?
How is DT Midstream financing the $1.2 billion pipeline acquisition?
When is the DT Midstream pipeline acquisition expected to close?
