DT Midstream Announces Closing of Midwest Pipeline Acquisition

Rhea-AI Summary

DT Midstream (NYSE: DTM) has completed the acquisition of three FERC-regulated natural gas transmission pipelines from ONEOK for $1.2 billion in cash, effective December 31, 2024. The acquisition includes Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission, providing 100% operating ownership of these assets. The combined pipeline network spans 1,300 miles across seven Midwest states with a total capacity exceeding 3.7 Bcf/d. The acquisition aligns with DTM's pure play natural gas strategy and increases pipeline segment revenue, supported by take-or-pay contracts with utility customers.

Positive

• Acquisition of three FERC-regulated pipelines for $1.2 billion
• Total pipeline capacity of 3.7 Bcf/d across 1,300 miles
• Revenue backed by take-or-pay contracts with utility customers
• 100% operating ownership of acquired assets
• Geographic expansion across seven Midwest states

Negative

• Significant cash outlay of $1.2 billion affecting balance sheet
• Integration costs and risks associated with merging operations

Insights

Financial Analyst

The $1.2 billion acquisition marks a substantial strategic expansion for DT Midstream, significantly enhancing its pipeline infrastructure portfolio. The deal's value represents approximately 12% of DTM's market capitalization, making it a material transaction that strengthens the company's market position in the Midwest region. The acquisition of these FERC-regulated assets with take-or-pay contracts provides stable, predictable cash flows - a important factor for midstream companies. The combined 3.7 Bcf/d capacity across 1,300 miles of pipeline infrastructure provides immediate scale benefits and revenue diversification. The transaction's timing, closing at year-end, suggests careful tax planning and positions DTM for strong revenue recognition starting in 2025. Utility customers typically maintain high credit ratings, which reduces counterparty risk and enhances the quality of future cash flows.

Energy Infrastructure Specialist

The strategic acquisition of Guardian Pipeline, Midwestern Gas Transmission and Viking Gas Transmission represents a significant expansion of DTM's regulated asset base. FERC-regulated pipelines typically generate stable returns with built-in inflation protection through rate cases. The 3.7 Bcf/d capacity is particularly valuable in the Midwest market, where natural gas demand shows strong seasonality and requires reliable infrastructure for utility services. The seven-state footprint enhances regional diversification and creates potential synergies with existing operations. Take-or-pay contracts provide revenue stability regardless of actual throughput volumes, essentially creating utility-like cash flows. The Tulsa office addition suggests retention of operational expertise, critical for maintaining service quality and regulatory compliance. The timing aligns with increased focus on natural gas infrastructure reliability in the Midwest region.

Market Research Analyst

This acquisition positions DTM as a stronger pure-play natural gas infrastructure company, enhancing its appeal to investors seeking exposure to regulated midstream assets. The transaction's structure as an all-cash deal at $1.2 billion demonstrates DTM's financial flexibility and confidence in the assets' value proposition. The expanded pipeline network strengthens DTM's competitive position in the Midwest, where natural gas demand remains robust due to industrial activity and residential heating needs. The take-or-pay contract structure with utility customers provides revenue visibility and should support stable dividend payments to shareholders. The integration of these assets is expected to be relatively smooth given their operational nature and the retention of key personnel. This transaction reinforces DTM's focus on regulated natural gas infrastructure, which typically commands higher valuation multiples compared to gathering and processing assets.

DETROIT, Dec. 31, 2024 (GLOBE NEWSWIRE) -- DT Midstream, Inc. (NYSE: DTM) today announced that it has successfully closed on the acquisition of a portfolio of three FERC-regulated natural gas transmission pipelines from ONEOK, Inc. (NYSE: OKE), effective as of 11:59 p.m. CT on Dec. 31, 2024, for a total cash consideration of $1.2 billion.

“The bolt-on acquisition of these premier pipelines is fully aligned with our pure play natural gas strategy,” said David Slater, DT Midstream President and CEO. “This acquisition also increases the revenue contribution from our pipeline segment, supported by take-or-pay contracts with strong credit quality utility customers.”

“We are happy to have on board the team members that support these assets, both in field operations and in DT Midstream’s new Tulsa office,” added Slater.

DT Midstream has acquired 100% operating ownership in Guardian Pipeline, Midwestern Gas Transmission and Viking Gas Transmission. The acquired 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.

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.

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 realize the anticipated benefits of the transaction described herein (“Transaction”), and our ability to manage the risks of the 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 assets did DT Midstream (DTM) acquire in the December 2024 pipeline acquisition?

DT Midstream acquired three FERC-regulated natural gas transmission pipelines from ONEOK: Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission, with a total capacity of 3.7 Bcf/d spanning 1,300 miles across seven Midwest states.

How much did DT Midstream (DTM) pay for the Midwest pipeline acquisition?

DT Midstream paid $1.2 billion in cash for the pipeline acquisition from ONEOK.

What is the total capacity and coverage of DTM's newly acquired pipeline network?

The acquired pipeline network has a total capacity of more than 3.7 Bcf/d and covers approximately 1,300 miles across seven states in the Midwest market region.

How are the revenues structured for DTM's newly acquired pipeline assets?

The pipeline revenues are supported by take-or-pay contracts with strong credit quality utility customers.

When did DT Midstream (DTM) close the ONEOK pipeline acquisition?

DT Midstream closed the pipeline acquisition at 11:59 p.m. CT on December 31, 2024.