How do the delays change growth expectations?

  • BofA estimates that, in addition to $2 billion in projects that have received final investment decisions, DT Midstream has approximately $3.5 billion to $4 billion in potential capital expenditure opportunities. The bank has pushed the in-service date for the portfolio, totaling approximately $5.4 billion, from 2030 to 2032.
  • Under BofA’s model, the compound annual growth rate in EBITDA generated by the portfolio falls from approximately 15% to approximately 10%. The projects have a “domino” relationship: only after one project reaches a final investment decision can it potentially generate demand for the next, so the entire process takes time.
  • Most of the $2 billion in projects that have received final investment decisions are currently expected to enter service by 2028. BofA expects these projects to support approximately 13% compound annual EBITDA growth through 2028; further projects will be needed to sustain growth thereafter.

Why is Midwest demand key to growth?

  • BofA estimates that Midwest pipelines currently contribute approximately 31% of DT Midstream’s EBITDA, but more than 85% of capital spending on major projects that have received final investment decisions is tied to natural gas growth in the region.
  • The company estimates that natural gas demand in the Upper Midwest could rise by 5 billion to 8 billion cubic feet per day over the next decade, equivalent to approximately 40% to 70% of current demand of 11.6 billion cubic feet per day. Growth in electricity demand, data centers and coal-fired power plant retirements are sources of the opportunity.
  • This increase implies a marked acceleration in demand growth: BofA estimates that natural gas demand in the region grew at a compound annual rate of approximately 1.5% from 2020 to 2025, while the increase proposed by the company corresponds to compound annual growth of 5% to 8% over approximately the next nine years. BofA considers the total reasonable, but believes growth may come later than investors hope.

What conditions determine whether projects can proceed?

  • BofA believes major opportunities, including MIST and further expansion of Vector, have emerged, but commercialization or permitting may take longer than expected a year ago. MIST’s proposed expansion would add 1.5 billion cubic feet per day of transportation capacity and is expected to be implemented in phases; BofA estimates its capital expenditure at approximately $1.5 billion.
  • The Millennium PRO project in the Northeast faces additional regulatory and political conditions. The company says that, before committing substantial capital, it needs support from New York customers and support, or at least no opposition, from regional governments; progress on the existing R2R project demonstrates local demand for additional gas transportation capacity.

How much growth is already priced into the stock?

  • Despite the stock’s recent underperformance, BofA says DT Midstream still trades at approximately 12.3 times 2027 EV/EBITDA, relatively high among midstream peers; market consensus also expects approximately 9% compound annual EBITDA growth from 2026 to 2030, near the higher end of its peer group.
  • BofA estimates that a share price of approximately $124 prices in little growth beyond confirmed projects. Its bear case assumes only that the $2 billion in projects with final investment decisions are delivered by 2030, yielding a valuation of $128 per share; its base case assumes the full $5.4 billion potential project portfolio is delivered by 2032, yielding a valuation of $145.
  • BofA cut its price target from $155 to $145 while maintaining its Buy rating. In addition to delaying project in-service dates, the base-case valuation raises the cost of equity from 6.75% to 7% and assumes growth gradually slows after 2032.