Fitch Affirms DT Midstream at 'BBB-'; Outlook Stable

About this update from Dt Midstream, Inc.

Fitch Ratings has affirmed DT Midstream, Inc.'s (DTM) Long-Term Issuer Default Rating (IDR) and senior unsecured rating at 'BBB-'. The Rating Outlook is Stable. DTM's ratings reflect the company's steady growth in size and scale, stable cash flows, and Fitch's expectations that leverage will remain around 3.5x in the forecast years. These strengths are balanced by exposure to its major counterparty, Expand Energy (BBB-/Stable), some volumetric risk in parts of its business, and non-controlling stake in the pipeline joint ventures. Key Rating Drivers Sustained Pipeline Expansion: With an adjusted EBITDA expected to exceed $1 billion in 2025, DTM's ratings benefit from its increased size and scale. Since its spin-off in 2021, DTM has achieved a compound annual growth rate of 10% through both organic expansions and acquisitions. Fitch forecasts that the pipeline segment, including distributions from unconsolidated joint ventures (JV), will account for approximately 65% of 2025 Fitch-calculated EBITDA, up from about 50% in 2021, with growth primarily driven by DTM's fully owned pipelines. Fitch views the company's consistent strategic focus on expanding the more stable pipeline segment, and geographic and customer diversification from the Midwest acquisition, as supportive of the ratings. Larger pipeline systems with integrated gathering and storage assets further enhance DTM's cash flow stability, operating leverage and growth capacity. Conservative Financial Profile: Fitch believes DTM's conservative financial policy and ability to maintain this discipline while pursuing growth are instrumental to the credit profile. Fitch expects leverage of around 3.3x in 2025 and to average about 3.5x in the forecast period. Fitch's forecast of slightly higher leverage in later years reflects the potential for bolt-on acquisitions or periods of elevated capex to support growth initiatives. However, Fitch forecasts positive post-dividends FCF throughout the forecast years and that dividend growth will remains in line with EBITDA growth. DTM remains committed to a public long-term proportionately consolidated net leverage target of below 4.0x, including its share of non-recourse debt from three unconsolidated JVs. This leverage target equates to Fitch-defined gross leverage of around 3.5x. Fitch views this financial policy as supportive of the ratings, as it offers a comprehensive view of group leverage and enhances economic exposure transparency. Cash Flow Stability: Revenues are fully fee-based, with about 75% minimum volume commitments (MVCs) and demand charges, supporting cash flow visibility and reducing volume risk. Contracts average around seven years remaining life and are primarily with investment-grade counterparties. Additionally, demand-pull customers, such as utility companies, account for a growing proportion of the customer base. While gathering cash flows remain more volatile, with only around 55% underpinned by MVCs versus over 90% in the Pipeline segment, Fitch expect DTM to align gathering and transportation agreements to mitigate volumetric risk and to further improve cash flow stability. Assets Base: Fitch views DTM's dual-basin, market-proximate natural gas platform favorably, given its cost and location advantages. The Appalachia basin, the largest natural gas producing basin in the US, provides significant cost advantage and long reserve life, while Haynesville, the third-largest gas-producing shale, serves as a strategic growth hub for liquified natural gas (LNG) exports. DTM's recent expansion into the Midwest market enhances access to seasonal heating and rising power demand. Fitch expects supply and market diversity to further support cash flow stability and provide operational flexibility in volatile natural gas markets. Customer Concentration: As a major counterparty, Expand Energy's (EXE; BBB-/Stable) credit quality remains an important consideration for DTM. EXE accounts for over 50% of DTM's revenues; however, Fitch notes that a material portion of DTM's EBITDA is generated from unconsolidated JVs, where EXE is not a key counterparty, thereby mitigating overall exposure. The recently completed Midwest acquisition has further diversified DTM's customer base. Fitch expects DTM's exposure to EXE will continue to decline over time as the company advances its growth strategy and further broadens its customer mix. Non-Operated JV: Three unconsolidated FERC -regulated pipeline JVs provides stable cash flows, contributing around 30% of management EBITDA and 23% of Fitch-calculated EBITDA in 2024. Fitch incorporates distributions from these JVs, which are structurally subordinated to JV-level debt. Fitch-defined JVs' EBITDA share has declined in 2024 due to higher JV level debt, and Fitch forecasts it to remain below 20% following the Millennium debt issuance and Midwest acquisition. Although not the operator, DTM retains significant influence via its ownership and governance rights, and Fitch expects continued alignment among JV members on strategy and operations. Peer Analysis The Williams Companies, Inc. (BBB/Positive) is a peer for DTM as both companies solely focus on natural gas infrastructure and have large operations in natural gas gathering and long-haul transportation with annual EBITDA of more than $500 million . Williams has no customer providing 10% or more of its revenues. By contrast, EXE accounts for over 50% of DTM's revenues, yet represents a smaller share of EBITDA, given that a substantial portion of EBITDA originates from JVs. Williams is about six times larger and has a nationwide presence in natural gas gathering and long-haul pipelines. DTM's footprint extends primarily across two highly economic basins and the Midwest. Partially offsetting the customer and geographic concentration risk, DTM's EBITDA is 100% fee-based, with no direct commodity price exposure, and over 70% EBITDA is derived from volume-assurance contracts. Fitch expects both companies' leverage to be below 4.0x over the forecast period. DTM is rated one notch lower than Williams, mainly due to its much smaller size, customer concentration and lower geographic diversity, partially offset by its slightly lower leverage. Williams currently has a Positive Outlook. Key Assumptions The Fitch price deck for oil and natural gas informs the commodity price assumptions. Base interest rate reflects the Fitch Global Economic Outlook. 2025 and 2026 EBITDA forecast in line with management guidance. Capital spending modestly higher than management five-year backlog to accommodate potential new projects. Dividend growth rate in line with EBITDA growth. Post-dividend free cash flow (FCF) positive over the forecast period. Bolt-on acquisitions. RATING SENSITIVITIES Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade EBITDA leverage expected to sustain at or above 4.0x; A large decline in MVCs or demand charges beyond Fitch's forecast period may require lower leverage for ratings to remain unchanged. Significant deterioration of EXE's credit quality; Acquisitions or a sizable increase in capex targeted toward higher business risk projects; Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade A significant increase in counterparty and geographic diversity; EBITDA leverage expected to be below 3.0x on a sustained basis. Liquidity and Debt Structure As of June 30, 2025 , DTM had $74 million of cash on the balance sheet. Fitch believes the revolving credit facility, with $959 million available net of the $16 million of outstanding letters of credit and $25 million drawn on the credit facility, provides DTM with sufficient liquidity through the forecast period. As of June 30, 2025 , DTM's exposure to variable rate obligations was less than 1% of total debt. Issuer Profile DTM has a platform of pipeline assets and gathering assets, wholly owned and through JVs, connecting natural gas in the Appalachian and Haynesville basins to the demand centers in the Midwestern U.S. , Eastern Canada , Northeastern U.S. and Gulf Coast regions. Summary of Financial Adjustments Fitch typically adjusts midstream energy companies' EBITDA to exclude equity in earnings of unconsolidated affiliates and includes cash distributions from unconsolidated affiliates. Fitch removes distributions to non-controlling interests from DTM's EBITDA. REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING The principal sources of information used in the analysis are described in the Applicable Criteria. MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included. ESG Considerations The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores . (C) 2025 Electronic News Publishing, source ENP Newswire

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