Olivia Halferty: Maybe we can pivot to CCS. Do you have any details that you can share on the initial public read for the Class V test well results? And then I guess looking forward, we’ve seen a couple of recent updates from peers on the potential to further pursue additional CCS opportunities. So to what extent do you see DTM further leading into CCS? And what would you need to see on lower carbon opportunities more broadly for that to take more capital share versus the planned 60/20/20 split currently among pipeline, gathering and energy transition spend?
David Slater: Well, let’s start with our current project and maybe I’ll provide a little more color around how that test well played out. So part of drilling the test well is we did injection testing in the formation and those tests were very positive. We also logged the entire strata above and below the formation that we’re planning to sequester into and all that came back very favorable and as expected. So we’re very pleased with the results of that test well. And it’s this methodical approach that we’re taking to this development, de-risking the capital that we have at risk, leveraging our expertise from natural gas storage development and pipeline development around this particular opportunity. And just to remind everybody, this is a source to sink development.
So we’re capturing the CO2 off our treatment plants, piping it to the sequestration site, doing the injection well, and doing the permanent sequestration. So we’re doing all three components. And as I alluded to in my opening remarks, we’re observing the need for that carbon capture and sequestration solution, all three pieces. That market is expanding right now, especially with these new rules that EPA is proposing for gas-fired power plants. But we’re also seeing inbound interest from industrial clients as well that have large CO2 emissions. This approach is a very rational approach for them. So, we’re seeing that third party business emerging. It’s early days, but strategically, our view is, let’s go through our own development, do it for ourselves, prove out our ability to do it in a very thoughtful, rational way, and position ourselves for third party opportunities, especially around our geographic areas of focus.
So that would be in Louisiana, that would be in the northern part of the country in the Midwest region. And again, these regions have great geology for CCUS and we believe will be a good counterparty to many of those customers that are looking for that service to provide it.
Operator: We’ll move next to Spiro Dounis at Citi.
Spiro Dounis: Maybe just to go back to LEAP Phase 4. David, I understand your point on producers being rational here in this price environment, but I’m curious if you see any potential to upsize that expansion, or at the very least, underwrite towards the higher end of that 200 million to 400 million cubic feet a day range, just given that some of your competitor pipelines might be delayed.
David Slater: Yeah. What you just said, Spiro, is a reality that’s playing out down there right now. There’s a lot of challenges for some of these new greenfield projects. So, what we’re doing is we’re just staying very close to the market, and these are real demands that are coming. They’re under construction. It’s unfortunate that, in the backdrop, we have this really weak price environment, but it truly is building torque down there right now in the system. And just to remind the audience here, we’re really the only project or one of the few projects that have been able to expand capacity into that market segment over the last 18 months. So we’ve got a great track record of getting stuff done, getting it done timely, in fact, early in most cases.
So that gives the market a lot of confidence when they’re looking at who I want to ride on in terms of the next wave of expansion. So, we’re really trying to leverage that. I think everyone’s looked at the numbers. Everyone sees the magnitude of the incremental demand that’s coming. So there’s a lot of opportunity here. And we’re confident that we’re going to get our fair share. Can we upsize beyond the 200 million to 400 million cubic feet a day? My aspiration would be to do that. But I think it’s going to come just like the first 900 million cubic feet a day of expansion has come, in nice bite size chunks. We have the ability to do that because we’re incrementally expanding an existing system. We also have the ability to do that all the way upstream to the wellhead.
Our system is an integrated system. And again, we’ve been able to demonstrate, we’ve been able to do wellhead to treatment, treatment expansions, and then treatment to all the regional market centers the basin serves. So, feel optimistic, but this price environment is definitely putting just a pause on people making their final decisions. So we’re being patient. We’re being patient and optimistic, and we believe we have a great service and a good track record of execution.
Spiro Dounis: Second question, maybe just going to the Stonewall interconnect with MVP. Sounds like the timing for that is 2026. And it looks like a good chunk of that is underwritten by MVCs. I know there is some concern around bottlenecks at the end of MVP. And so, just curious how you’re thinking about actual volume flows in 2026. Do you see any bottlenecks? Is this going to be a phased-in approach, just any color there?
David Slater: We’re really happy with what we announced this morning. We always viewed that, if MVP gets built and it’s on the doorstep of being completed, that it’s going to unlock incremental opportunity for that integrated system, the Stonewall and Appalachia Gathering Systems. And that’s exactly how it’s played out. So I think from an MVP perspective, this interconnect will provide supply diversity to all those shippers. It’ll open up incremental producers to compete for that market. So, we believe across our whole network it’s an incremental positive. As you alluded to, in this environment, this arrangement that we have with the anchor is backed by significant firm commitments, so that we are confident that we’ll realize our returns on this project.
In terms of how we expect that to be utilized when it comes in service in 2026, again, I think that the demand in the Mid-Atlantic region is really strong and robust. And again, my view, likely under forecasted right now. So again, may there be some timing issues here in terms of how that capacity is ultimately utilized? I think time will tell. But from a financial perspective, we’re protected with those firm charges that we have embedded in the contract structure that, even if it’s a lower utilization on day one, economically, it’s not going to matter to us.
Operator: We’ll move next to Keith Stanley at Wolfe Research.
Keith Stanley: Wanted to follow up on the data centers and the inquiries you’re getting for new capacity. Is that mainly to serve newly proposed gas-fired power plants that would serve data centers, or do you see this going more as you have existing gas plants that need to increase pipeline capacity, and so there’s volume increases kind of across your existing gas pipelines.
David Slater: Keith, we’re seeing both phenomenon playing out, which is kind of why I think, generally speaking, the market is under forecasting the power demand load. These data centers are base load, right? They’re 24/7 base load power and they’re huge load centers. I personally believe that’s going to translate pretty directly back through to the gas-fired generation fleet. The renewables are already factored into the demand curve. And this incremental base load demand will trigger a much higher utilization, I believe, in the gas-fired fleet in these MISOs. So we’re seeing it on both dimensions, the existing fleet and the 2B, the next wave of incremental capacity being contemplated.
Keith Stanley: Second question, just wanted to touch base on the Louisiana pipeline crossing issue. And the most recent court decision, I guess, kind of went in your favor. One of your peers has now argued that certain Haynesville takeaway pipelines should have been FERC regulated as long-haul pipelines. Do you see any implications at all for LEAP on this, depending on how that goes at FERC, or any other thoughts you have just on this topic and how it could play out?
David Slater: Yeah, there’s been tremendous drama, right, that has been playing out in the basin for the last 18 months. So I’ll start with our particular ruling. We’re very positive and it’s favorable to us. It’s what we expected. That being said, it doesn’t impact. It did not impact phase 1. It will not impact phase 4. So, we pursued that more out of our long-term view for the industry what’s right and wrong in these servitude agreements and the interpretation of those servitude agreements. So that’s all I’ll say about that. That process is still unfolding in the courts and will continue to play out. In terms of our perspective, we’re not stepping into the drama that’s playing out in the basin because it’s not impacting us.
We’re very supportive of the legislation that’s rolling through the Louisiana at a state level that’s looking to clarify some of this for the future. And in terms of our Haynesville system, we have an integrated system. And the best analogy I’ll use is offshore activity in the Gulf of Mexico where you have an integrated system that reaches out to the wellheads, gathers from all the wellheads, treats and then brings it onshore to the major market pipes. Our system’s no different than that. It’s integrated. And as you all have seen over the last 18 months, there’s almost a one-for-one relationship between wellhead and treatment expansions and LEAP expansions. So our systems have been operational for over five years. And we’ve never had this issue emerge before.
So again, I’m not going to step into the drama, but there’s lots of volleys going back and forth over the net, if I can use that analogy. And I don’t expect that will stop until the competitive process plays out, and I’ll just leave it there.
Operator: We’ll go next to Robert Mosca at Mizuho Securities.
Robert Mosca: Just one from me. It seems like the Stonewall expansion timeline may have accelerated a little bit here. Wondering whether you think there’s some potential for similar accelerations in the Northeast and also wondering how much of the expectation for increased domestic demand to the Mid-Atlantic is baked into your CapEx outlook right now?
David Slater: Yeah, let me let me talk maybe at a high level about Appalachia and this acceleration that you’re referring to. So, I’d say when I look at Appalachia and look at our footprint, Ohio Utica, we’re really bullish, that play. As I alluded to in my opening remarks, we’re seeing incremental activity showing up around that acreage. So we’re optimistic that we’re going to see continued growth there, potentially an acceleration of growth there. So I’ll start with that. How this Mid-Atlantic market plays out here over the next 12 to 18 months as this demand becomes clearer – I know Mountain Valley is looking at an expansion. The EQT-Equitrans merger, I think, has to settle out. And we’ll get better clarity on the timing around those potential opportunities and if there’ll be upstream impact and an incremental upstream impact on Stonewall.
So I think that will all play out, but I think the fundamentals are all constructive. I guess my view is that when I look at the fundamentals, both on the supply side and on the demand side, they seem to be very constructive around our asset positioning and our asset footprint. It was alluded to earlier on the call that there’s some hydraulic capacity that we’re looking to unlock out of NEXUS. And again, that all plays into this outlook that we’re seeing right now, where we’re seeing strong fundamentals in certain parts of the basin emerging. And then this demand pool that’s emerging in the load centers, we have a nice interconnected integrated asset footprint that we can use to take advantage of all of that and piece together solutions for both producer customers and for power generators on the other side.
So, very optimistic right now that that’s going to continue to play out over the next couple of years in the portfolio.
Operator: We’ll move next to Sunil Sibal at Seaport Global Securities.
Sunil Sibal: First of all, on the investment grade credit ratings, I think previously you’ve talked about end of the year, 2024 or early 2025 as the goal. And I was just trying to see based on your comments, going into discussions with rating agencies in the next few months, how should we think about that? Do you see kind of an acceleration of a timeline? Or the previous timeline is still kind of a good timeline to think about?
David Slater: I think your timeline at later 2024, 2025, that’s our original plan. That’s what we’ve been talking to you guys about over the last few years. So, we’re set up to have our annual meeting. It’s going to be the first week of May. It’s like next week. We’re meeting with all three of the rating agencies. So again, we’re anticipating those are going to be very positive discussions, and so we’ll get more clarity from them on what is that final piece. Now, related to acceleration, maybe pulling forward either positive outlook or being upgraded to investment grade, it’s the Chesapeake-SWN transaction, like we’ve talked about, we think that’s probably the biggest thing that could accelerate when that deal gets done here in the second half of this year. So that’s kind of what our plan is. Our plan gets us there according to the timeline and then the merger is what would – we see that as an accelerant towards the plan.
Sunil Sibal: One clarity on your latest project in the Northeast. So it seems like, do you see this as kind of an incremental demand per se with regard to the takeaway capacity or is it just the fact that producers kind of are lining up to fill up the MVP? So I’m just kind of curious how – in your discussions, how do you see MVP volumes progressing as it comes online in the next month or so?
David Slater: Yeah, I’ll take that one, Sunil. I’d say for our project, which, just to remind everybody, comes online in 2026, I’d say the initial thinking there is more diversity of supply for the existing Mountain Valley contracts in the early days when it comes online, but I think a longer view would also – that would be another pathway if there is a Mountain Valley expansion. And I think the owners of Mountain Valley are talking about an expansion. This is another pathway to serve that incremental demand and again provide some diversity of supply into that asset longer term. So I actually think it’s both, one in the short term and the other one in the longer term. Hopefully that answered your question.
Operator: And that does conclude our Q&A session. I will now turn the conference back over to David Slater for closing remarks.
David Slater: Well, thank you very much for joining us today, and we certainly appreciate your interest in DT Midstream, and look forward to seeing many of you at the EIC Conference coming up in a few weeks. Have a great day.
Operator: And this concludes today’s conference call. Thank you for your participation. You may now disconnect.
