DT Midstream - Earnings Call - Q2 2025

Executive Summary

• Q2 2025 delivered solid results: Net income $107M, $1.04 EPS, and Adjusted EBITDA $277M; pipeline segment dipped modestly QoQ due to a planned Guardian rate step-down, partially offset by short-term revenues on LEAP and Stonewall.
• Management reaffirmed FY 2025 Adjusted EBITDA guidance of $1.095–$1.155B and the 2026 early outlook of $1.155–$1.225B, signaling confidence in execution despite near-term seasonality.
• Commercial momentum accelerated: ~$600M of organic projects reached FID (Guardian “G3” + interstate modernization Phase 1), with ~90% in the pipeline segment; Haynesville gathering throughput hit an all-time quarterly record at 1.74 Bcf/d (+16% YoY).
• Credit tailwind: DTM achieved full investment-grade ratings across Fitch, Moody’s, and S&P (upgraded by Moody’s and S&P in Q2), improving cost of capital and strategic flexibility.
• Near-term setup: management guided Q3 Adjusted EBITDA roughly in line with Q2, with a seasonal ramp in Q4; catalysts include power-demand-driven pipeline opportunities and LNG connectivity expansions.

What Went Well and What Went Wrong

What Went Well

• FIDs and backlog conversion: “We’ve reached FID on approximately $600 million of new organic growth projects… ~90% within our growing pipeline segment,” including Guardian “G3” (210 MMcf/d, 20-year contract) and Phase 1 interstate modernization ($130–$150M).
• Power demand tailwinds: “The PJM auction cleared at over $329 per megawatt day… highest price ever recorded,” underscoring strong regional demand; DTM is advancing opportunities in PJM/MISO and sees >40% demand growth over 20 years.
• Balance sheet strength: Achieved investment grade from all three agencies, supporting lower financing costs and greater optionality; dividend maintained at $0.82/share, with a 5–7% long-term dividend growth target aligned to EBITDA growth.

What Went Wrong

• Modest QoQ pressure in pipeline segment: Q2 pipeline Adjusted EBITDA fell $3M QoQ due to a planned rate step-down on Guardian effective April 1 and seasonal softness in interstate/JV assets.
• Northeast volume dip: Q2 Northeast volumes averaged 1.17 Bcf/d (down vs Q1) due to maintenance and timing of producer activity, though management expects flat entry-to-exit volumes for the year.
• Behind-the-meter commercialization lag: Data center lateral proposals remain a pipeline of opportunities but have not yet commercialized; utilities are winning a disproportionate share, favoring utility-scale expansions DTM serves.

Transcript

Operator (participant)

Hello, and welcome to the DT Midstream second quarter 2025 earnings call. I will now turn it over to our speaker today, Todd Lohrmann, Director of Investor Relations. Thank you. Please go ahead.

Todd Lohrmann (Director of Investor Relations)

Good morning, and welcome, everyone. Before we get started, I would like to remind you to read the Safe Harbor statement on page two of the presentation, including the reference to forward-looking statements. Our presentation also includes references to non-GAAP financial measures. Please refer to the reconciliations to GAAP contained in the appendix. Joining me this morning are David Slater, President and CEO, and Jeff Jewell, Executive Vice President and CFO. With that, I'll go ahead and turn the call over to David.

David Slater (President and CEO)

Thanks, Todd, and good morning, everyone, and thank you for joining. During today's call, I'll touch on our financial results, share details on the latest commercial activity, and provide a status update on our key growth projects that are currently under construction. I'll then close with some commentary on the current market fundamentals before turning it over to Jeff to review our financial performance and outlook. With that, midway through the year, we're continuing our strong performance, giving us confidence to reaffirm our 2025 adjusted EBITDA guidance range and our 2026 adjusted EBITDA early outlook range. The second quarter was an active quarter for us commercially, and we are announcing today that we've reached FID on approximately $600 million of new organic growth projects from our capital projects backlog, of which approximately 90% of the investment is within our growing pipeline segment.

Unpacking the new investment projects, the first is an expansion of Guardian Pipeline, increasing the capacity of the pipeline by 15%. This expansion is anchored by an investment-grade utility customer under a 20-year negotiated rate contract. The next project that we are moving forward with is the first phase of our interstate pipelines modernization program. This initial phase will be predominantly focused on Guardian Pipeline and will improve the reliability of this critical capacity for our value customers in Wisconsin. Both of these investments are supported by strong fundamentals, as there is robust power demand growth throughout the region. They also have connectivity to DT Midstream's broader portfolio, including a pathway to our natural gas storage facility, offering our customers greater supply flexibility and optionality to meet their growing demand.

Additional modernization investment opportunities exist across all of our new interstate assets to ensure reliability and maintain a high service level for our customers. Reaching FID on this first phase of our modernization efforts is just step one, and we will keep you updated as we advance the program. We have also executed gathering agreements with private producers in each of the basins we operate in, a positive signal of the strengthening macro environment surrounding natural gas. Turning to our construction activity, during the quarter, we placed three gathering projects into service across our footprint, continuing our track record of delivering projects on schedule and on budget. As a reminder, these projects are all expected to have a ramp period following their in-service date, with full contribution expected by the end of 2026.

Our Haynesville Leap Phase 4 expansion is progressing ahead of schedule, allowing us to pull forward the expected in-service date to the first quarter of 2026. Finally, I'd like to take a moment to address the current natural gas fundamentals and why I feel DT Midstream is so well positioned. We've clearly seen a positive shift in the Haynesville over the last few quarters, as producers are beginning to drill into the long-awaited LNG demand ramp. To date, private producers have been the most active; however, we expect public producers will also respond as pricing and physical demand increases, and we are forecasting a 16 Bcf per day increase in LNG feed gas demand through 2035 from facilities that have access to our Haynesville system, with the majority of these terminals already reaching FID.

In addition to the growing momentum in the LNG market, we continue to have a very constructive view on power demand growth in the country, fueled by the increasing electrification of the economy, onshoring of manufacturing, and demand for more AI computing and data centers. Last week, the PJM auction cleared at over $329 per megawatt day, a 22% increase from last year's auction and the highest price ever recorded for a PJM capacity auction. This is a clear signal of the significant power demand growth that is occurring in that region. We continue to advance pipeline opportunities driven by power demand within PJM and MISO, the two primary electric markets our assets reside in. These ISOs expect to see demand growth of more than 40% over the next 20 years.

To date, we have commercialized more of these opportunities as in front of the meter utility scale projects, but we are also in numerous discussions with developers of behind-the-meter projects, providing pipeline lateral proposals to the projects. Moving to the regulatory framework, the current federal administration has also created a more favorable environment for much-needed energy infrastructure projects to advance. We are finally beginning to see initiatives to streamline approval processes, a welcome development that will reduce permit times, increase project transparency, and enable investment in critical energy infrastructure throughout the country. I'll now pass it over to Jeff to walk you through our quarterly financials and outlook.

Jeff Jewell (EVP and CFO)

Thanks, David, and good morning, everyone. In the second quarter, we delivered adjusted EBITDA of $277 million, representing a $3 million decrease from the prior quarter. Our pipeline segment results were $3 million lower than the first quarter 2025, driven by a planned rate step-down on Guardian Pipeline effective April 1 and seasonally lower EBITDA from our interstate and joint venture pipelines, partially offset by an increase in short-term revenues on LEAP and Stonewall. Gathering segment results were in line with the first quarter 2025, reflecting higher volumes on our Haynesville system, offset by lower volumes in the Northeast. Operationally, total gathering volume for the Haynesville averaged 1.74 BCF per day, an all-time record throughput on our system for a quarter, and a 16% increase over the second quarter 2024.

In the Northeast, volumes averaged 1.17 BCF per day, which was a decrease from the first quarter, driven by maintenance and timing of producer activity, primarily on our Appalachia and Susquehanna gathering systems. Northeast volumes remain in line with our full year plan and expectation for flat entry-to-exit volumes. Looking ahead to the third quarter, our plan is for adjusted EBITDA to be relatively in line with the second quarter, followed by a ramp in the fourth quarter, driven by timing of producer activity and typical seasonality of pipeline segment earnings. As David stated, we are confident in our full year 2025 adjusted EBITDA guidance range and our 2026 adjusted EBITDA early outlook.

We've increased our committed capital in 2025 and 2026 to reflect the new growth projects reaching FID, with approximately $385 million committed in 2025 and approximately $230 million committed in 2026, which is an increase of approximately $150 million from our first quarter disclosure. For our Guardian expansion project, we expect to invest $345 to $375 million at a five to six times build multiple, with the project entailing a combination of compression and looping and expected to be in service in the fourth quarter of 2028. For the first phase of our interstate pipelines modernization program, we are planning to invest $130 to $150 million, with an expected second half 2027 in service date. The capital associated with this project will be included in the pipeline's next rate case for recovery.

Overall, our committed capital has increased for the 2025 to 2029 time period to $1.1 billion out of our total $2.3 billion backlog. Therefore, we are feeling confident in achieving this total investment. We are also pleased to report that during the quarter, we were upgraded to investment grade by both Moody’s and S&P, joining Fitch Ratings, who upgraded us last year, and solidifying DT Midstream as a full investment grade entity. Achieving investment grade was a strategic goal we established upon spinning the company, and I am incredibly proud of the entire team in reaching this milestone. On the legislative front, we see several items from the recently enacted One Big Beautiful Bill Act that will financially benefit DTM. The act’s extension of 100% bonus depreciation will benefit DTM’s unregulated investments, and we also see benefits in increased interest expense deduction.

These items provide a favorable impact on our projected cash taxes, and we anticipate further deferral of a significant portion of our federal tax for multiple years. Finally, today we also announced that our board of directors approved our second quarter dividend of $0.82 per share, unchanged from the prior quarter, and we remain committed to grow the dividend 5% to 7% per year in line with our long-term adjusted EBITDA growth. I'll now pass it back over to David for closing remarks.

David Slater (President and CEO)

Thanks, Jeff. In summary, we are excited for the growth opportunities ahead for the company and remain confident in delivering on our guidance, continuing our track record of disciplined execution. Our high-quality pure-play natural gas portfolio is well positioned to capture the growing opportunities across our entire network as we are focused on continued execution of our $2.3 billion organic project backlog, of which $1.1 billion is already FID'd. Sentiment and fundamentals around natural gas infrastructure continue to improve, with the LNG export ramp building momentum, strong demand growth in our northern region, increased political backing of natural gas and energy infrastructure, and a renewed realization of the role that natural gas plays as a critical fuel supporting the growing power generation fleet that runs the country. With that, we can now open up the line for questions.

Operator (participant)

Thank you. If you'd like to ask a question, please press star one on your telephone keypad. If you'd like to withdraw your question, please press star one again. Our first question comes from the line of Jeremy Bryan Tonet from JPMorgan Chase & Co. The line's open.

Jeremy Tonet (Research Analyst and Managing Director)

Hi, good morning.

David Slater (President and CEO)

Morning, Jeremy.

Jeremy Tonet (Research Analyst and Managing Director)

Just want to pick up on some of your last thoughts there, winds of change and changing views on natural gas, and want to dial in on New York a bit more, given the higher power prices, given some of the issues with de-voltages, what have you. I was wondering if you could talk a bit more about what you're seeing in the state and, I guess, any line of sight you might have to specifically water permits there to be able to get comfort in moving forward with Millennium expansions.

David Slater (President and CEO)

Yeah, Jeremy, I'll start with sort of our view on power generation in the state of New York. Millennium directly serves two plants, and both those plants have been running at very high load factors, much higher than historic load factors. I think that's just a data point that supports what you said in the question, that there's clearly strong power demand in New York and a need for additional generation, just given how the existing fleet is operating right now. That's a positive, encouraging signal that we see on the power generation side. If I flip to what I'll call the regulatory environment, we've been seeing incremental positive changes.

A lot of it is caught up in the political dialogue, and I'm not going to get into the details on the call here, but what I would say is, at a high level, we're seeing a positive shift and a recognition that there is a need, a legitimate need in the state for additional infrastructure. We're obviously working in conjunction with the shippers that are interested in expansion capacity, to sort of bring all those pieces together and have all the regulatory agencies and the state leadership sort of aligning around and recognizing the need. I think, as I said earlier on this topic, that's sort of a critical gating item for us, is that we need to see state support for any project that we would FID on Millennium in terms of expansions.

Jeremy Tonet (Research Analyst and Managing Director)

Got it. Thank you for that. I was just wondering, also, moving south, if we could expand a bit more, I guess, on Haynesville activity. How you think about producers, particularly privates in the Haynesville, responding to price signals there, and how you think that kind of impacts the ramp in the basin, what pricing, what time frame, how do you see that unfolding?

David Slater (President and CEO)

Yeah, I think, like I said in the opening remarks, and you can see in the data that we shared here on the second quarter call, we're seeing our Haynesville volumes ramping, which is very encouraging. The privates seem to be a little quicker on the draw, if I can use that term, in terms of deploying capital and ramping rig activity, resulting in volume growth. We've been a beneficiary of that, and we've been working very closely with a handful of private producers that we brought onto the network over the last couple of years. Very happy about that. The publics are coming around. I fully expect that the publics will begin to respond to the physical market growth and the price signal that's sitting out in 2026 and 2027. They're just being a little more cautious, and I think just a function of their ownership sentiment.

They want them to be cautious and focused on real disciplined capital execution, and that's fine. We're seeing the growth. We expect more of that to show up on the network in the second half of the year. It feels like the Haynesville is pointed in a positive direction right now to exit this year, likely delivering some significant growth and getting the production back to where it was at the peak two years ago and then moving beyond that going forward.

Jeremy Tonet (Research Analyst and Managing Director)

Got it. That's helpful. Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Michael Jacob Blum from Wells Fargo Securities. The line's open.

Michael Blum (Managing Director)

Thanks. Good morning, everyone. I wonder if you could expand on the comments you made on the potential data center-related laterals investments that I know you've been working on for a while. Just how are things progressing? What's going on there? Any best guess you have for timing of when some of these could actually move forward?

David Slater (President and CEO)

Yeah, maybe I'll start at the macro level and then we'll double-click down into the details. I'd say at the highest level, we're seeing strong power demand growth manifesting across both PJM and MISO, which is predominantly where our assets reside. To date for us, that growth has manifested itself in what I'll call utility scale expansions on our network directly serving the utilities that are serving these growing power demands. The AES lateral that we announced off of Midwestern, the combined cycle plant in West Virginia, and our Guardian expansion that we announced here today, all of those are driven by the power demand ramp. That's currently how our portfolio has been experiencing what I'll call the data center power-driven growth across our footprint. Now we have a plethora of proposals in front of site-specific behind-the-meter development, and those just haven't commercialized yet. That's the bottom line.

I think I've been saying this publicly for a while now, we've been observing the utilities winning a disproportionate share of this market. I think DTE announced yesterday a very bullish expectation of data centers in Michigan. I think they're very confident in one gigawatt of capacity with the potential to go to three gigawatts of capacity. That's significant. That's two to three combined cycle power plants. WEC has announced similar data center success. If you go through the whole utility segment, I won't name them all, but they've all been very successful in winning large percentages of this new power demand. That's been fine for us. We love our utilities on the network, and we want to serve them. Just like what we announced on Guardian, a 20-year negotiated rate contract. We absolutely love that type of business.

It's right down in the center of the fairway, right in line with our strategy to grow our gas pipelines. That's how it's been manifesting to date on the network. I fully expect we are going to get some laterals, more laterals, just like the AES lateral. Again, it's just a matter of when those sites commercialize. What I am hearing directly from the underlying companies that are building these is that all things equal, they want to be directly connected to the grid. They would prefer to be connected to the utilities. There are significant reliability benefits and counterparty strength benefits that come with that. There's a lot of things happening in the space right now. What I would just keep everybody focused on is that demand is real, and it is showing up. It'll manifest itself in various ways across our network. We're very excited about it.

We're going to participate in this growth through this region, and that's a guarantee.

Michael Blum (Managing Director)

Great. Thanks for all those details. Just a question on the spend, the CapEx for 2025. Obviously, if I just take the first half, it's pretty light relative to the full-year guidance, both for growth and maintenance. Just wondering, do you think you're sort of running more efficiently and you'll end up spending less on the guidance, or should we just expect a big ramp in the second half? Thanks.

David Slater (President and CEO)

Yeah, I wouldn't read into that. I fully expect we're going to land in our guidance range as we approach the end of the year. I think as we get into Q3, if we think we're going to be outside of that band, we'll certainly telegraph that. As we sit here today, I fully expect that we'll deploy that capital.

Michael Blum (Managing Director)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Theresa Chen from Barclays Bank. The line's open.

Theresa Chen (Senior Analyst)

Thank you and good morning. With the FID of Guardian 3, how do you think about gas sourcing for this project? Are there additional brownfield expansions upstream of Guardian on your other transmission assets that directly or indirectly tie into the Gilead hub that could FID on the heels of this?

David Slater (President and CEO)

Yeah. You can kind of see our physical network if you look at the map. That customer will have to procure gas at the Gilead hub into this capacity, and there's various ways to feed that. Certainly, our pipelines and our pipeline network, we have two pipelines that can feed the Gilead hub, Midwestern and Vector. The Vector pathway can bring you all the way back to Appalachia on Nexus. That certainly will be part of the future conversation as they take care of getting critical firm capacity into the state to serve the growing demand in the state. I think as they look further upstream, we'll clearly be part of that conversation. We have a very large percentage of our Washington 10 storage capacity that's dedicated to Wisconsin utilities, so there is already a very well-established firm pathway between Michigan and Chicago, the Gilead hub.

That today serves a big portion of that Wisconsin market. We absolutely believe that'll be part of the conversation going forward.

Theresa Chen (Senior Analyst)

Got it. Going back to your earlier comments about LNG, David, clearly 2025 has been a banner year so far for this part of the energy infrastructure value chain. Your feed gas assets are integral in moving these molecules. Can you share any color at this point on potential additional phases of LEAP from here? How have the competitive dynamics evolved given multiple infrastructure providers along that corridor and the fierce competition that has resulted?

Yeah, that's a great question. Maybe I'll start with the short term and kind of walk my way through an answer for you. I think Jeff may have mentioned it in his opening remarks that we've seen some short-term favorability on LEAP, and it kind of goes to your statement. As these volumes have begun to physically ramp, I think we're peaking now above 16 BCF a day, that they need to come from somewhere. I think we've been a beneficiary of that this summer so far, which has been very nice to see that demand showing up and searching for the molecules. That's the short term. I'd maybe draw your attention to our deck. We did announce this quarter that we are expanding our delivery point connectivity into the LNG header system. We're expanding that by 1.25 BCF a day. A big chunk of that is going to Woodside.

I think a BCF a day, that's going to Woodside, and the residuals are going to Cameron. We're positioning ourselves for that continued ramp. Competitively speaking, we've been really intentional about making sure that our assets are deeply interconnected with all the demand along the Gulf Coast and Louisiana so that shippers on our system have maximum flexibility and optionality. Likewise, we've been doing the same in basin to get really strong receipt point connectivity from Carthage all the way through into Louisiana on the supply side. That's kind of been our strategy in terms of positioning the asset. Yes, at the end of the day, like you said, there's competitive tension, which is healthy. We're pretty confident that we're going to win our fair share of that market. There's a large demand coming, as evidenced by all the other projects that are being built.

David Slater (President and CEO)

The nice thing about our project is it's real. It's in the ground. It's flowing today. Customers can see exactly how the asset works today versus a paper pipe on someone's desk somewhere. Those are the factors that are at play right now, and we'll continue to compete with our brethren in the space. Again, I'm confident we're going to get our fair share.

Theresa Chen (Senior Analyst)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Manav Gupta from Mizuho Securities USA. The line's open.

Manav Gupta (Executive Director)

Good morning. Congrats on the rating upgrades. I wanted to touch a little bit. Last year, obviously, you announced a very smart deal, and the benefits can be seen already. I'm just trying to understand. Is there a bolt-on strategy still in place? We saw another bolt-on deal, smart deal today by another competitor of yours. I'm just trying to understand between all these good growth projects you have, what would be the appetite for small bolt-on deals? If you're still looking for them, what exactly are the criteria for which you decide this is a good deal and we should move ahead with it?

David Slater (President and CEO)

Good morning, and thank you for the question. Yes, we are very pleased with how this acquisition is playing out. I think, as I've said publicly, we fully expected there would be growth in this region and additional investment opportunity. It's coming at a much quicker pace than I think we expected. It's a core investment in terms of our core strategy to grow our pipeline segment, to do it with long-term, high-quality, investment-grade counterparties in a regulated asset construct. It's absolutely right down the fairway for us, and we're very excited about that. In terms of additional bolt-on opportunities, we're always looking for those. What is the criteria that would guide our activity in that space? I'd go back to our core investment thesis around the company. We're a pure-play natural gas company. Long tenor in our portfolio, high-quality counterparties.

We've said publicly that our stated goal is to grow our pipeline segment to 70% or higher. Just to remind everybody, when we spun the company, we were at 50%. As a snapshot in time today, we're at 70%. Feels like we're moving to 70-plus now. Those fundamental strategies of having a high-quality portfolio with very predictable cash flows, like Jeff said, growing our dividend as we grow EBITDA, maintaining a real healthy balance sheet, and achieving investment grade by all three rating agencies, was a big milestone for us that happened in the last quarter. It just goes to what I'll call the quality metrics of the portfolio. That's very important to me. I believe that's very valued by our investor base. That's the discipline strategy that will guide us as we consider any bolt-on that may present itself. Obviously, this goes with what I'm saying.

Bolt-on M&A has to compete with organic growth. We have a very robust organic growth opportunity set in front of us. Our job is to allocate capital and maximize shareholder value. Bolt-on M&A has to make strategic sense and compete with organic capital allocation. I'll stop there.

Manav Gupta (Executive Director)

Thank you for a very detailed, my quick, very quick follow-up is it's about seven months since you have a new federal government. Have things actually started changing on the ground? Are you feeling it's easier to get permits? Is it easier to move ahead with the projects? If you could talk about how this change in the administration has been a little bit of a tailwind for DT Midstream. Thank you.

David Slater (President and CEO)

Yeah. The change of administration has been a breath of fresh air. They're working to reduce the friction in large-scale infrastructure investments, and they're working at various levels across agencies, executive orders. Supreme Court's weighed in on a few decisions. There's this multi-prong approach that the administration has been taking to reduce the friction that we've seen historically in large-scale energy capital deployment. I was actually in Washington last week and had an opportunity to visit with all three firm commissioners, the permanent commissioners. Again, just a very constructive attitude. Very curious and engaged. Clearly a sentiment there that there is an acknowledgment that we need significant investment in energy infrastructure in this country to meet the growing demand and to compete on the world stage. A lot of the pieces are all pointed in the right direction, and that's really encouraging.

I think it's going to unleash a significant amount of capital into this sector over the next three or four years, which is really encouraging.

Manav Gupta (Executive Director)

Thank you so much.

Operator (participant)

Thank you. Our next question comes from the line of Jean Ann Salisbury from BofA Securities. The line's open.

Jean Ann Salisbury (Managing Director)

Hi, good morning. When you contemplated your 2026 adjusted EBITDA early guidance number earlier this year, I guess there was probably an embedded expectation of how quickly projects in your capital backlog would move to FID. Can you just kind of speak to whether that movement to FID is kind of happening as you expected or slower, even faster?

David Slater (President and CEO)

Yeah, that's a good question. I'm just thinking in my mind right now how I want to answer it. I think the simple answer is we reaffirmed our 2026 early outlook, and everything that's been happening is happening inside that two-way. Yes, we are definitely on track, confident in delivering that early outlook. I think as the year progresses, we're in the second quarter here. As the year progresses, if we need to adjust or change that, we'll be sharing that with the investors.

Jean Ann Salisbury (Managing Director)

Okay. Thank you for that. As a follow-up, congrats on getting the Haynesville and Appalachia gathering expansions online. Can you just remind us how much total capacity that will take you to in each basin compared to the Q2 volumes on slide 13 that you're at now?

David Slater (President and CEO)

That's a really good question. You're going to stump me on that one because I don't know the answer off the top of my head, but I'm looking at Todd Lohrmann right now, and he's smiling, and he will get back to you with it.

Jean Ann Salisbury (Managing Director)

Okay, sure. Sorry about that. Cool. That's all for me. Thank you.

David Slater (President and CEO)

Okay.

Operator (participant)

Thank you. Our next question comes from the line of John Ross Mackay from Goldman Sachs Group. The line's open.

John Mackay (VP of Equity Research)

Hey, good morning, guys. Thank you for the time. I wanted to start in the backlog. You kind of FID'd about $600 million of projects today. I think you guys were really clear on those. I think they made a lot of sense that you're able to come out with them. I guess you're keeping the backlog number unchanged. I understand the $2.3 billion is a risked number, but maybe just kind of talk through the moving pieces on what could be coming in there. How do you think about risking the piece that hasn't reached FID yet? Maybe just moving pieces. Thanks.

David Slater (President and CEO)

Yeah. Good morning, John. Maybe I'll start at the highest level. When we updated that backlog in the beginning of the year, and we're sitting here in the second quarter, and we have 50% of that backlog FID'd, that feels real positive to me and to the whole organization. I think that's a reflection of the macro environment that we're in, and we've kind of talked about that already on the call here through some of the questions. I'd say it's very encouraging that we're six months into a five-year plan, and we're 50% FID'd. I think it's safe to say that's significantly de-risking that backlog. In terms of process, the way we're going to address this, John, with our disclosures is we'll annually update that backlog. I don't think it makes sense for us to be trying to do that quarter by quarter.

It's a long-term view, and I think that's how we're going to handle that going forward. What I would say is you should expect that on the year-end call, we'll do a refresh on that backlog. Obviously, the timeframe will move forward a year, and we'll do a refresh. As we sit here today, I'll start by saying as we sat here back in the new year, I was highly confident on executing that backlog. That is not the gross backlog. That is the backlog that we are highly confident that we're going to execute on, and that confidence level has only significantly gone up in the last six months. Feeling really good with what the market's presenting to us.

I feel like our asset base is sitting in the right locations in the country to take advantage of the momentum that we're seeing across the country, the derivative investments that are driven by power demand growth. As we have already talked about, the significant LNG ramp that, like I said in my opening remarks, a significant portion of that is already FID'd. That's coming. It's just a question now of getting our fair share of that.

John Mackay (VP of Equity Research)

All right. That's clear. I appreciate you walking through that. For the second question, I just wanted to go back to some of the Ohio through Midwest opportunities. Can you remind us, one, I guess, how to think about expansion capacity on Nexus? And then two, maybe taking that a step further, how you could think about maybe either some of the Midwest utilities participating in something reaching back to the basin versus potentially some of the E&Ps there looking to move their incremental supply out?

Yeah. What I was shared with Nexus, and this might be a bit of a history lesson for some folks on the call, is that when we built Nexus, we actually had an additional compressor station in the original design that we elected not to construct just based on the amount of contracts that we had anchored prior to going into construction. Nexus is ready for a compression expansion. The simple way to think about it is every major compressor is going to deliver $100 million to $200 million a day of capacity, just depending on where those shippers want to take that gas to, like how far into Ohio or how far into Michigan they want to take the capacity. It's very bite-sized and very digestible into the market.

It's a lot like LEAP in terms of we can expand very rationally a couple hundred million a day, and it's a relatively light touch in terms of a regulatory application and construction. That's how to think about Nexus. Nexus clearly is one of the new pipes that was built in the last decade that has significant expansion runway in front of it. It can comfortably expand up to 2, 2.5 BCF a day, again, depending on where the gas is ultimately destined to go to. There's a nice runway there of expandability that we're obviously very aware of and working actively in the market to commercialize. That would be point number one. I think you mentioned Michigan. Go look at the DTE transcript about their views on gas growth potential in Michigan and power generation growth in Michigan.

I think there's some pretty bullish activity happening in Michigan right now, all driven by data centers. Very similar to what's happening in Wisconsin and other locations around our footprint. Let's just make it up for a minute. You build another combined cycle power plant in Michigan. We have a lot of pipeline assets pointed to Michigan, and we have storage in Michigan. We are going to be a beneficiary of that kind of demand materializing in Michigan, either directly or indirectly through those assets that serve Michigan. Just a lot of very favorable fundamentals playing out right now in the marketplace that are all very supportive of our assets and our long-term strategy.

I appreciate that. Thanks for your time.

David Slater (President and CEO)

You're welcome.

Operator (participant)

Thank you. Our next question comes from the line of Keith T. Stanley from Wolfe Research. The line's open.

Keith Stanley (Director)

Hi. Good morning. Wanted to start on the modernization investment. You said most of the phase one is on Guardian. Should we assume that can get reflected in the rate case filing potential in the second half of 2026, even though the project's coming on in the second half of 2027? You can look forward in that case. At a high level, should we think of this modernization spend and ongoing programs as directly growing the EBITDA of the company entirely, or is some of this spend going to be to maintain rate base over time?

David Slater (President and CEO)

Yeah. I'll start with Guardian. The short answer is yes. We expect that to roll through the next rate conversation with the anchor shippers of the pipeline. Just to remind everybody, approximately 95% of the capacity of the current pipeline are the WEC family of utilities, just for reference. Yes, we expect that modernization will be part of the rate case conversation and that the rate adjustment related to the modernization would be happening when those facilities go into service. This is a like-for-like replacement and modernization, so it'll have a very light regulatory touch in terms of the FERC. That would be the Guardian component. In terms of how to think about modernization more broadly, at the highest level to think about it, I would say that the regular maintenance that we would put into those FERC assets kind of keeps the rate base treading water, relatively flat.

There may be some timing issues here from year to year, but generally speaking, that keeps the rate base flat. I think your thesis there and your question is correct, that modernization will predominantly grow the EBITDA on those three regulated assets, which is one of the reasons why we're so excited about it. Not only does it significantly improve the quality of the asset and the reliability to the customers, but it has a growth dimension to our total pipeline segment.

Keith Stanley (Director)

Very clear. Thanks for that. Second question. Are there any opportunities to expand your existing pipes to be part of a solution to increase Appalachia takeaway capacity, potentially to the Gulf Coast even? Curious if any updated thoughts you talked last quarter on. Could you maybe work with the Borealis project and Texas Gas to be part of a solution?

David Slater (President and CEO)

Yes, we're obviously working on that, like I said previously. We're a very open-minded company, and we work with everybody. We'd like to have good relations with all of our peers and work cooperatively with them, especially when it's to each company's mutual benefit. That's just how we work, generally speaking, and that isn't going to change going forward. There are lots of different ways that people are looking at creating additional egress capacity out of Appalachia. Again, Appalachia is the largest resource base we have in the country and has tremendous runway on it in terms of decades of resource and runway to increase the annual production without stressing the system there at all. The short answer is yes, we are looking at all the different ways that we can use our assets to expand the egress capacity. We talked about Nexus already on the call.

That's an obvious one, but we're looking at all the other ways as well and how we can participate in a cooperative manner with even other companies to unlock basin capacity.

Keith Stanley (Director)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Spiro Michael Dounis from Citigroup. The line's open.

Spiro Dounis (Director)

Thanks, Jeff Jewell. Morning, gentlemen. First question.

David Slater (President and CEO)

Morning.

Spiro Dounis (Director)

Morning. I want to start with the Midwest pipelines. It's a two-part question. David, as I remember when you announced that transaction originally, I think you talked about these three growth buckets that you expected to come out of these pipelines. Modernization was certainly one of those. I think the intention at some point was to provide the market with a sort of broad opportunity set and actually quantify the growth opportunity set for those buckets. Curious where that stands and how to think about that potential update now that you've got modernization underway. Second part of that question, just around modernization itself, you've got this cadence of one rate case per year, '26, '27, '28. Is that how we should think about sort of the next phases as you announce them? Are they a year away, or could you actually do that much sooner?

David Slater (President and CEO)

Yeah. Thanks for the question, Spiro. Maybe we'll just start with what we have disclosed, which is between G3 and modernization phase one, we've essentially disclosed a $500 million investment in these assets. Six months in, which is pretty darn exciting from our perspective. Hopefully, you feel the same way. In terms of how we're going to disclose the total opportunity set, I'll go back to my earlier answer. I think as we thought it through, we don't want to get in this cadence of every quarter changing this and changing that. The long-term capital backlog, I think we're going to get in a cadence of refreshing that annually so that we're not bouncing it around quarter to quarter. I think that'll just be a more stable, predictable way for the investment community to understand our business. We'll continue to talk about how we're doing.

Like we talked on the call today, we're 50% of the way there six months in on our $2.3 billion. I think you can infer appropriately how we feel about that $2.3 billion based on where we are six months in. Again, we'll refresh at the end of the year. My goodness, we're feeling very happy with our acquisition. It's coming along nicely. There's a really clear line of sight for a significant capital deployment here. The growth that has occurred already is very significant to us in terms of our size and the size and scale of the growth.

The more encouraging part, Spiro, is as I look at that business and as we get deeper and deeper and understand it more and more and get ourselves and the way in which we approach our customer base, as we get deeper into this new customer base, we just continue to uncover more and more. We're seeing more and more growth opportunities. It's just very encouraging and tremendously happy with the acquisition. I'll just say it that way.

Spiro Dounis (Director)

Got it. No, that's great, Keller. It's good to hear. Second question, kind of picking up on that last point just around a lot of the sort of unexpected growth that seems to be coming forward. As we look at 2026 CapEx, I guess I could call it half full if we're just comparing it to 2025. I guess as you sit here today, and I know you're not going to guide 2026, should we consider 2026 as a similar CapEx spending year to 2025? I think about that in the context of Millennium Pro and maybe some other major projects that have yet to be sanctioned. If you could, in that context, once again, just maybe remind us about how you think about any self-imposed capital spending limits in any given year.

David Slater (President and CEO)

Yeah. I'll start at the highest level. Our goal and our experience over the last four years in a not as constructive of an environment is just deploying our organic cash flow to predominantly greenfield opportunities across the network. We've been able to do that successfully over the last four years. Any M&A has really been over and above that, utilizing dry powder that we've accumulated on the balance sheet. With those two M&As that we've done over the last two years or three years. As I look forward, we're looking really at organic investment opportunity using that free cash flow. As I look at where next year FID projects sit in relation to that, we're in no different position today than we were a year ago if we were looking ahead at 2025. We're right on pace. We're right on track. I fully expect we'll deploy that.

I think what you're kind of scratching at here, Spiro, is, what if the market is more robust and presents opportunities that are above and beyond your free cash flow? I think the nice thing here, and I'm kind of looking at Jeff right now, the disciplined management of our balance sheet and getting to investment grade, and as we continue to grow EBITDA inside our free cash flow, Jeff's accumulating dry powder again on the balance sheet. We have $1 billion of undrawn debt capacity on the revolver. If we have little, what I'll call, timing mismatches, we've got plenty of debt capacity to handle timing mismatches. If the market does present opportunities that are above and beyond our free cash flow, we are accumulating dry powder on the balance sheet. We will not jeopardize investment grade.

That dry powder in the back of our mind, we're thinking is either going to new greenfield opportunities, or as the question earlier, if an appropriate bolt-on presented that fit the strategy and made sense in the portfolio, we have that dry powder optionality to pursue something like that as well. It can go to either of those opportunities, Spiro. That's kind of how I think about it at the highest level. I hope I answered your question.

Spiro Dounis (Director)

You did, David. Super helpful. I'll leave it there. Thank you, gentlemen.

David Slater (President and CEO)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Robert Mosca from Mizuho Securities USA. The line's open.

Robert Mosca (VP of Equity Research)

Good morning, everyone. There are a lot of positive indicators in the Haynesville and still a lot of expansion potential across your assets there, especially with these additional interconnections. Could you speak to maybe other opportunities you're assessing in the basin, be it last-mile solutions to LNG facilities, storage, or whether you've evaluated the potential to connect to PowerGen in Western Louisiana?

David Slater (President and CEO)

Yeah. All of those that you rattled off, Rob, are in our sights right now. We're definitely looking at greenfield storage opportunities. Our customers are asking for that. They're searching for that. Given the LNG demand ramp, that's going to be an element of the ecosystem down there that's going to be required and required in significantly larger quantities as we look forward in time with this growth coming. That's one that we're spending a lot of time on. We have storage up here in Michigan. We're very familiar with storage. That's clearly on our short list. You alluded to the interconnect expansions. That's important. We are talking on the last-mile piece if parties downstream of us. If there's opportunities to participate in last-mile expansions. There will be a number of last-mile expansions required to meet this ramp, this LNG ramp.

In terms of other, what I'll call, incremental greenfield activity, we've been very successful in the private producer space recently. We continue to focus on that market segment. There are more and more privates emerging in the basin as the basin is becoming more of a focal point in the near term. That's a segment of the market up there that we've been, that we will continue to focus on and try to pull them into the broader network there and give them that turnkey solution to go well ahead, right, to the LNG market.

Robert Mosca (VP of Equity Research)

Got it. That's great, Keller. For my follow-up, there's been a couple of announcements this quarter around projects that could drive in-basin demand in the Northeast. Were any of those projects included in your assessment of demand pull opportunities around your network? Do you have the potential to benefit either directly or indirectly from that increased pull in Southwest PA?

David Slater (President and CEO)

Yeah. The short answer is yes. Some of these AI data center demands that are dropping, what I'll call in basin proper, so that they're not caught up in egress capacity constraints. At the highest level, it's going to allow the basin to ramp. The ones that have been recently announced, it's going to allow basin production to ramp, call it a BCF plus over the next couple of years as those facilities get constructed. Yeah, that'll drive incremental drilling across the basin. We believe that some of that incremental drilling is going to happen on our footprint. It'll happen across the basin. Some of those big public companies that have announced and have been very vocal about this are customers of ours. I'll just leave it at that.

Robert Mosca (VP of Equity Research)

Got it. Really helpful. Thanks for the time, everyone.

David Slater (President and CEO)

You're welcome.

Operator (participant)

Thank you. Our next question comes from the line of Zackery Lee Van Everen from Tudor Pickering Holt & Co. The line's open.

Zackery Van Everen (Research Analyst)

Hi, all. Thanks for squeezing me in. Maybe just starting on the Haynesville, good to see the record volumes for Q2. I was curious, I know some of those volumes are under acreage dedications as well as MVC-style contracts. At this point, are you guys above MVC levels, or are there a few of those contracts that are still below their contracted levels?

David Slater (President and CEO)

Yeah, Zach, that's a great question. It's a question that we get asked frequently. That's just a level of disclosure that we've not provided because of the sensitivity of a lot of those contracts with those individual customers. What I'll say at a high level is we'd like to put those floors into our agreements there to protect the downside. I think over the last 18 to 24 months, we've all lived through the downside of the Haynesville. They accomplished what they were intended to accomplish, I'll just say it that way. We're kind of on the other side of the valley now, climbing the mountain on the other side. I think that's going to be positive for us. I'll just leave it at that.

Zackery Van Everen (Research Analyst)

Makes sense. Appreciate that. A quick one on the northeast. Seems like volumes and EBIT are going to ramp into Q4. Is it fair to assume Q3 is relatively flat to maybe slight growth, and then all the growth in the northeast will hit in Q4?

David Slater (President and CEO)

Yeah. I think what we're saying publicly is that we expect a flat entry-to-exit rate in Appalachia. I think Jeff provided a little color as to what was happening in Q2. We had some drilling timing, and you shift drilling timing three or four months, and it creates dips. We had some maintenance/construction activity that occurred across the network that also impacted some volume flow. That's really what happened. We'll have the typical ramp, the seasonal ramp going into the winter, and we expect entry/exit flat rates out of the Appalachian gathering.

Zackery Van Everen (Research Analyst)

Makes sense. Appreciate the time, everyone.

David Slater (President and CEO)

Oh, you're welcome.

Operator (participant)

Thank you. There are no further questions. I'll turn the call back over to our CEO, David Slater, for closing remarks.

David Slater (President and CEO)

Thank you again, everybody, for your time this morning and an excellent round of questions. We appreciate your interest in DT Midstream and have a great day.

Operator (participant)

The meeting has now concluded. Thank you all for joining. Have a great rest of the day.