Q2 2024 The Williams Companies Inc Earnings Call

Good day and thank you for standing by. Welcome to the Williams Second Quarter Earnings 2024 conference call.

Operator: At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Danilo Juvane, Vice President of Investor Relations, ESG, and Investment Analysis.

Speaker Change: At this time, all participants are in a listen-only mode.

After the speaker's presentation, there will be a question and answer session.

To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised.

Danilo Juvane: To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Danilo Juvane, Vice President of Investor Relations, ESG and Investment Analysis. Please go ahead.

Danilo Juvane: Thanks, Rich, and good morning, everyone. Thank you for joining us and for your interest in the Williams Company. Yesterday afternoon, we released our earnings press release and a presentation that our President and CEO, Alan Armstrong, and our Chief Financial Officer, John Porter, will speak to this morning. Also joining us on the call today are Michael Dunn, our Chief Operating Officer; Blaine Wilson, our General Counsel; and Chad Zamarin, our Executive Vice President of Corporate Strategic Development.

Danilo Juvane: Thanks, Rebecca, and good morning, everyone. Thank you for joining us and for your interest in the Williams Companies.

Speaker Change: Yesterday afternoon, we released our earnings press release and a presentation that our President and CEO, Alan Armstrong, and our Chief Financial Officer, John Porter, will speak to this morning.

Speaker Change: Also joining us on the call today are Michael Dunn, our Chief Operating Officer, Lane Wilson, our General Counsel, and Chas Zemrin, our Executive Vice President of Corporate Strategic Development.

Danilo Juvane: In our presentation materials, you'll find a disclaimer related to the, This disclaimer is important and integral to our remarks, and you should review it. Also included in the presentation materials are non-GAAP measures that we reconciled to generally accepted accounting principles. And these reconciliation schedules appear at the back of today's presentation materials. So with that, I'll turn it over to Alan Armstrong.

Speaker Change: In our presentation materials, you'll find a disclaimer related to forward-looking statements.

This disclaimer is important and integral to our remarks and you should review it.

Also included in the presentation materials are non-GAP measures that we reconcile to generally accepted accounting principles.

and these reconciliation schedules appear at the back of today's presentation materials. So with that, I'll turn it over to Alan Armstrong.

Alan Armstrong: Great, well, thanks Danilo, and thank you all for joining us today. The story that John and I get to lay out for you this morning is one of consecutive growth as Williams continues to deliver on a long-term trend of per share growth and resilience regardless of the macro environment. In fact, we delivered record second-quarter results driven by the strong performance of our transmission and storage business this quarter. And even our gathering and processing business held up very well despite challenging natural gas prices.

Alan Armstrong: Great. Well, thanks Danilo, and thank you all for joining us today.

Alan Armstrong: The story that John and I get to lay out for you this morning is one of consecutive growth.

Alan Armstrong: as Williams continues to deliver on a long-term trend of per-share growth and resilience regardless of the macro environment. In fact, we delivered record second-quarter results driven by the strong performance of our transmission and storage business this quarter.

Even our gathering and processing business held up very well despite challenging natural gas prices.

Alan Armstrong: The good news is that a meaningful increase in natural gas demand that continues to exceed our expectations will take advantage of these abundant supplies driving growth for years to come, and the supply side is poised to respond with over one VCF a day of volumes from delayed tills and temporary shut-ins to return to our gathering. And before we get deeper into the financial metrics, I want to hit on a few key things from the quarter, namely our crisp execution of key projects that are positioning us for continued earnings growth and the ongoing focus we have on optimizing our portfolio and ensuring sustainable operations.

The good news is that a meaningful increase in natural gas demand that continues to exceed our expectations

will take advantage of these abundant supplies driving growth for years to come.

and the supply side is poised to respond with over one VCF a day of volumes from delayed tills and temporary shut-ins to return to our gathering systems.

Speaker Change: And before we get deeper into the financial metrics, I want to hit on a few key themes from the quarter, namely our crisp execution of key projects that are positioning us for continued earnings growth and the ongoing focus we have on optimizing our portfolio and ensuring sustainable operations.

Alan Armstrong: So starting here on slide two, our teams have executed on an extraordinary number of strategic priorities, including placing projects into service in the Northeast, the West, and the Deepwater Gulf of Mexico. Just to run down the list quickly, last week, we placed Transco's Regional Energy Access into full service ahead of schedule and under budget once again, ensuring clean and reliable natural gas is available to serve the Northeast region for the upcoming winter heating season. And while the D.C.

Alan Armstrong: So, starting here on slide two, our teams have executed on an extraordinary amount of strategic priorities, including placing projects into service in the Northeast, the West, and the deepwater Gulf of Mexico. Just to run down the list quickly here, last week we placed Transco's regional energy access into full service ahead of schedule and under budget once again, ensuring clean and reliable natural gas is available to serve the Northeast region for the upcoming winter

Alan Armstrong: Although the Circuit Court did issue a decision last week to vacate the FERC certificate for REA, we believe the Court's concerns about the FERC's process are once again flawed and will be fairly easy for the FERC to resolve. In the meantime, we are taking the necessary legal and regulatory steps to address the Court's concerns and ensure that this much-needed firm transportation capacity continues to be available to serve the needs of our customers without interruption.

Alan Armstrong: And while the D.C. Circuit Court did issue a decision last week to vacate the FERC certificate for REA, we believe the Court's concerns about the FERC's process is once again flawed and will be fairly easy for the FERC to resolve.

Alan Armstrong: In the meantime, we are taking the necessary legal and regulatory steps to address the court's concerns and ensure that this much-needed firm transportation capacity continues to be available to serve the needs of our customers without interruptions.

Alan Armstrong: I'll remind you that our industry has seen similar court rulings in the past with projects such as Sable Trails and Spires Expansion. With both of these projects operating today, we see limited risk of major interruptions to REA operations and are prepared to help the FERC in reaffirming the merits of this important project.

Speaker Change: I'll remind you that our industry has seen similar court rulings in the past with projects such as Sable Trails, as well as Spires Expansion.

Alan Armstrong: With both of these projects operating today, we see limited risk to major interruptions to REA operations and are prepared to help the FERC in reaffirming the merits of this important project.

Alan Armstrong: Other notable expansions we've recently completed include the Marcellus gathering expansion that serves Southwestern's rich gas zone in the Marcellus and the fully contracted Mountain West Uintah Basin transmission expansion. And in deep water, there are two new fields that will increase EBITDA in the third quarter on our discovery system, which we now fully own. So we're excited about the acquisition of the additional interest in discovery, and we're really excited about the kind of growth that we're seeing both here in the near term and in the long term.

Alan Armstrong: Other notable expansions we've recently completed include the Marcellus gathering expansion that serves Southwestern's rich gas zone in the Marcellus and the fully contracted Mountain West Uintah Basin transmission expansion.

Speaker Change: And in the deep water, there are two new fields that will increase EBIDTA in the third quarter on our discovery system.

Alan Armstrong: which we now fully own. So we're excited about the acquisition of the additional interest in Discovery and we're really excited about the kind of growth that we're seeing both here in the near term and the long term. So first of all Chevron's large anchor development

Alan Armstrong: So first of all, Chevron's large anchor development and Beacon's Winterfell five-well program are both fully connected and will drive a large increase in EBITDA for 2025 as well as for the balance of this year. Additionally, Hess brought on their pickerel prospect on June 25th that will grow EBITDA in our eastern gulf. We were also active in advancing construction for several key projects. We initiated construction activities on the Louisiana Energy Gateway Gathering, Treating, and Carbon Capture project, as well as Transco's Texas to Louisiana Energy Pathway project, which we call TLEP.

Alan Armstrong: and Beacon's Winterfell five-well program are both fully connected and will drive a large increase in EBITDA for 2025 as well as for the balance of this year.

Speaker Change: Additionally, Hess brought on their pickerel prospect on June 25th that will grow Ebitda on our eastern gulf assets.

Speaker Change: We were also active on advancing construction for several key projects. We initiated construction activities on the Louisiana Energy Gateway, Gathering, Treating and Carbon Capture Project, as well as Transco's Texas to Louisiana Energy Pathway Project.

Alan Armstrong: TLEP provides our anchor shipper, EOG Resources, with access to the LNG corridor and higher price markets on the Transco pipeline and specifically all the way into the Louisiana market. So we're excited about getting started on that fairly significant project for us. And then recently, we also signed a precedent agreement on Transco's Gillis West expansion. This will bring new, reliable, and low-cost supplies to CenterPoint Energy's Houston area markets from Louisiana, so this is effectively a backhaul on Transco, helping CenterPoint to reduce its dependence on the Texas intrastate gas pipeline systems.

Alan Armstrong: which we call TLEP. TLEP project provides our anchor shipper EOG resources with access to the LNG corridor and higher price markets.

Alan Armstrong: on the Transco pipeline, and specifically all the way into the Louisiana market. So we're excited about...

Alan Armstrong: for getting started on that fairly significant project for us. And then recently, we also signed a precedent agreement on Transco's Gillis West expansion. This will bring new, reliable, and low-cost supplies to CenterPoint Energy's Houston area markets.

Speaker Change: from Louisiana, so this is effectively a backhaul on Transco, helping CenterPoint to reduce their dependence on the Texas intrastate gas pipeline systems. Importantly, this quick-turn project will add meaningful EBITDA with very little capital required on our part to place that into service.

Alan Armstrong: Importantly, this quick-turn project will add meaningful EBITDA with very little capital required on our part to place that into service. I also want to call out the significant Emissions Reductions and Cost Savings Accomplished This Quarter as Part of Our System-Wide Modernization and Emission Reduction Program. Thus far, we have replaced 57 transmission compressor units and are on track to meet our goal of 112 units to be replaced by the end of this year.

Alan Armstrong: I also want to call out the significant

Alan Armstrong: emissions reductions and cost savings accomplished this quarter as part of our system-wide modernization and emission reduction program.

Alan Armstrong: Thus far, we have replaced 57 transmission compressor units and are on track to meet our goal of 112 units to be replaced by the end of this year.

Alan Armstrong: So that we can begin recovering on these investments in our latest rates. And on that note, we will file our new rates on Transco at the end of this month, and the new rates will go into effect in March of twenty five. So, an incredible amount of work is going on by teams to replace a lot of these very old units with modern, low emission equipment on the system. And a lot of times, those kind of projects kind of get overlooked, but a tremendous amount of effort and great execution are going on by the teams on that front as well.

Alan Armstrong: so that we can begin recovering on these investments in our latest rates.

Alan Armstrong: And on that note, we will file our new rates on Transco at the end of this month, and the new rates will go into effect in March of 2025. So, incredible amount of work.

Alan Armstrong: going on by teams to replace a lot of these very old units with modern, low-emission equipment on the system. And a lot of times those kind of projects kind of get overlooked, but a tremendous amount of effort and great execution.

Alan Armstrong: Looking at the second column, we continue to take steps to optimize our asset portfolio. We sold our stake in the OxSable joint venture at an attractive gain and consolidated our ownership interest in the Gulf of Mexico Discovery System at an attractive value given both the very near and long-term growth of this asset. From a financial perspective, we remain on track to achieve the top half of our 24 EBITDA guidance, and we also reaffirm our expectations for 2025, which translates into a five-year EBITDA CAGR of 8%.

Alan Armstrong: going on by the teams on that front as well.

Speaker Change: Looking at the second column, we continue to take steps to optimize our asset portfolio. We sold our stake in the OxSable joint venture at an attractive gain and consolidate our ownership interest in the Gulf of Mexico Discovery System at an attractive value given both the very near and long-term growth on this asset.

Speaker Change: From a financial perspective, we remain on track to achieve the top half of 24 EBITDA guidance, and we also reaffirm our expectations for 2025, which translate into a 5-year EBITDA CAGR of 8%. More importantly,

Alan Armstrong: More importantly, the growth in our per share metrics will be just as strong over this five-year period, with an AFFO per share CAGR of 7% and our EPS CAGR of 12% over this five-year period. Of note, the fundamentals to sustain and even improve on this industry-leading earnings and cash flow growth beyond 25 actually continue to improve. For example, our southeast.

Alan Armstrong: The growth in our per share metrics will be just as strong over this five-year period with AFFO per share CAGR of 7% and our EPS CAGR of 12% over this five-year period.

Alan Armstrong: Of note, the fundamentals to sustain and even improve on this industry-leading earnings and cash flow growth beyond 25 actually continue to improve.

Alan Armstrong: Our CESI project is just the first of a few projects we expect from the secular trend of increased demand for power generation, and we remain in the best position to secure additional infrastructure solutions in and around our Transco pipeline. And, finally, we continue to prioritize being a responsible operator in all that we do. And this is clearly outlined in our 2023 Sustainability Report that we published last week. This report is really a deep dive on how we focus on doing business the right way.

Speaker Change: Our CESI project is just the first of a few projects we expect from the secular trend of increased demand for power generation, and we remain in the best position to secure additional infrastructure solutions in and around our Transco pipeline footprint.

Alan Armstrong: And finally, we continue to prioritize being a responsible operator in all that we do.

Speaker Change: and this is clearly outlined in our 2023 sustainability report that we published last week. This report is really a deep dive on how we focus on doing business the right way and one area I'll call out is our efforts in progressing on our decarbonization goals.

Alan Armstrong: And one area I'll call out is our efforts in progressing on our decarbonization goal. We are focused on proving that the natural gas industry can play an even more important role in providing affordable and reliable energy while also continuing to reduce greenhouse gas emissions here at home and around the world. And so with that, I'll turn it over to John to walk through the second quarter financials. Okay, John?

John Porter: Thanks, Alan. Starting here on slide three with a summary of our year-over-year financial performance, beginning with adjusted EBITDA, we saw about a 3.5% year-over-year increase despite low natural gas prices that fell about 5% versus 2Q23, averaging close to around $2 per second quarter of 2024. And that 3.5% adjusted EBITDA growth is over a second quarter last year that had grown about 8%. So, in spite of low natural gas prices, once again, our resilient business continued to grow even as producer-customers employed pretty significant temporary production reduction measures like not completing drilled wells and or not turning inline wells that now stand ready to flow as prices improve.

Speaker Change: And so with that, I'll turn it over to John to walk through the second quarter financials. John.

John Porter: Starting here on slide 3 with a summary of our year-over-year financial performance, beginning with adjusted EBITDA, we saw about a 3.5% year-over-year increase despite low natural gas prices that fell about 5% versus 2Q23, averaging close to around $2 per second quarter of 2024.

Speaker Change: So, in spite of low natural gas prices, once again, our resilient business continued to grow even as producer-customers employed pretty significant temporary production reduction measures like not completing drilled wells and or not turning inline wells that now stand ready to flow as prices improve.

John Porter: As we'll see on the next slide, our adjusted EBITDA growth was driven by strong growth from our large-scale natural gas transmission and storage businesses, including the favorable effects of our recent acquisition. Year-to-date, our adjusted EBITDA is now up 6%, so right in the middle of our long-term growth target of 5% to 7%. For too few, our adjusted EPS was up 2%, and year-to-date EPS is up about 3%, so a bit slower EPS growth in 24 as compared to the 19% five-year CAGR that we've seen through 2023.

Speaker Change: As we'll see on the next slide, our adjusted EBIDA growth was driven by strong growth from our large-scale natural gas transmission and storage businesses, including the favorable effects of our recent acquisitions.

Speaker Change: Year-to-date, our adjusted debit DOT is now up 6%, so right in the middle of our long-term growth target of 5 to 7%.

Speaker Change: So a bit slower EPS growth in 2024 as compared to the 19% 5-year CAGR that we've seen through 2023. But as Alan mentioned, looking through 2025, we do see a 5-year CAGR that will be in excess of 12%.

John Porter: But as Alan mentioned, looking through 25, we do see a five-year CAGR that will be in excess of 12%. For 2Q, available funds from operations, AFFO growth was 3% and 4% year-to-date. A similar story here with this slower 24 growth is following an 8% 5-year CAGR through 2023. And when you look through 2025, we see a 5-year CAGR of 7%.

John Porter: Also, you can see our 2Q dividend coverage based on AFFO was a very strong 2.16 on a dividend that grew 6.1% over the prior year and 2.38 times coverage year to date. And our debt-to-adjusted EBITDA was 3.76 times, which is in line with our expectations for slightly higher leverage in 2024 before dropping back down in 2025 to guidance of 3.6 times or better. So before we move to the next slide and dig a little deeper into our adjusted EBITDA growth for the quarter, we'll provide an update on our financial guidance. In general, our second quarter update is unchanged from what we provided in our first quarter earnings presentation.

Alan Armstrong: And our debt to adjusted EBITDA was 3.76 times, which is in line with our expectations for slightly higher leverage in 2024 before dropping back down in 2025 to guidance of 3.6 times or better.

John Porter: Based on our strong starts in 2024, we guided to the upper half of our 2024 adjusted EBITDA range of 6.95 to 7.1 billion, and we indicated that we were well positioned for upsides to drive toward the high end of this original guidance. We also share that we remain well positioned to deliver on our 2025 adjusted EBITDA range of $7.2 to $7.6 billion. And that, based on our improved 24 Adjusted EBITDA Outlook and some other changes, we saw our key per share metrics, Adjusted EPS and ASFO per share, coming in at the high end of their ranges for 2024.

Speaker Change: And that, based on our improved 24 Adjusted EBIDTA Outlook and some other changes, we saw our key per share metrics, Adjusted EPS and ASFO per share, coming in at the high end of their ranges for 2024.

John Porter: So again, no major shifts to that first quarter update except perhaps to say that we are increasingly comfortable that we can clear the $7 billion level for 2024 Adjusted EBITDA while still not counting on any additional help from CCOINT. And, of course, we also wouldn't include the around $150 million gain we expect to have on the OXABLE sale there, as we exclude gains and losses on asset sales from our Adjusted EBITDA measures.

Alan Armstrong: So, again, no major shifts to that first quarter update except perhaps to say that we are increasingly comfortable that we can clear the $7 billion level for 2024 adjusted EBITDA while still not counting on any additional help from CCOINT, and of course, we also wouldn't include the around $150 million gain we expect to have on the OXABLE sale in there, as well as we exclude gains and losses on asset sales from our adjusted EBITDA measure.

John Porter: So let's turn to the next slide and take a little closer look at our first quarter result. Walking now from last year's $1.611 billion to this year's $1.667 billion, we start with our transmission and Gulf of Mexico business, which improved $64 million, or just over 8.5%, due to the combined effects of a full quarter contribution from the Hartree Gulf Coast Storage Acquisition, which is delivering as expected following a flawless integration effort.

Alan Armstrong: So let's turn to the next slide and take a little closer look at our first quarter results.

Alan Armstrong: Walking now from last year's $1.611 billion to this year's $1.667 billion, we start with our transmission and Gulf of Mexico business.

Speaker Change: which improved 64 million or just over 8.5% due to the combined effects of a full quarter contribution from the Hartree-Gulf Coast Storage Acquisition, which is delivering as expected following a flawless integration effort.

John Porter: We also had higher Transco revenues, including partial in-service from the Regional Energy Access Project, and segment growth was unfavorably impacted by last year's bayou ethane divestiture and also some planned downtime in the eastern Gulf of Mexico. Now, the $36 million unfavorable variance for the Northeast GMP business is really against a strong quarter last year that included the effect of a one-time $15 million favorable gathering revenue catch-up adjustment. However, we did see lower Northeast gathering volumes that were driven by those temporary producer reductions that were basically roughly in line with our plan for the year. And partially, those volume reductions were partially offset by rate escalations across several franchises in the Northeast.

Speaker Change: We also had higher Transco revenues, including partial in-service from the Regional Energy Access Project. And segment growth was unfavorably impacted by last year's bayou ethane divestiture and also some planned downtime in the eastern Gulf of Mexico.

Speaker Change: However, we did see lower Northeast gathering volumes that were driven by those temporary producer reductions that were basically roughly in line with our plan for the year. And partially, those volume reductions were partially offset by rate escalations across several franchises in the Northeast.

John Porter: Shifting now to the West, which increased about $7 million, benefiting from the DJ transactions that we completed in the fourth quarter of 2023. The increase in the DJ basin results was about the same magnitude as the unfavorable loss of hedge gains we had in 2023. Segment performance was also favorably impacted by higher NGL services results, including Higherland Overland Pass pipeline volumes where low natural gas prices have supported greater ethane recovery. Overall, waste gathering volumes were also lower as a result of temporary producer reductions, primarily in the dry gas Haynesville area.

Speaker Change: Shifting now to the West, which increased about $7 million, benefiting from the DJ transactions that we completed in the fourth quarter of 2023. The increase in the DJ Basin results was about the same magnitude as the unfavorable loss of hedge gains we had in 2023.

John Porter: And then you see the $2 million lower marketing loss that was in line with our plan, based on the expectation that our natural gas marketing business will typically have a loss in the second quarter. Our upstream joint venture operations, included in our other segment, were up about $12 million from last year. So again, a second quarter that continued to beat our business plan, proving once again our ability to grow our business in spite of a challenging natural gas pricing environment, and also giving us further confidence in our ability to beat $7 billion of adjusted EBITDA in 2024. And with that, I'll turn it back to Alan.

Speaker Change: So, again, a second quarter that continued to beat our business plan, proving once again our ability to grow our business in spite of a challenging natural gas pricing environment and also giving us further confidence in our ability to beat $7 billion of adjusted EBITDA in 2024. And with that, I'll turn it back to Al.

Alan Armstrong: Okay, well, thanks, John. Just a few closing remarks before we turn it over to your questions. I'll end where I started with my remarks, and that is to emphasize what Williams has been able to deliver in the current environment and how well-positioned we are for the future as natural gas demand continues to grow. As we think about our long-term strategy, we are confident in the role our valuable natural gas infrastructure will play in meeting both today's energy demand as well as the projected growth from power generation and LNG access.

al: Okay, well, thanks, John. Just a few closing remarks before we turn it over to your questions.

al: I'll end where I started with my remarks, and that is to emphasize what Williams has been able to deliver in the current environment and how well-positioned we are for the future as natural gas demand.

Alan Armstrong: natural gas demand continues to grow. As we think about our long-term strategy, we are confident in the role our valuable natural gas infrastructure will play in meeting both today's energy demand as well as the projected growth from power generation and LNG exports.

Alan Armstrong: We are seeing demand grow at an unprecedented pace, and expansions of our uniquely placed infrastructure will demand a premium. Simply put, there is no other midstream company today that is set up better than Williams to capture this demand growth. We are the most natural gas centric, large-scale midstream company around today, and our natural gas focused strategy continues to deliver growth on top of growth, quarter after quarter. And to that point, we've now seen 11 consecutive years of adjusted EBITDA growth and an 8% compound annual growth rate of our adjusted EBITDA since 2018.

Speaker Change: Simply put, there is no other midstream company today that is set up better than Williams to capture this demand growth.

Speaker Change: We are the most natural gas centric large-scale midstream company around today and our natural gas focused strategy Continues to deliver growth on top of growth quarter after quarter

Speaker Change: And to that point, we've now seen 11 consecutive years of adjusted EBITDA growth and an 8% compound annual growth rate.

Alan Armstrong: In addition, we have realized a 19.5% return on our invested capital during the last four years, and our steadfast project execution has led to record contracted transmission capacity and will continue to drive per share growth in 2024 and beyond. In fact, our current projects in execution have higher returns than the prior four years. So in closing, we've built a business that is delivering record profitability and strong financial returns in the present but is positioned for even faster growth. And so with that, we'll open it up to your questions. Thank you. Thank you.

Speaker Change: of our adjusted EBITDA since 2018.

Speaker Change: In addition, we have realized a 19.5% return on our invested capital during the last four years.

Speaker Change: and our steadfast project execution has led to record contracted transmission capacity and will continue to drive per share growth in 2024 and beyond.

Speaker Change: In fact, our current projects in execution have higher returns than this prior four years.

Speaker Change: So, in closing, we've built a business that is delivering record profitability and strong financial returns in the present, but is positioned for an even faster growing future.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please limit your questions to one question and one follow-up. Please stand by while we compile the Q&A list. Our first question comes from the line of Praneeth Satish of Wells Fargo. Your line is now open.

Speaker Change: And so with that, we'll open it up to your questions. Thank you.

Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Please limit your questions to one question and one follow-up. Please stand by while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Praneeth Satish of Wells Fargo. Your line is now open.

Praneeth Satish: Hi all, good morning. Maybe I'll start with data centers here. So you mentioned that you're looking, that CESI is just the first in maybe a handful of other data center projects. I guess, you know, two questions here.

Praneeth Satish: Hi all, good morning. Maybe I'll start with with data centers here. So you mentioned that you're looking, that CESI is just the first and maybe a handful of other data center projects.

Praneeth Satish: Can you give us a sense of the size and scope of some of the other projects that you're looking at in the backlog? And then how do you think about the returns on future projects for CESI? I mean, we're estimating around a five times EBITDA multiple. Do you think that some of the future data center projects that are in the backlog?

Alan Armstrong: Yeah, well, first of all, Pradeep, thank you for the question and, you know, important issue. First of all, on SESI, actually, our return is even better than that. Probably, as we've mentioned, the best return we've ever seen on a large-scale project on Transco and actually any of our transmission expansions over the long history for Williams. So, pretty extraordinary return opportunity there.

Speaker Change: Yeah, well, first of all, thank you for the question and, you know, important issue. First of all, on SESI, actually our return is even better than that. Probably, as we've mentioned, the best return we've ever seen on a large-scale project on

Alan Armstrong: You know, in terms of data center load, we are right in the throes of that. We have a very long backlog of projects, and I will tell you that, particularly in the Southeast and the Mid-Atlantic.

Speaker Change: a pretty extraordinary return opportunity there. In terms of the data center load, we are right in the throes of that. We have a very long backlog of projects.

Speaker Change: And I will tell you that, particularly in the Southeast and the Mid-Atlantic,

Alan Armstrong: Those expansion opportunities that we have, we're frankly kind of overwhelmed by the number of requests that we're dealing with, and we are trying to make sense of those projects. Obviously, we're not going to start or announce another expansion project on top of CESI, because obviously that would force a combination of projects. And so, it doesn't make any sense for us to be making any announcements when we've got a large project that we've committed to our customers to do everything we can to get that permitted cleanly and push that ahead.

Speaker Change: the number of requests that we're dealing with, and we are trying to make.

Speaker Change: And so, it doesn't make any sense for us to be making any announcements when we've got a large project that we've committed to our customers to do everything we can to get that permitted cleanly and push that ahead. So, extremely critical expansion for our utility customers there in the Mid-Atlantic and the Southeast, and we understand that, and we're going to make sure that we deliver on that first to our customers.

Alan Armstrong: So, this is an extremely critical expansion for our utility customers there in the Mid-Atlantic and the Southeast, and we understand that, and we're going to make sure that we deliver on that first to our customers. But despite the fact that there's a lot of attention there in the Southeast and the Mid-Atlantic, we're actually seeing a strong demand response and a lot of projects that we're dealing with and trying to figure out how we can respond to in the Rocky Mountain states, particularly in eastern Washington and the Quincy area, in Idaho, and in the Salt Lake City region.

Speaker Change: But despite the fact that there's a lot of attention there in the Southeast and the Mid-Atlantic, we're actually seeing a strong demand response.

Alan Armstrong: So, there's a lot of demand going on everywhere, and frankly, the big developers that we're working with are looking to find where they can, because there's the. Time is of the essence, probably more than we can even imagine in our business. And so they are looking to where the permitting regime is right, where there's access to abundant natural gas supplies, and frankly, where expansions on our systems are available.

Speaker Change: are looking to find where they can, because there's the...

Speaker Change: Time is of the essence, probably more than we can even imagine in our business.

Speaker Change: on our systems are available. And so this is moved from

Alan Armstrong: Previously, in cloud-based data centers, they've been very focused on the latency issue, or in other words, the connection to very fast and broadband networks, to where they are now focused on latency being less of an issue. I wouldn't say it's not an issue, but less of an issue, and the speed to market for power generation and gas resources being available to power that are coming front and center, along with the local air permitting issues associated with that.

Speaker Change: being one where people have been very focused previously in cloud-based data centers, they've been very focused on the latency issue, or in other words, the connection into very fast and broadband networks.

Speaker Change: and the speed to market for power generation and gas resources being available to power that are coming front and center along with the local air permitting issues associated with that. So I would just tell you it is kind of

Alan Armstrong: So I would just tell you, it is kind of an exciting time for us, and even for me personally, to be on such a steep learning curve as to how we are going to make the very best use of our assets. But there certainly is not a dearth of opportunity for us in that regard. In fact, as I said, it's a little bit overwhelming, and we're going to have to just make sure we make the very highest use of our assets. Because obviously, as we expand, the lower cost expansions drive very high returns, but we only have so many of those, and those are precious, and we know that, and so we're making sure that we make the very highest return.

Speaker Change: an exciting time for us and even for me personally to be in such a steep learning curve on how we are going to make the very best use of our assets, but there certainly is not a dearth of time.

Speaker Change: because there obviously is, you know, as we expand, the lower cost expansions drive very high returns, but we only have so many of those, and those are precious and we know that, and so we're making sure that we make the various highest return.

Alan Armstrong: Associated with the expansion around our assets. So, you know, we're not going to put a number on it because I hear people putting a number on it. And frankly, that's a very large guess. And it's in a timeframe that's out there so far, that and if you're not speaking to the returns that you're making on the project, I'm not really purposeful in quoting those kind of numbers when you're not really talking about the economic or financial impact on your business, and we're not ready to lay that out.

Speaker Change: associated with the expansion around our assets. So, you know, we're not going to put a number on it because I hear people putting a number on it and frankly that's a

Speaker Change: That's a very large guess, and it's in a time frame, frankly, that's out there so far that, and if you're not speaking to the returns that you're making on the project, I'm not really...

Speaker Change: The

Danilo Juvane: and Danilo Juvane.

Alan Armstrong: But I can tell you that if anybody else has more opportunity than we do, I wish them luck because we're going to have a hard time keeping up with the opportunity in front of us. So hopefully, that gives you some color, but I would tell you it's not all that meaningful to quote volumes on expansions if you're not talking about returns and you're not talking about

Danilo Juvane: so hopefully that gives you some color but but I would tell you I think it's

Danilo Juvane: not all that meaningful to quote volumes on expansions if you're not talking about returns and you're not talking about the time frame for those opportunities.

Praneeth Satish: Got it. No, that's helpful. That's, that's great.

Praneeth Satish: And maybe just switching gears, can you help us understand, you know, what the next steps are for REA, following the DC Circuit Court's decision? I guess, have you filed for an emergency petition to keep the pipeline in service? And is there gas flowing today? Just trying to understand whether this impacts

Speaker Change: Got it. No, that's helpful. That's great. And maybe just switching gears, can you help us understand what the next steps are for REA following the D.C. Circuit Court's decision? I guess, have you filed for an emergency petition to keep the pipeline in service?

Speaker Change: And is there gas flowing today? Just trying to understand whether this impacts the early in service at all.

Praneeth Satish: Yeah, well, first of all, yes, gas is up and flowing, and kudos to our team for being able to respond so quickly to that just incredible project execution on that project in a difficult area. And I'm going to turn it to Lane Wilson, our General Counsel.

Lane Wilson: Yeah, well, first of all, yes, gas is up and flowing and kudos to our team for being able to respond so quickly quickly to that just Incredible project execution on that project in a difficult area and I'm going to turn it to Lane Wilson our general counsel to speak to the legal procedure

Terence Wilson: Yes, I think the next step will be seeking a temporary certificate. This is not new to FERC; they've dealt with this issue before. We fully anticipate they'll be defending this certificate. We'll be seeking re-hearing on a timely basis, and that's probably about 35 days out at this point, maybe 37, 38. But we don't have any concerns that we're going to be able to continue to operate, don't have any concerns about getting a temporary certificate and ultimately not being able to continue to operate. Thank you.

Lane Wilson: Yes, I think the next step will be seeking a temporary certificate. This is not new to FERC, they've dealt with this issue before. We fully anticipate they'll be defending this certificate.

Lane Wilson: We'll be seeking re-hearing on a timely basis, and that's probably about 35 days out at this point, maybe 37, 38.

Lane Wilson: We don't have any concerns that we're going to be able to continue to operate, don't have any concerns about getting a temporary certificate, and ultimately don't have any concerns about defending what FERC has done on this project.

Operator: One moment for our next question. Our next question comes from the line of Jeremy Tonet of J.P. Morgan. Your line is now open.

Jeremy Tonet: Just wanted to look at the guidance here and see what the current thoughts are with regard to producer production expectations over the, I guess, balance of the year and into 25 years, the expectation that we've kind of hit the lows and there's kind of a growth from these points, or just how you see, you know, production trending across your gathering assets.

Lane Wilson: Hi, good morning.

Jeremy: Good morning, Jeremy.

Speaker Change: I just wanted to look at the guidance here and see what the current thoughts are with regards to

Danilo Juvane: and Danilo Juvane.

Micheal Dunn: Morning, Jeremy. It's Michael.

Danilo Juvane: Good morning, Jeremy. It's Michael. Yeah, I think right now we feel good about where we're at in regard to our current forecast for the

Micheal Dunn: Yeah, I think right now we feel good about where we are in regard to our current forecast for the production profiles coming from our customers. You know, you've got to look at it between the rich basins and the dry gas. And obviously, dry gas is challenged by pricing now, so producers are making a month by month decision on gas volumes that they might shut in. I think you probably saw Koterra's announcement where they were shutting in 300 million for the month of August. And it's really a month by month decision for all the producers out there.

Jeremy: production profiles coming from our customers. You know, you've got to look at it between the rich basins and the dry gas, and obviously the dry gas is challenged by pricing now, so producers are making a month-by-month decision on

Micheal Dunn: But right now, we've anticipated this, as you've probably seen through the first half of the year; the team did a really good job anticipating where the production shut-downs would occur and the delayed tills and ducts. I would say right now we've got over a BCF of delayed tills in the queue right now between all of our customer base, meaning that the producers have drilled the wells and completed them, and we've connected to them. And they are ready to go when the price signals are there. And there's over a BCF as well of ducks.

Jeremy: And it's really a month-by-month decision for all the producers out there, but right now we've anticipated this as you've probably seen through the first half of the year.

Speaker Change: The team did a really good job anticipating where the production shut-ins would occur and the delayed tills and ducts.

Speaker Change: And they are ready to go when the price signals are there. And there's over a BCF as well of dust, so they've been drilled but not completed on our system. So there's definitely a lot of opportunity to bring on gas.

Micheal Dunn: So they've been drilled but not completed on our system. So there's definitely a lot of opportunity to bring on gas as the producers see a price signal. And so I'd say our rich basins are still outperforming. We're seeing, you know, good price netbacks for the producers there. And that certainly buffers the dry gas situation that we have right now. But all in all, we feel good about our end-of-year forecast. Then certainly 2025 is going to be price sensitive as well. The Golden Path LNG facility, you probably saw the announcements yesterday that there is going to be an end to 2025 in service, it appears.

Speaker Change: As a producer, we see a price signal.

Speaker Change: And so I'd say our rich basins are still outperforming. We're seeing, you know, good pricing netbacks for the producers there.

Speaker Change: and that certainly buffers the dry gas situation that we have right now, but all in all, we feel good about our end of year forecast, and certainly 2025 is going to be price sensitive as well.

Speaker Change: The Golden Path LNG facility, you probably saw the announcements yesterday that they're going to be at the end of 2025 in service it appears.

Micheal Dunn: And so that should have been anticipated already by the market, it looks like, with the four curves, and producers will be making decisions on these curves, prices will increase. Obviously, they'll hedge into that and keep their volumes flowing, which is what we anticipate. So we're really comfortable with where our current forecast is.

Speaker Change: And so that should have been anticipated already by the market, it looks like, with the forward curve.

Speaker Change: and producers will be making decisions on these curves, and when prices elevate, obviously they'll hedge into that and keep their volumes flowing is what we anticipate. So we're really comfortable with where our current forecasts are.

Jeremy Tonet: Got it. That's very helpful. Thank you for that. And just wanted to pivot towards leg, if I could, and just wanted to see your latest thoughts on moving forward there with regards to FERC requesting more information. Just wondering if you could update us there and how you think about that.

Speaker Change: Got it. That's very helpful. Thank you for that. And just wanted to pivot towards LEG, if I could, and just wanted to see your latest thoughts on moving forward there with regards to FERC requesting more information. Just wondering if you could update us there and how you think about that.

Terence Wilson: Yeah, we've responded to the FERC data request, and we fully anticipate that FERC is either going to dismiss this matter or find a leg as a gathering system. We don't really have any concerns. And so there's really nothing for us to do right now except continue down the current road, which is in construction. We feel pretty confident about where we are.

Speaker Change: Yeah, we've responded to the FERC data request, and we fully anticipate that FERC is either

Speaker Change: Dismiss this matter or find a leg as a gathering system. We really don't have any concerns there. And so there's really nothing for us to do right now except continue down the current road, which is in construction.

Speaker Change: So, again, we feel pretty confident about where we are in this project.

Jeremy Tonet: Got it, understood. Thank you for that.

Operator: One moment for our next question. Our next question comes from the line of Spiro Dounis of Citibank. Your line is now open.

Speaker Change: Got it, understood. Thank you for that.

Speaker Change: One moment for our next question.

Spiro Dounis: Thanks, operator. Good morning, everybody.

Speaker Change: Our next question comes from the line of Spiro Dunis of Citibank. Your line is now open.

Spiro Dunis: Thanks, operator. Morning, everybody. Alan, I wanted to go back to some of your closing comments there, and maybe if we could tie power generation demand with how you're thinking about the EBITDA outlook longer term.

Spiro Dounis: Alan, I want to go back to some of your closing comments there, and maybe we could tie power generation demand with how you're thinking about the EBITDA outlook longer term. So, one of your slides, slide 17, points to 10 times the amount of electricity demand growth over the next 10 years versus the last 10 years. And I think you mentioned your comments there.

Speaker Change: So one of your slides, slide 17, points to 10 times the amount of electricity demand growth over the next 10 years versus the last 10 years.

Spiro Dounis: You guys have been able to grow at about an 8% CAGR historically. So, as you think about the go forward here, you know, you guys have that 5% to 7% growth target out there. Is it time to start thinking about that as maybe, potentially moving higher in this environment, which I don't think he contemplated when he sort of laid that out there?

Speaker Change: And I think you mentioned in your comments there, you guys have been able to grow at about an 8% CAGR historically. So as you think about the go forward here, you know, you guys have that 5% to 7% growth target out there. Is it time to start thinking about that as maybe potentially moving higher in this environment, which I don't think you contemplated when you sort of laid that out there?

Alan Armstrong: Yeah, Spiro, it's a great question, actually, and I do think that there is plenty of potential, you know, even in the face of just the law of big numbers and continuing to put an absolute level of growth against a bigger and bigger number that, you know, as you know, has grown faster than we've expected over the last three or four years. But I do think that given the strength of the return on our projects and the kinds of opportunities that are coming at us right now, there is a fairly high probability that we could expand beyond that.

Speaker Change: Yes, it's a great question actually and and I do think that there is...

Speaker Change: plenty of potential, even in the face of just the law of big numbers and continuing to put an absolute level of growth against a bigger and bigger number that, as you know, has grown faster than we've expected over the last three or four years.

Speaker Change: But I do think that given the strength of the return on our projects and the kinds of opportunities that are coming at us right now, I do think that that is a fairly high probability that we could expand beyond that.

Alan Armstrong: And particularly, you know, as we get into the 27 and 28 timeframe, and because I do think that people thinking that, for instance, data center load and power gen load, For us, that's going to result in capacity sales on our transmission system, and that is going to take time to, you know, we're completely contracted out on our existing capacity and so that is going to take time to build that out but I do think as we get into 27 and 28 we're going to see a very strong impact from the kind of demand that we're seeing right now. The good news is for us and I think a little bit uniquely I think is the number of projects we already have coming on in 25, 26 and 27 give us a great runway of growth and I don't remember a time when we've looked out and thought we've got this kind of accelerating growth into that past the next three or four years so I do think that, you know, we just got done with our long-range plan and strategic planning and it was a very encouraging look at what our business looks like for the future with the kind of demand that we have coming in and frankly I would say we've been pretty conservative in marking that into our plan at this point. So yes, I do think that we certainly, there's a very high probability that we'll be able to exceed, or

Speaker Change: And particularly, you know, as we get into the 27 and 28 timeframe,

Speaker Change: And because I do think that people thinking that, for instance, data center load and power gen load.

Speaker Change: For us, that's going to result in capacity sales on our transmission systems.

Speaker Change: and that is going to take time to, you know, we're completely contracted out on our existing capacity.

Speaker Change: and so that is going to take time to...

Speaker Change: build that out, but I do think as we get into 27 and 28

Speaker Change: We're going to see a very strong impact from the kind of demand that we're seeing right now. The good news is, for us, and I think a little bit uniquely, I think, is the number of projects we already have coming on.

Speaker Change: in 25, 26, and 27 give us a great runway of growth. And I don't remember a time when we've looked out and thought we've got this kind of accelerating growth.

Speaker Change: into that past the next three or four years. So, I do think that, you know, we just got done with our long-range plan and strategic planning, and it was a very encouraging

Speaker Change: look at what our business looks like for the future with the kind of demand that we have coming in and frankly I would say we've been pretty conservative in marking that into our plan at this point so

Speaker Change: Yes, I do think that we certainly, there's a very high probability that we'll be able to exceed that over the next five years.

Spiro Dounis: Great, that's a helpful color. Second question...

Speaker Change: Great, that's a helpful color. Second question, just going to M&A, I was hoping for an update on the landscape and if you're seeing the same value proposition you saw over the last two years, or maybe if we could expect you to look a little bit more inward now.

Alan Armstrong: Yes, I mean, there's certainly an inventory of opportunities. Obviously, the Discovery Joint Venture that we bought in here just recently is one of those that was important for us, and particularly where we're seeing growth. And certainly, as we look at the free cash flow that this business generates, we are looking for places to make wise investments with that capital, and so that certainly represents a target opportunity for us in terms of the joint ventures.

Speaker Change: and consolidate some of these other JV positions.

Speaker Change: Yes, I mean, there's certainly an inventory of opportunity, obviously, the Discovery joint venture that we bought in here and just recently.

Speaker Change: obviously is one of those that was important for us and particularly where we're seeing the growth.

Speaker Change: And certainly, as we look at the free cash flow that this business generates.

Alan Armstrong: I would say we were very fortunate to have great partners like the Canadian Public Investment Fund that helped us in the OPM area and helped us really expand that area pretty dramatically. And we're excited to have them as partners. But you know, there will be a time

Speaker Change: We are looking for places to make wise investments with that capital, and so that certainly represents a target opportunity for us.

Speaker Change: in terms of the joint ventures that we, you know, I would say we were very fortunate to have great partners like the Canadian investment, Canadian Public Investment Fund that helped us in

Speaker Change: the OPM area and helped us really expand that area pretty dramatically and we're excited to have them as partners but you know there will be a time perhaps where they would want to monetize that so good example of one where it worked out perfectly well and now provides an inventory of investment opportunity.

Alan Armstrong: So, a good example of one where it worked out.

Danilo Juvane: and Danilo Juvane.

Danilo Juvane: and Danilo Juvane.

Spiro Dounis: Got it. I will leave it there. Thanks, as always.

Speaker Change: Got it. I will leave it there. Thanks as always.

Speaker Change: Our next question comes from the line of Manav Gupta of UBS. Your line is now open.

Manav Gupta: Hi, quick follow-up a little bit on the lines of Spiro. Looks like you bought some stuff from PSX, you know, as a part of a partnership of 170 million you paid for it. So, help us understand the strategic thought rationally, if you know, buying at this point and buying from PSX and obviously I think PSX is in market with some other assets. Would you be interested in those also?

Chad Zamarin: Yeah, this is Chad Zamarin. I'd say, you know, again, we owned 60% of the Discovery Joint Venture with Philips 66. And they've been a great partner for us, but you've heard a lot about our offshore growth. And certainly a core part of our business and a very attractive growth profile ahead. And so, you know, very core for us, but I think you'd probably hear not core for PSX

Manav Gupta: Yeah, this is Chad Dameron. I'd say, you know, again, we owned

Chad Dameron: 60% of the Discovery joint venture with with Phillips 66 and they've been a great partner for us but you've heard a lot about our offshore growth and so certainly a core part of our business and a very attractive growth

Chad Dameron: profile ahead and so you know we

Chad Zamarin: So, you know, as Alan mentioned, where we have joint venture interests, we understand the operations of those facilities. It's a low-risk investment for us. We see growth coming. In this quarter, if you think about Discovery, we were able to acquire that at what we think is a low multiple on a go-forward basis, as you'll see the growth in Discovery really ramp up through the remainder of this year and even more impressively into 2025 and beyond.

Chad Zamarin: And AuxAble, on the other hand, again, an asset that we've owned for a long time, had a great relationship there, but not core to our business. And Pembina has been consolidating their ownership of AuxAble and the Alliance Pipeline System. And so we, you know, were able to sell that at what we saw as a pretty high multiple. And, you know, and when you think about the difference in those cash flows, AuxAble is a more volatile commodity exposed set of cash flows. Discovery is a highly contracted asset that's going to grow, so I don't think that that should be translated to other assets that PSX may own.

Speaker Change: high multiple and, you know, and you think about the difference in those cash flows. AuxAble is a more volatile commodity exposed set of cash flows. Discovery is a highly contracted.

Chad Zamarin: That really is us, I think, rotating and optimizing our portfolio in a way that's going to create incremental value. And that's really the strategy when we look at any transaction. Where do we have a unique opportunity to turn something into more value by owning or consolidating? Perfect. My quick follow-up is, obviously, we get a lot of questions on storage, so what is your thought process on current storage rates and, you know, expansion opportunities? If you could talk about the set of opportunities that specifically relate to storage? Thank you. Gary F., this is Chad again.

Speaker Change: transaction, where do we have a unique opportunity to turn something into more value by by owning or consolidating that interest?

Chad Zamarin: You know, we've only owned the Hartree storage assets for just, you know, six, seven months, and we've already seen really attractive recontracting of storage at rates that have exceeded our expectations. We have been in the market to test whether or not we're seeing those rates, and the tenor of terms, approach expansion economics. You know, we've seen the storage market certainly growing in value. That's why we acquired Northex, the Gulf Coast storage facility, and we acquired Clay Basin, the largest storage asset in the Rockies as part of the Mountain West acquisition, and in all cases, we've seen an increase in value in storage over the last few years.

Speaker Change: expansion economics. We've seen the storage market certainly growing in value. That's why we acquired Nortex, the Gulf Coast Storage. We acquired Clay Basin, the largest

Chad Zamarin: I'd say that we're still climbing the curve towards what we think makes sense from an expansion perspective. We are, I think, approaching the rates that are required for both brownfield and potentially greenfield expansion, but we're still needing to see a bit more depth in the terms of contracts for us to put large capital to work. But all signs are that we've shown the fundamentals. We haven't grown storage as a country at all over the last 10 years, while gas demand has been and will continue to grow significantly and, importantly, will grow in more volatile markets. And so we have a lot of confidence that storage will continue to increase in value, and we will at some point reach that goal.

Speaker Change: Greenfield expansion, but we're still needing to see a bit more depth in the term of contracts for us to put, you know, large capital to work in expansion.

Danilo Juvane: and Danilo Juvane.

Operator: One moment for our next question. Our next question comes from the line of Neil Zinnian of Chua Security. Your line is now open.

Speaker Change: Our next question comes from the line of Neil Zeeman of Chua Security. Your line is now open.

Neil Zinnian: Thanks for getting me in. My first question is just on the GOM, especially you talked about the continued upside there, specifically, you know, it's interesting, it seems like you have a lot of opportunities for additional projects, and I think you all mentioned the two zero CapEx tiebacks that you announced after winning that acres dedication, so I'm just wondering, sort of, not even for the remainder of this year, but in 2025, how are you sort of looking at the upside potential

Neil Zeeman: Thanks for getting me in. My first question is just on the GOM especially. You talked about the continued upside there. Specifically, you know, it's interesting. It seems like you have a lot of opportunities for additional projects and I think you all mentioned

Alan Armstrong: Yeah, great, great question. There are a lot of exciting things going on in deep water. And, you know, again, we've got so much activity going on. I think it's easy to overlook the amount of execution that's gone on on projects like Whale, which, you know, Shell is working away at. Most of our work is retired on that at this point, and so there's a little bit of remaining commissioning. But for the most part, our work there and the risk of our work has been retired.

Speaker Change: Shell is working away at most of our

Speaker Change: work has retired on that at this point, and so there's a little bit of remaining commissioning, but for the most part,

Speaker Change: Our work there and the risk of our work has been retired, so we're excited about seeing that project come on.

Alan Armstrong: So we're excited about seeing that project come on. And that, by far, is the largest. The second largest is Chevron's Ballymore project, and that's actually been accelerated a little bit from our original plans in terms of the timing on that. It will take a shutdown on their Blind Faith platform that feeds into us here in the back half of this year, but an exciting project coming on there as well.

Speaker Change: The second largest is Chevron's Valleymoor project, and that's actually been accelerated a little bit from our original plans in terms of the timing on that. It will take a shutdown on their BlindFaith platform that feeds into us here in Seattle.

Alan Armstrong: And a great example of one where very large project, kind of like Anchor, but no capital required on our part. Those are our very favorite projects in terms of adding incremental value on the business. And there's a lot of drilling activity going on and in and around our assets that we think is going to continue to drive value. You know, if you roll the clock back 15, 20 years ago, people were building these mammoth platforms, floating platforms, deep water platforms that were, in an incredible engineering feed, but it took a long time, a lot of uncertainty, a lot of risk, and today what we're seeing is producers working hard to find reserves and develop reserves around their asset base and their existing infrastructure, and with that comes extremely high incremental returns for us because we're not having to build out to that new infrastructure, and so I would say in the deep water that is one of the really powerful things for us is the fact that we built a lot of this infrastructure with latent capacity in it.

Speaker Change: You know, if you roll the clock back 15, 20 years ago, people were building these mammoth platforms, floating platforms, deep water platforms that were incredible engineering feats.

Alan Armstrong: And, and because it costs so much to lay a line in that, in that depth of water, anyway, and as that latent capacity fills up, we're getting very high incremental cash flows off of that.

Speaker Change: And just because it costs so much to lay a line in that depth of water anyway, and as that latent capacity fills up, we're getting very high incremental.

Alan Armstrong: So, we, but we are continuing to see a lot of activity, and the producers happen to be, we're very fortunate that a lot of the activity happens to be centered around our asset, in deep water. And it really goes not just the Western Gulf, where there's a lot of activity, but the Central Gulf, which we talked about today with both Anchor and Winterfell, and Shenandoah is the next to come on.

Speaker Change: cash flows off of that. So we but we are continuing to see a lot of activity and and the producers happen to be. We're very fortunate that a lot of the activity happens to be centered around our asset base.

Speaker Change: in the deep water. And it really goes not just the western gulf where there's a lot of activity, the central gulf which we talked about today with both Anchor and Winterfell and Shenandoah is the next to come on. Next year we spent a lot of time and effort getting prepared for Shenandoah because it is a fairly large

Alan Armstrong: Next year, we spent a lot of time and effort getting prepared for Shenandoah because it is a fairly large prospect that'll be coming on to our discovery system that'll be coming on next year. And then in the Eastern Gulf, of course, you heard me mention the Hess-Pickrell project. It's a tieback to Gulfstar, as well as to Chevron's Ballymore prospect. So there is a lot of activity going on. We couldn't be happier to have such really strong competitors.

Speaker Change: prospect that'll be coming on to our discovery system, that'll be coming on next year.

Speaker Change: And then, in the Eastern Gulf, of course, you heard me mention the Hesse-Tickrell project that's a tie-back to Gulfstar, as well as the Chevron's Ballymore prospect. So, a lot of activity going on. We're going to be...

Speaker Change: happier to have the really strong competitive

Neil Zinnian: Fantastic details. And then just one quick one on West, specifically, you've been, you know, there's been quite a bit going on in the DJ with the acquisitions there. I'm just wondering if you talked about potential near-term upside around what you see post those acquisitions.

Speaker Change: and Danilo Juvane.

Speaker Change: Fantastic details and then just one quick one on on West. Specifically, you've been, you know, there's been quite a bit going on in the DJ with the around the acquisitions there. I'm just wondering, you talked about potential near term upside around what you see post those acquisitions.

Micheal Dunn: Oh, on, sorry, excuse me, on Curitin and our Rodney. Yes.

Speaker Change: Thank you.

Speaker Change: Oh, I'm sorry, excuse me, on Curitin and in our rock. Yes.

Micheal Dunn: Yeah, I would just say that that area continues to evolve, perform, and frankly outperform. We really like the positioning that we have. We're not only seeing more integration value and being able to optimize processing and gathering in the Basin, but because we market and transport the NGLs, we see a lot of our

Speaker Change: Jed, you would take that? Yeah, I would just say that that area continues to...

Speaker Change: gathering in Basin, but because we

Speaker Change: market and transport the NGLs we see a lot of origin from.

Speaker Change: that growth further downstream.

Speaker Change: Yeah, I think you're already seeing some of the important contributions, and we do expect that to continue to grow for a long time to come.

Speaker Change: So we do expect our performance to amount to anything.

Operator: One moment for our next question. Our next question comes from the line of Zach Van Everen of TPH and Company. Your line is now open.

Speaker Change: Thank you so much.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Zach Van Everen of TPH and Company. Your line is now open.

Zach Van Everen: Hey guys, thanks for taking my question. Just shifting to the Northeast, you mentioned rates on Susquehanna and Bradford ticked up this quarter. I know you have CASA service contracts, at least on the Bradford side. Was that part of the dynamic, or was this something else, and is this kind of a good run rate going forward, or was this kind of a one-time revenue makeup like we saw last year?

Speaker Change: Hey guys, thanks for taking my question.

Speaker Change: Just shifting to the Northeast, you mentioned rates on Susquehanna and Bradford ticked up this quarter. I know you have CASA service contracts, at least on the Bradford side. Was that part of the dynamic, or was this something else? And is this kind of a good run rate going forward, or was this kind of a one-time revenue makeup like we saw last year?

Micheal Dunn: Well, this is Micheal. The cost of service agreement we had in Bradford has reverted to a fixed fee for the contract terms. So that that has been finished and completed, and negotiations have been made with all the customers on the Bradford. And so I would just say we did have a one-time drop last year that obviously affected the comparable value this year. But other than that, you should expect to see this as a run rate fee with obviously escalation being the variable there going forward, and then any expansions that we do would be negotiated as well through the capital that would be invested and those expansion opportunities there in Bradford.

Speaker Change: Well, this is Michael. With the cost of service agreement we had with Bradford, it has reverted to a fixed fee for the contract terms. So that has been finished and completed.

Speaker Change: and negotiated with all the customers on the Bradford.

Speaker Change: And so I would just say we did have a one-time truck last year that obviously affected the comparable for this year, but other than that, you should expect to see this as a run rate.

Speaker Change: Fee was obviously escalation being the variable there going forward, and then any expansions that we do would be negotiated as well through the capital that would be invested.

Alan Armstrong: Probably the main thing that you see in the numbers you're looking at is the fact that when we see more and more activity in the rich gas like we've been seeing, you see, you know, our margins in the rich gas are almost double what they are in the dry gas and sometimes more than that. And so as the drilling moves into some of these rich gas developments like in Utica and in southwestern PA in West Virginia, you will see our average rate increase as more and more of the mix moves into the rich gas.

Speaker Change: and those expansion opportunities there in Bradford.

Speaker Change: probably the main thing that you see in the numbers you're looking at is

Speaker Change: the fact that when we see more and more activity in the rich gas like we've been seeing

Speaker Change: You see our margins in the rich gas are almost double what they are in the dry gas and sometimes more than that.

Speaker Change: And so, as the drilling...

Speaker Change: moves into some of these rich gas developments like in the Utica and in.

Speaker Change: Southwestern PA in West Virginia.

Alan Armstrong: In addition to that, though, we have the inflation adjuster that hits every spring as well, and so that picks up those rates as well. So a lot of positive momentum on rates. And importantly, you know, as we've said in the past, when the dry gas area is challenged, typically, we see the rich gas respond, and we make a much higher margin on the rich gas because of all the services we provide on it. That tends to offset the client.

Speaker Change: you will see our average rate increase as the broth more and more of the mix moves into the rich gas. In addition to that though, we have the inflation adjuster that hits every spring as well. And so that picks up those rates as well. So a lot of positive momentum.

Speaker Change: on rates and importantly, you know, as we've said in the past, when the dry gas area is challenged, typically we see the rich gas respond and we make so much higher margin on the rich gas because of all the services we provide on it. That tends to offset declines in the dry gas.

Zach Van Everen: Gotcha, that makes sense. Thank you for that.

Speaker Change: Gotcha, that makes sense. Thank you for that. And then, maybe shifting to the Rockies, you know, one of your peers announced they'd be converting their crude pipe out of the Bakken that flows into Wyoming into NGL service. Probably a little bit far out, but, you know, is there space on Overland and would you guys be interested and, you know, able to take those volumes if they were to approach you on that?

Chad Zamarin: And then maybe shifting to the Rockies, you know, one of your peers announced they'd be converting their crude pipe out of the Bakken that flows into Wyoming into NGL service, probably a little bit far out. But, you know, is there space on Overland? And would you guys be interested in, you know, able to take those volumes if they were to approach you on that?

Speaker Change: There is space on Overland Pass, and we do see that as an opportunity, and I think good, frankly, for the Bakken producers, that there is some takeaway diversity.

Speaker Change: We're certainly focused on making sure we'd be a good option to receive NGLs from the Bakken and from the Powder River Basin. So yeah, we do think there's an opportunity there. We're not going to get, you know,

Zach Van Everen: Yeah, sure, this Chad. There is space on Overland Pass, and we do see that as an opportunity and, frankly, for the Bakken producers, that there's some takeaway diversity, and, you know, we're certainly focused on making sure we'd be a good option to receive NGLs from the Bakken from the Powder River Basin. So yeah, we do think there's an opportunity there. We're not gonna get too far ahead of that, but we're hopeful to see those barrels heading south, and yes, we've got capacity, and we're going to pass.

Speaker Change: know too far ahead of that but we're hopeful to see those barrels heading south and

Speaker Change: Yes, we've got capacity in Oakland Pass that would be available.

Operator: Awesome. Thanks, guys. One moment for our next one.

Operator: One moment for our next question. Our next question comes from the line of Robert Catellier of CIBC Capital Markers. Your line is now open.

Danilo Juvane: and Danilo Juvane.

Speaker Change: Awesome. Thanks, guys.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Robert Cotelier of CIBC Capital Markers. Your line is now open.

Robert Catellier: Hey, good morning everybody. Understanding that you will follow rates by the end of the month on Transco, can you give us any insight into the progress you're making there and the likelihood of a settlement? And also, your interpretation of shipper appetites to support modernization investments in light of your new methane intensity targets?

Robert Cotelier: Hey, good morning everybody. Understanding that you file rates by the end of the month on Transco, can you give us any insight into the progress you're making there and the likelihood of a settlement, and also your interpretation of shipper appetites to support modernization investments in light of your new methane intensity targets?

Micheal Dunn: Yeah, thanks for the question. Yeah, we would love to see a settlement there. We'll obviously get our rate gauge filed at the end of the month and then work on seeing if we can get to a settlement. We've obviously been talking to customers for quite some time about the modernization efforts that we have underway. There should be no surprise to them when we make our filing and they see the amount of investment that we've made there.

Speaker Change: Yeah, thanks for the question. Yeah, we would love to see a settlement there. We'll obviously get our rate gauge filed at the end of the month and then work on seeing if we can get to a settlement. We've obviously been talking to the customers for quite some time about the modernization efforts that we have underway.

Speaker Change: There should be no surprise to them when we make our filing and they see the amount of investment that we've made there. And so we do think that will help.

Micheal Dunn: So we do think that will help and possibly grease the skids for some type of modernization tracker with them so that we can smooth out some of these increases going forward. On the Transco assets, just like we did on the Northwest Pipeline rates with our last rate case that we settled there. So that is the intent going in, is hopefully we can get a modernization tracker, not just for our emissions reduction program but for some of our pipe replacements that are needed.

Speaker Change: possibly grease the skids for some type of modernization tracker with them so that we could smooth out some of these increases going forward.

Speaker Change: on the Transco assets, just like we've done on the Northwest Pipeline rates with our last rate case that we settled there. So that is the intent going in, is hopefully we can get a modernization tracker, not just for our emissions reduction program, but for some of our pipe replacements that are needed.

Micheal Dunn: Some of the growing population centers there, we have a significant amount of pipe that we've degraded over the last several years and decades. We could upgrade, and we will be doing that, but it would be better to do that through a modernization tracker. Well, that is the intent, but we've got a pretty good opportunity to discuss and alert the customers as to what to expect in this rate case, and once we get it filed, we'll start the settlement opportunities, but as you probably well know, the rates will go into effect on March 1st of next year, subject to refund once we either get a settlement or fully litigate the outcome of the rate.

Speaker Change: and some of the growing population centers there. We have a significant amount of pipe that we've derated over the last several years and decades.

Speaker Change: that we could upgrade, and we will be doing that, but it would be better to do that through a modernization tracker as well. So that is the intent, but we've had a pretty good opportunity to...

Speaker Change: discuss and alert the customers as to what to expect in this rate case and once we get it filed we'll start the settlement opportunities but

Speaker Change: As you probably well know, the rates will go into effect on March 1st of next year, subject to refund once we either get a settlement or fully litigate the outcome of the rate case.

Robert Catellier: Okay, and then the next question here is just on what's going on in the legal realm. How does the DC Circuit decision on the REA and also the Chevron deference case reversal impact how you approach this?

Speaker Change: Okay, and then the next question here is just on the what's going on in the legal realm.

Speaker Change: How does the DC Circuit decision on REA and also the Chevron deference case reversal impact how you're approaching permitting?

Terence Wilson: Transcripts provided by Transcription Outsourcing, LLC. What Congress has set out in the laws probably means fewer pendulum swings. I think that's probably good for the industry on the whole. And in terms of REA, what was your specific question?

Speaker Change: Wait, you want to take that?

Speaker Change: Yeah, it's Blaine Wilson. On REA, well, let me first address Chevron deference. I don't think anybody really knows for certain how that's going to play out except that it will likely force the administration and subsequent administrations to stick more closely to

Operator: Yeah, I'm just wondering if that decision changes how you approach future permitting activities.

Terence Wilson: Yeah, I don't think so. I mean, I think we feel like FERC drafted a certificate order that was very defensible. The decision is unfortunate, but the D.C. Circuit did what it generally does in this situation. It kind of laid out a path for the FERC to fix the certificate, and that's what we expect to happen. I don't think that the Chevron case, Loper, has any real impact on the way we'll approach it.

Speaker Change: The decision is unfortunate, but the D.C. Circuit did what it generally does.

Operator: Okay, thanks very much. One moment for our next question.

Operator: One moment for our next question. Our next question comes from the line of Tristan Richardson of Scotiabank. Your line is now open.

Danilo Juvane: and Danilo Juvane.

Tristan Richardson: Good morning, guys. Just a question on the Gillis-West project, a small project, but can you talk about maybe some of the key differences between this project as a Transco expansion versus, say, a leg from a permanent?

Speaker Change: Just a question on the Gillis-West project, a small project, but can you talk about maybe some of the key differences between this project as a transco expansion versus, say, a leg?

Speaker Change: from a permitting standpoint, right-of-way standpoint, seems like this is certainly a smaller project but offers quite a few efficiencies from a capital and permitting perspective.

Alan Armstrong: Yeah, Tristan, thanks for the question. And, you know, the reason this is important is that, you know, center point has been plagued with a number of very high price spikes in the Texas intrastate market for various reasons, and this allows them access to gas supplies that are more associated with the Henry Hub from a pricing point and gives them reliable access to supplies from Louisiana without being dependent on the volatility that some of the Texas infrastructure pipes and markets have imposed on them both for power generation Normal

Speaker Change: Yeah, Tristan, thanks for the question, and you know, the reason this is important is because that, you know, center point's been plagued with a number of very high price spikes in the Texas intrastate market for various reasons.

Speaker Change: Pikes and markets have imposed on them both for power generation and for normal residential loads.

Alan Armstrong: So we think it's a great project for CenterPoint and important for us. Really, all we need to do there is primarily just an interconnect, and that will allow us to provide gas supplies to the Louisiana market. Places like Gillis, which is becoming, obviously, an important pooling point for supplies, and this will allow them access to those supply points from places like Hainesville and diversify their supply. So, for us, it's a great project because, effectively, we're getting paid for transportation capacity flowing back to Texas and requires very little capital on our part. So exciting and I think, you know, a meaningful improvement for Texas and the volatility they've had to deal with there from some of the suppliers. But in terms of, you know, this is fair.

Speaker Change: So, we think it's a great project for Centerpoint and important for us. Really all we need to do there is primarily just an interconnect.

Speaker Change: and that will allow for us to provide gas supplies coming into the Louisiana market. Places like Gillis, which is becoming obviously an important pooling point for supplies.

Speaker Change: and this will allow them access to those supply points from places like the Haynesville and diversifies their supply and again kind of moves them away.

Speaker Change: So for us, it's a great project because it's effectively, we're getting paid for transportation capacity flowing back, you know, back to Texas and requires very little capital on our part, mostly just the internet.

Speaker Change: connect there. So exciting and I think, you know, a meaningful improvement for Texas and the volatility they've had to deal with there from some of the suppliers into that market.

Speaker Change: But in terms of, you know, this is just basically transmission quality gas coming out of Gillis that will help supply directly to their markets there down the Transco corridor. So pretty simple on one hand, but pretty important on the other.

Tristan Richardson: I appreciate it, Alan, and then maybe just on the last line of questioning a broader question about the regulatory environment. It's been 2 years since we've had a full board of commissioners, and we're here at a time when you're seeing meaningful demand in the Southeast Mid-Atlantic. Can you talk about what you would like to see on the permitting side from a streamlining perspective or just anything to be able to

Speaker Change: I appreciate it, Alan. And then maybe just on the last line of questioning, a broader question about the regulatory environment. It's been two years since we've had a full Board of Commissioners, and we're here at a time where you're seeing meaningful demand in the Southeast Mid-Atlantic. Can you talk about, you know,

Speaker Change: what you would like to see on the permitting side from a streamlining or just anything to be able to better accommodate the demand you're seeing.

Alan Armstrong: Yeah, it's a great question. I think, you know, the primary issue with the permitting is not really the FERC. FERC, I think, has been a very responsible agency, and particularly under Chairman Phillips' leadership. And I think they're trying to do their very best to see responsible infrastructure get developed, and they realize it's very clear to them the kind of challenges that we're going to have on the grid if we don't have natural gas supplies available to provide incremental power supplies on the one hand and back up renewables on the other. So that's not really where the problem is.

Speaker Change: Yeah, it's a great question. I think, you know, the primary issue with the permitting, it's not really the FERC. FERC, I think, has been a very responsible agency, particularly under Chairman Phillips' leadership.

Speaker Change: and I think they're trying to do their very best to see responsible infrastructure get developed and they realize it's very clear to them.

Speaker Change: the kind of challenges that we're going to have on the grid if we don't have natural gas supplies.

Speaker Change: available to provide incremental power supplies on the one hand and backing up renewables on the other. That is not lost on them at all. They face that responsibility as a commission and an agency, and I think they take it very seriously.

Alan Armstrong: The problem really revolves around the NEPA process and the handles that it gives to environmental opposition to take up issues that have very little to do with the pipeline construction but have to do with their own fight against fossil fuels. And because the NEPA process allows them to kind of grab hold of projects inappropriately, the NEPA reform is probably the most important thing and is really exciting. Everybody's been talking about the Chevron deference, which we think is important, but you also saw the Supreme Court agree to take up a review of the NEPA process as well. And I'm actually really excited to see that.

Speaker Change: That's not really where the problem is. The problem really revolves around the NEPA process and the handles that it gives to environmental opposition to take up issues that have very little to do with the pipeline construction, but have to do with their own fight against fossil fuels.

Speaker Change: and because the NEPA process allows them to kind of...

Speaker Change: grab hold of projects inappropriately, the NEPA reform...

Alan Armstrong: That could really reform permitting in a meaningful way and really stop people from being able to just arbitrarily stop projects in their tracks and cause lawsuits in the process, which is the NEPA process that we know today. And so anyway, that's important to the 401 water quality certificate that the states are allowed, that gives them a right to just stop projects. It's important to see that turned around, and as well as the judicial standard for the way that a court would review a complaint against a permit.

Speaker Change: in a way that's meaningful and really stop people from being able to just arbitrarily stop projects in their tracks and cause lawsuits in the process, which is the NEPA process that we know today.

Speaker Change: And so, anyway, that's important to the 401 Water Quality Certificate that the states are allowed, you know, that gives them a right to just stop projects.

Speaker Change: is important to see that turned around and as well as the judicial standard for the way that a court would review a complaint against the permit. So those are really the three primary things that we're looking for and and I actually for you know

Alan Armstrong: So those are really the three primary things that we're looking for. And I actually am not very optimistic about seeing anything happening on the permitting reform but really excited to see the Supreme Court taking on the NEPA. So we could see some, it's not going to be quick, but we could see some relief there.

Tristan Richardson: I appreciate it. Thank you, Alan, very much. Thank you.

Operator: One moment for our next question. Our next question comes from the line of Theresa Chen of Barclays. Your line is now open.

Speaker Change: I appreciate it. Thank you, Alan, very much.

Speaker Change: One moment for our next question.

Theresa Chen: Based on what we've seen in the market, very recently, as far as the, you know, data center related or data center driven brownfield expansion of natural gas transmission, the implied rates seem to be, you know, far above several multiples of existing tariffs and economics. Is that consistent with your expectations as you move through the process of addressing the sheer number of requests you have? And is that a key hurdle in getting these projects done in addition to the speech market?

Speaker Change: Morning.

Speaker Change: data center-related or data center-driven brownfield expansion on natural gas transmission. The implied rates seem to be far above several multiples of existing tariffs and economics. Is that consistent with your expectations as you move through the process of addressing the sheer number of requests you have? And is that a key hurdle in getting these projects done in addition to space market?

Micheal Dunn: Hey, Theresa, this is Michael. Yeah, I would say we're still going to be seeing negotiated rate contracts, as we've been doing in our transmission businesses that are in excess of our base tariff rate. I believe that's what your question was, and, as Alan said, there are a lot of opportunities that we're exploring, not just on Transco, but on Northwest Pipeline, on Mountain West Pipeline, and the Overthrust Pipeline that we're considering. And allocating resources to all of these projects to analyze has been a bit of a challenge.

Speaker Change: I believe that's what your question was, Anne.

Speaker Change: As Alan said, there's a lot of opportunities that we're exploring, not just on Transco, but on Northwest Pipeline, on Mountain West Pipeline, and Overthrust Pipeline that we're considering and allocating resources to all of these projects to analyze.

Micheal Dunn: Redeploying some of our engineers and our project development teams to really focus on this has been a critical activity over the last several months. But I would say we're going to see, I think, really good multiples on our projects. You know, we aren't doing six X multiple projects on any of our transmission businesses, and, in fact, none of them have a five handle anymore.

Speaker Change: Redeploying some of our engineers and our project development teams to really focus on this has been a critical activity over the last several months.

Speaker Change: But I would say we're going to see, I think, really good multiples on our projects. You know, we aren't doing 6X multiple projects on any of our transmission businesses. And in fact, none of them have a 5 handle anymore.

Theresa Chen: So I think that trend will continue because, as I said, the speed to market is incredibly important for these data center loads. And the fact that they need to be online quickly is their biggest priority, as opposed to what their energy costs are, it appears to us. And so that does certainly give us some leverage in the marketplace, and especially with where our assets are located, I think it gives us an incredible opportunity.

Speaker Change: So I think that trend will continue because, as Alan said, the speed to market is incredibly important for these data center loads.

Alan Armstrong: and the fact that they need to be online quickly is their biggest priority as opposed to what their energy costs are it appears to us.

Alan Armstrong: And so that does certainly give us some leverage in the marketplace and especially with where our assets are located I think it gives us an incredible opportunity to serve these new loads

Alan Armstrong: Got it. And a follow-up on the regulatory front. As we approach the election season in the fall, what are your latest thoughts around that as it pertains to assets within your business? Any key considerations on your mind as we move through the next few months on this front? Yeah.

Speaker Change: Got it and a follow-up on the regulatory front

Speaker Change: As we approach the election season in the fall, what are your latest thoughts around that as it pertains to assets within your business? Any key considerations on your mind as we move through the next few months on this front?

Alan Armstrong: Yeah, well, that's a big, hairy topic, but I'll just try to address it quickly. First of all, taxes are probably the most important thing. And it's very real to us in terms of the ability to continue to invest in these high-return projects that we have as an opportunity in front of us. You know, the tax impact on our business and the amount of free cash flow.

Speaker Change: Yeah, well, that's a big, hairy topic, but I'll just try to address it quickly. First of all, the taxes probably are the most important thing, and it's very real to us in terms of...

Speaker Change: The ability to continue to invest in these high-return projects that we have as an opportunity in front of us is, you know, how the tax impact

Speaker Change: on our business and the amount of free cash flow. So it's pretty obvious to us.

Alan Armstrong: So it's pretty obvious to us, you know, that Delta and something we're keeping a close eye on. But beyond that, I will tell you that, and I have to remind people this, that even during the prior Trump administration, we had major projects get stopped, like Constitution and Nessie, because of the 401 water quality certificate that allowed a state to stop a project without really an ability. The Federal Government. Solve that.

Speaker Change: You know that that Delta and something we're keeping a close eye on you know beyond that I will tell you that

Speaker Change: And I have to remind people of this, that even during the prior Trump administration, we had major projects get stopped, like Constitution and Nessie, because of the 401 Water Quality Certificate that allowed a state to stop a project without really an ability for the

Alan Armstrong: So. You know, I think it's great that there will be a bigger push. I actually think paying more attention to how Congress turns out and the legislative front is actually a bigger push because that's actually where we might see some change, reform in the law in a way that allows us to build out the pipeline infrastructure that we need. And so we, you know, we saw recently the Manchin-Barroso bill, did really nothing for the pipeline industry, and while we, you know, are very thankful for both Senator Manchin and Senator Barrasso and what they've done for our industry, in this case, you know, that was really a throw to the transmission side of the business and really didn't do much for pipelines, and so we think there's got to be some, and, you know, we get that.

Speaker Change: [inaudible]

Speaker Change: to solve that.

Speaker Change: and so

Speaker Change: I think it's great that there will be a bigger push. I actually think paying more attention to how Congress turns out and the legislative front is actually a bigger push because that's actually where we might see some.

Speaker Change: reform in the law in a way that allows us to build out the pipeline infrastructure that we need. And so we, you know, we saw recently the Manchin-Barroso bill.

Speaker Change: did really nothing for the pipeline industry.

Speaker Change: And while we are very thankful for both.

Speaker Change: and Senator Manchin and Senator Barrasso.

Speaker Change: what they've done for our industry. In this case, you know, that was really a

Speaker Change: to the transmission side of the business and really didn't do much for pipelines. And so we think there's got to be some, and you know, we get that, that's, that's a.

Alan Armstrong: That's the state of the current Congress and the way the numbers stack up in there today. I think they would both like to do more, obviously, for pipelines if they thought that was possible. And so we do think that, you know, watching to see how the legislature turns out could be an opportunity to see some serious reform on the permitting front. So I would say we're paying a little more attention.

Speaker Change: state of the current Congress and the way the numbers stack up in there today. I think they both would like to do more obviously for pipelines if they thought that was possible.

Speaker Change: And so we do think that, you know, watching to see how the legislature turns out could be an opportunity to see some serious reform on the permitting front. So I would say we're paying a little more attention to that for now.

Operator: One moment for our next question. Our next question comes from the line of John Mackay of Goldman Sachs. Your line is now open.

Danilo Juvane: and Danilo Juvane.

Danilo Juvane: Thank you.

Speaker Change: Our next question comes from the line of John McKay of Goldman Sachs. Your line is now open.

John Mackay: Hey, good morning, everyone. I wanted to go back to the conversation quickly, if we can, around data centers. Just on the comments around speed to market, I was just wondering if you could flesh that out a little bit more for us, what that would actually look like.

John McKay: Hey, good morning, everyone. I wanted to go back to the conversation quickly if we can around data centers. Just on the comments around speed to market, I was just wondering if you could flesh that out a little bit more for us, but that would actually...

Speaker Change: look like? Is that co-location on Transco? Is that something non-FERC jurisdictional? Anything you can bring up there would be helpful.

Alan Armstrong: Yeah, well, John, thanks for the question. I would say that, you know, what we're seeing is a shift because I think that the big developers are realizing that they're kind of up against a brick wall right now in terms of extracting more generation off the grid. They realize that that's pretty well exhausted, and so they're going to look to areas where both the natural gas resource is available, the capacity for it is available, and as well as the permitting environment allows them to go build out some very significant power generation. Behind the meter, on the one hand, we still are seeing a lot of growth on the utilities as well, more for the conventional data centers and the cloud-based data centers, a lot of growth continuing Sorry, that is not correct.

Speaker Change: Yeah, well, John, thanks for the question. I would say that, you know, what we're seeing is a shift because I think that the, you know, the big developers are realizing that they're kind of up against a brick wall right now in terms of

Speaker Change: extracting more generation off the grid. They realize that that's pretty well exhausted and so they're going to look to areas where both natural gas resource is available

Speaker Change: The capacity for it is available, and as well as the permitting environment allows them to go build out some very significant power generation.

Speaker Change: behind the meter. On the one hand, we still are seeing a lot of growth.

Speaker Change: On the utilities as well, more for the conventional data centers and the cloud-based data centers, a lot of growth continuing, as well as just general electrification of load. Sorry, that is.

Alan Armstrong: And I'm sure that you are driving that as well. But in terms of the hyperscalers and their approach right now, we are seeing them look all the way back into areas where the gas resource is abundant, and the permitting allows for getting on with developing the infrastructure that they need to have reliable and affordable power in those markets. But as Micheal pointed out, I think... And I, in my earlier comment, the speed to market seems to be the thing that is most top of mind for the big, that big hyperscaler development.

Speaker Change: to driving that as well. But in terms of, you know, the hyperscaler

Speaker Change: and their approach right now. We are seeing them look all the way back into areas where the gas resource is abundant and the permitting allows for getting on with developing the infrastructure that they need to have reliable.

Speaker Change: and affordable power into those markets. But as Michael pointed out, I think the...

Michael: In my earlier comment, the speed to market seems to be the thing that is most top of mind for the big data, big hyperscaler developers. And so.

Alan Armstrong: That's where we think there's going to be opportunity and in places like Wyoming, where we have a lot of gas resources available and a lot of wind resources available as well. And so I think we're going to see that. But we're also going to get a lot of indirect load.

Speaker Change: That's where we think there's going to be opportunity in places like Wyoming.

Speaker Change: where we have a lot of gas resource available and a lot of wind resource available as well.

Speaker Change: And so I think we're going to see that. But we're also going to get a lot of indirect.

Speaker Change: load from our utilities in these other areas.

Speaker Change: as both the conventional data centers and electrification continues to grow in those markets.

John Mackay: I appreciate that and acknowledge we're at the top of the hour. Squeeze one more in.

Alan Armstrong: Gillis West is relatively small, but actually pretty interesting. I guess we've had a lot of conversations around trying to get gas out of Texas into Louisiana, given the LNG ramp. I guess I'd just be curious, your perspective, is this a macro trend kind of shifting? Or is this kind of more of a maybe one-off with this customer? Anything you can kind of frame up from a kind of Louisiana demand ramp perspective would be interesting.

Speaker Change: and Danilo Juvane. Thank you.

Alan Armstrong: Yeah, well, I would just say if you think about all of the supply that Haynesville has available and some of the resources even south of Haynesville that we think will get developed in a pricing environment that's coming forward right now, we think that having access to those Louisiana supplies and diversity of supply is really important. And again, as I mentioned in my comments, if you think about the pain that has been inflicted on some of the Texas utilities from the Texas intrastate market, where they didn't have access to a more diverse supply, we think this is a trend.

Danilo Juvane: Yeah, well I would just say if you think about all of the supply that the Haynesville has available and some of the resources even south of Haynesville that we think will get developed in a

Speaker Change: in a pricing environment that's coming forward right now. We think that having access to those Louisiana supplies and diversity of supply is really important. And again, as I mentioned in my comments, if you think about the

Speaker Change: the pain that has been inflicted on some of the Texas utilities from the Texas intrastate market where they didn't have access to

Alan Armstrong: I mean, it only makes sense that they're going to look back to see what's been imposed on them from a pricing standpoint and look for more reliable, low-cost supplies to be available. And to me, the important thing about this is them recognizing that that fluctuation did not occur in places like Louisiana. It really only occurred on the Texas intrastate, and this gives them access to a more diverse supply. So that, to me, is the key takeaway from that.

Speaker Change: We think this is a trend. I mean, it only makes sense that they're going to look back to see what's been imposed on them.

Speaker Change: and this gives them access to a more diverse supply. So that to me is the keynote to take away from that project.

John Mackay: Interesting. Thanks for that, Alan. I appreciate the time.

Alan Armstrong: This concludes the question and answer session. I would now like to turn it back over to Alan Armstrong, President and CEO, for closing remarks.

Speaker Change: Interesting. Thanks for that Alan. I appreciate the time.

Speaker Change: This concludes the question and answer session. I would now like to turn it back over to Alan Armstrong, President and CEO, for closing remarks.

Alan Armstrong: Okay, well, thank you all very much for joining us today. An exciting time for us here at Williams as we continue to deliver the long list of projects that we have in execution and that continues to mount growth for us, and importantly, how strong the future is in terms of the demand that we are excited that we have an opportunity to help address, but an exciting challenge for the organization that we're excited to show what we're made of on that front. So, with that, thank you very much for joining us today.

Alan Armstrong: Okay, well, thank you all very much for joining us today. An exciting time.

Alan Armstrong: but an exciting challenge for the organization that we're excited to show what we're made of on that front. So with that, thank you very much for joining us today.

Operator: Thank you for your participation in today's conference. This concludes the program.