DETROIT - DT Midstream, Inc. (NYSE: DTM), an owner and operator of natural gas infrastructure assets, has announced its agreement to acquire a portfolio of three natural gas transmission pipelines from ONEOK , Inc. (NYSE: NYSE:OKE). The deal, valued at $1.2 billion, will see DT Midstream taking over more than 3.7 billion cubic feet per day (Bcf/d) of pipeline capacity across the Upper Midwest.
The acquisition includes 100% operating ownership of the Guardian Pipeline, Midwestern Gas Transmission, and Viking Gas Transmission, which together span approximately 1,300 miles across seven states. These pipelines are strategically positioned to cater to the growing power demand in the Midwest market region.
David Slater, President and CEO of DT Midstream, highlighted that the addition of these pipelines is in line with the company's strategy to focus on natural gas assets and will increase the revenue from its pipeline segment. The pipelines in question have a high demand-pull customer base, which is approximately 90% and includes investment-grade utility customers.
The transaction, which is expected to close between late 2024 and early 2025, will be financed through approximately $900 million in debt and roughly $300 million in common equity. DT Midstream anticipates that this acquisition will be immediately accretive to Distributable Cash Flow (DCF) and will enhance the company's business profile.
The deal awaits regulatory approvals and the fulfilment of customary closing conditions, including the expiration or termination of the waiting period under the Hart-Scott-Rodino Act.
DT Midstream's Board of Directors has approved the transaction, with Barclays (LON:BARC) providing financial advisory services and committed financing support, and legal counsel from Weil, Gotshal & Manges LLP.
The company has scheduled a conference call to discuss the transaction details further. This move is part of DT Midstream's broader strategy to connect supply basins with key demand centers and market regions, underpinned by contracts with creditworthy customers.
This news article is based on a press release statement from DT Midstream, Inc.
In other recent news, DT Midstream has seen several significant developments. Goldman Sachs (NYSE:GS) has raised its price target for the company to $74 while maintaining a sell rating. This adjustment follows DT Midstream's third-quarter results for 2024, which revealed improved gathering margins that offset weaker than expected pipeline contributions. Additionally, the company has increased the lower end of its 2024 EBITDA guidance to a range of $950 million to $980 million, aligning with Goldman Sachs' estimate and slightly below the FactSet consensus.
DT Midstream anticipates increased gas gathering volumes by the end of 2024 and into the first half of 2025. The company is also focusing on medium to long-term growth, with the Final Investment Decision on the LEAP Phase 4 project in the Haynesville region being a notable development. However, the company also experienced a delay in the Final Investment Decision for the carbon capture and storage project.
In addition, DT Midstream has raised its adjusted EBITDA guidance for 2024 during its Third Quarter 2024 Earnings Conference Call. The company is pursuing new power and data center opportunities, with six potential projects under discussion. They also declared a stable dividend at $0.735 per share and anticipate maintaining a free cash flow positive status for 2024 and 2025. These are recent developments that investors should be aware of as they consider the company's future growth prospects.
InvestingPro Insights
DT Midstream's strategic acquisition aligns well with its current financial performance and market position. According to InvestingPro data, the company boasts a market capitalization of $10.01 billion, reflecting its significant presence in the natural gas infrastructure sector. The company's strong financial health is evident in its profitability over the last twelve months and analysts' predictions of continued profitability this year.
The acquisition's potential to be immediately accretive to Distributable Cash Flow is particularly noteworthy given DT Midstream's current dividend profile. InvestingPro Tips highlight that the company has raised its dividend for 4 consecutive years, with a current dividend yield of 2.88%. This consistent dividend growth, coupled with the expected cash flow enhancement from the new assets, could further strengthen DT Midstream's appeal to income-focused investors.
Moreover, DT Midstream's stock has shown impressive performance, with InvestingPro data indicating a 92.36% year-to-date price total return. This strong market performance, combined with the strategic expansion of its pipeline portfolio, suggests investor confidence in the company's growth trajectory.
For investors seeking a deeper understanding of DT Midstream's potential, InvestingPro offers 12 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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