Q1 2025 The Williams Companies Inc Earnings Call
[inaudible]
Good day everyone and welcome to the Williams First Quarter 2025 earnings conference call.
Speaker Change: Today's conference is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Danilo Juvane, Vice President of Investor Relations, ESG, and Investment Analysis. Please go ahead.
Danilo Juvane: Thanks, Ari, 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 the presentation that a president CEO , Alan Armstrong, and a chief financial officer, John Porter, who
Danilo Juvane: Also joining us on a call today are Larry Larson, our Chief Operating Officer, Lane Wilson, our General Counsel, and Chad Zamarin, our Executive Vice President of Corporate Strategic Development
Danilo Juvane: In our presentation material, you'll find a disclaimer related forward-looking statements This disclaimer is important and integral to our remarks and you should review it.
Danilo Juvane: Also included in the presentation materials are non-GAAP measures that we reconciled to generally accepted account in principle. 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: Porter. But before I dive into my remarks, I do want to welcome Larry Larson, our new chief operating officer to the call. This is technically day two for Larry, but he's been a valuable member of the Williams team for more than 25 years.
Alan Armstrong: So I know you're going to come to value his perspective and knowledge of our operations just as you have enjoyed that for Michael Dunn who did retired this past Friday. So Larry has served as an important member of Michael's leadership team over the past several years. So this will be a seamless transition with Larry caring for the commitment to excellence. [inaudible]
that Michael that established in all aspects of our operations [inaudible]
Alan Armstrong: Obviously, some other leadership changes to hit on, but I'll say my remarks on that matter for the end of the call.
Alan Armstrong: So, beginning here on slide two, you know, it really is staggering when you step back and consider all the facets of our businesses that are providing high return growth opportunities.
and Danilo Juvane.
Alan Armstrong: The positive results in the near term, like the 9% growth this year, coupled with an improved credit rating already continue to speak for themselves, but the continued stream of very high return projects suggest that we are in the early endings of this long horizon of growth. [inaudible]
Alan Armstrong: So let me just share a few of the drivers for my optimism in this level of growth continuing. First, we will be a big beneficiary of the fast rising data center power load.
Alan Armstrong: and we are very encouraged by the uptake we are seeing on the new model we have brought to market in the indirect business we are seeing on our gas transmission systems that is showing up as very high return large scale expansions. [inaudible]
Alan Armstrong: Socrates is our first example on the direct service front and we talked first about this project during our earnings call in February and since then we have fully contracted this project that will deliver speed to market solutions for the growing data setter demand in Ohio.
Alan Armstrong: Williams will invest the approximately $1.6 billion to provide committed power generation and associated gas pipeline infrastructure for our customer in this area and the project is backed by a 10-year fixed price power purchase agreement with an opportunity to extend the contract for another five years and beyond.
Alan Armstrong: Importantly, we expect the project to generate earnings consistent with a five times EBITDA build multiple, an impressive return given the low-risk nature of the Power Purchase Agreement and the fact that this project does not leverage Williams' existing asset footprint to a meaningful degree.
Alan Armstrong: We are full steam ahead on this project and anticipate completing the build out in the second half of 2026.
Alan Armstrong: We also have two other projects that are utilizing the same model in flight now and have ordered equipment that has the same backstop the agreements that we used in the original Socrates project much more to come on this but it is clear that we have a model that works for this customer base and the opportunities are developing fast in the space.
Alan Armstrong: Next, on the indirect side, we are pleased to announce Transco's power express pipeline, a 959 cubic feet per day expansion to markets north of station 165, hoping to serve the power hungry Virginia area.
Alan Armstrong: The project is backed by a significant commitment from an anchor shipper and will utilize existing right-of-ways and infrastructure to dramatically reduce permitting risks and provide scalability.
Alan Armstrong: This project will provide the same kind of return as our Cessi project, and that a man for this capacity has been robust
Alan Armstrong: And finally, we acquired a 10% interest in cogentrix energy closing on this deal in early March.
Alan Armstrong: This investment enhances our sequent market intelligence and gives Williams insight into how to better serve the emerging power markets with natural gas supply.
Alan Armstrong: Importantly, we are excited to be working with the quantum team on this business and to ensure that the gas supply is optimized for these gas fired power plants.
Next, turning to our operational execution.
Alan Armstrong: Our team continues to flawlessly deliver on a string of high return projects that will accelerate earnings growth throughout the balance of the year.
Alan Armstrong: This quarter, we successfully placed two projects in the service, the Southeast Energy Connector in Alabama and the Texas to lose the energy pathway along the Gulf Coast . . .
Alan Armstrong: These fully contracted transco expansions were designed to reduce land use and minimize community and environmental impacts while also delivering clean and affordable natural gas volumes to the region.
Alan Armstrong: These projects demonstrate both LNG export growth and coal to gas conversion opportunities.
and Danilo Juvane.
Alan Armstrong: Our project execution team continues to deliver on projects throughout this year, starting construction on another expansion in the southeast on Transco, the leg project in Hainesville, and out west on our over thrust westbound expansion.
Alan Armstrong: These projects represent nearly two BCFs of day coming online for the balance of this year.
Also, in the deep water,
Alan Armstrong: The, you know, the deep water really is coming on strong this year and shows no signs slowing down. We recently completed two expansions that add significant earnings growth.
Alan Armstrong: The whale expansion went into service in the first quarter and has been ramping up through the first quarter and Chevron's Valleymore started up two weeks ago. Both of these projects are large-scale and will be significant contributors for the balance of the year.
Alan Armstrong: Additionally in the deep water, both the Shenandoah and Salamonka floaters are now being commissioned and these will drive a significant cash flows across our discovery assets which is now in a holy hunt. These projects are expected to make meaningful contributions in the third quarter.
Alan Armstrong: And finally, let me just hit on a few key financial highlights from the quarter before I turn it over to John to walk through the results in detail.
John Porter: First of all, we are raising our adjusted EBITDAG guidance midpoint by $50 million to $7.7 million driven by our strong
John Porter: Our capex increase of $925 million reflects the updates that we provided with the announcement of our Socrates project.
John Porter: and also in recognition of the resilient business model and balance sheet strength we receive an S&P credit rating upgrade to triple B plus.
John Porter: During the quarter and very recently were assigned a positive outlook by Moody's.
John Porter: The strength of the base business was really the story in the first quarter with both the transmission and golf hitting new record Abbotop and strong rebounds from the west and northeast gathering.
John Porter: In the transmission and golf, this record was driven by both record contract gas transmission capacity and record gathering processing and storage fee based revenue. So the transmission business we again saw
John Porter: Now a record in the long-term transmission capacity, but also should solve a fee-based revenue in the debt, gathering in the deep water and in our storage business.
John Porter: In the West, it was driven by strong gathering volume rebounds and bolt-on acquisitions. Given the strong volumes we are currently seeing, we expect to see more records surpassed again in the second quarter.
John Porter: Speaking of the second quarter, this marks the 37th consecutive quarter of meeting or meeting consensus, and that is on top of this was the eight time that we've raised our guidance during the same period. [inaudible]
John Porter: So, lastly, we increased Williams quarterly dividends in the quarter, up 5.3% to 50% per share.
John Porter: and the Demonstrating Continued Commitment to Williams Longstanding and Well-Covered Dividend Program.
John Porter: and with that I'm going to turn it over to John . All right, thanks Alan, starting here on slide three with the closer look at our adjusted EBITDA performance, which was up 3% over the first quarter of 2024, excluding the marketing business our adjusted EBITDA was up 5% with growth across all the other segments.
and Danilo Juvane.
Speaker Change: Our overall first quarter 25 results were basically right on top of our business plan. Additionally, I will note that our business plan anticipated our first quarter to show the least amount of quarterly growth over 24 with our four or two cues through four cue 25 quarters each showing substantially higher growth rates.
Speaker Change: In other words, we expect growth over the prior year, year will accelerate each quarter through the remainder of the year. I'll address our current thoughts on full-year performance in a moment. I'll address our current thoughts on full-year performance in a moment.
Speaker Change: Walking out from last year's $1.934 billion to this year's record $1.989 billion, we start with our transmission and golf business, which improved $23 million for a free percent, setting an all-time record due primarily to higher revenues from expansion projects. [inaudible]
Speaker Change: At Transco, we had increases from regional energy access, Southside reliability enhancement, and parts of quarter contributions from Carolina MarketLink . . .
Speaker Change: We also continue to see growth from our storage businesses with renewals at Gulf Coast Storage and Nortex coming in at higher rates as we had expected from those two acquisitions as well as incremental contributions from our market-based rates at our Washington Storage facility.
Speaker Change: In the Gulf, we saw contributions from our discovery acquisition, as well as initial contributions from our whale project that were partially offset by some maintenance and producer issues
Speaker Change: Even with those issues we saw about a 12% increase in golf gathering volume and about 42% higher
Speaker Change: Lastly, for this segment, I'll just note that although our due transco race went into effect on March 1, you're not really seeing much of an impact here as we continue to maintain a conservative reserve pending the final settlement [inaudible]
Speaker Change: Next, our Northeast GMP business improved 10 million or 2 percent, primarily on higher revenues, including the effects of higher gathering and processing rates. This segment was unfavorably impacted by the Octables of Estature that we made last August .
Speaker Change: Overall volumes were basically pretty loud with the first quarter of 24, however they are up about 6% sequentially over the fourth quarter of 24, and we've continued to see overall additional growth in April .
Speaker Change: In the west, we were 26 million or 8 percent higher driven by strong margins, alkaline pipeline volumes, and a partial quarter from the rimrock acquisition that closed at the end of January .
Speaker Change: We did have a small gain on an asset sale that was under our materiality threshold for adjustment of around $10 million. The West was negatively impacted by a step down in our minimum volume commitments at Eagle Brook.
Speaker Change: On the volume front, similar to the Northeast, overall volumes were basically pretty flat with the first quarter of 24, but up about 5% sequentially over 4th quarter of 24, and we continue to see overall additional growth in April . [inaudible]
Speaker Change: Our secret marketing business had another strong start to the year, with 155 million of adjusted FDOT, which is the third straight year where our first quarter marketing results exceeded $150 million million.
Alan Armstrong: However, the 25 results were still down about 34 million overall versus 2024. And this segment is to see a small $1.3 million contribution from the Co-fintrics investment that Alan discussed earlier.
Alan Armstrong: And then finally, our upstream business, including our other segment, was up about $37 million and roughly half of that was related to our consolidation of the warm-sutter upstream position effective in November of last year [inaudible]
Alan Armstrong: Also, we did see some overall improvement in gas prices year-over-year [inaudible]
Alan Armstrong: So that gets you to the $1.989 billion of Epidop for first quarter 25 or 3% growth, which as I mentioned a moment ago should be the lowest growth rate we see this year as we look forward to accelerating growth through the remainder of this year [inaudible]
Alan Armstrong: Now let's move to the next slide and discuss what we're seeing in our outlook for the remainder of 25.
Alan Armstrong: As Alan mentioned, we are reviving our 2025 Adjusted Debate Doc Guidance upward from a previous midpoint of 7.65 billion to now 7.7 billion and we're moving the top of the range to 7.9 billion.
Alan Armstrong: At 7.7 billion, we will see 9% growth in adjusted evidence over 24 and a 9% tager from 2020.
Alan Armstrong: Our current guidance reflects the solid starts 25th, the addition of the cogentry investment, and our overall confidence in the growth of our underlying business plus line of sight to an extraordinary number of projects coming online in the near future.
Alan Armstrong: Speaking specifically to the segment, in our transmission and golf segment, we look forward to settling our transco-ray kids.
Alan Armstrong: and seeing the contributions from the two transmission projects we recently placed in service as well as completing six additional transmission projects by the end of this year, and we remain often to speak about continued upside from the re-contracting of our storage business.
Alan Armstrong: Additionally, in the deep water, we've now completed the Whale and Ballon More projects and still have the Shin and Doha and Solid Monter projects to go for 2025. In the deep water, we are only in the early stages of a volume ramp that will accelerate through the remainder of the year. In the early stages of a volume ramp, we are only in the early stages of a volume ramp that will accelerate through the remainder of the year.
Alan Armstrong: Intergathering and processing businesses we continue to see overall strengthening in our volumes, reflecting our exposure to crucial natural gas-focused basins and our Haynesville expansions, including our large scale Louisiana Energy Gateway Projects
which is proceeding very well with expected completion in 3Q25.
and Danilo Juvane.
Alan Armstrong: In our more commodities, those upstream and marketing businesses, we've generally lowered our expectations for price and tailwinds [inaudible]
Alan Armstrong: However, we are still well positioned to deliver on our plan for our upstream business as the combination of our first quarter performance and forward hedge book have basically already locked in about 65% of the expected 2025 revenue and the majority of the marketing businesses plan has been realized through the first quarter [inaudible]
Alan Armstrong: As we demonstrated over the last 10 plus years, our business is very resilient to commodity price swings, and especially inflated from the risk of crude oil downturns associated with economic downturns.
Alan Armstrong: Williams continues to be primarily focused on two things, demand for natural gas pipeline capacity, and the growth of natural gas volumetric demand. We continue to have confidence in the outlook for both of these regardless of near-term macroeconomic conditions and look forward to delivering at least 9% growth this year. And with that, I'll turn it back over to Alan.
Alan Armstrong: Great, thanks John , and just a few closing remarks before we turn it over to your questions.
Alan Armstrong: I'll start by saying it should be very apparent that our business is firing on all cylinders, and we have a track record of generating predictable, growing earnings in a variety of economic cycles, which underscores the value of Williams as a weatherproof long-term investment with a high growth dividend. [inaudible]
Alan Armstrong: With an ever-expanding backlog of fully-contracted projects extending beyond 2030 and our proven ability to capture new business in emerging markets.
Alan Armstrong: Williams's position better than any other company to benefit from the coming wave of natural gas demand, from the power generation market, industrial resources and LNG exports while continuing to deliver on traditional market needs.
Alan Armstrong: Williams is excelling all on all fronts thanks to a strong and energized organization that is very passionate and dedicated to our strategy and to doing the right thing.
Alan Armstrong: So I feel that the time is right for the transition we announced yesterday that effective July 1 Chad Zamarin will succeed me as President and CEO and I will serve as Executive Chairman of the Board.
Alan Armstrong: Steve Bergstrom, who has been a great leader of our board and a great thought partner to meet personally will become our lead independent director.
Alan Armstrong: Since joining Williams, Chad and I have worked together closely and he has successfully built on our strong natural gas focus strategy while advocating for Williams and the role of natural gas in our clean energy
Alan Armstrong: He is the right next leader for Williams at this point in our company's history and I know he will take the company forward with pride and commitment to Williams' values [inaudible]
Alan Armstrong: And with that, I'll turn the call over to Chad for a few brief remarks before we get to Q.
Jeff.
Jeff: Thanks, Alan. I am truly humbled and honored to be asked for Lee Williams in the months and years ahead.
Jeff: The rich history of Williams is truly the story of a great American company, and we have many amazing chapters left to right [inaudible]
Jeff: Alan, you've been a great mentor of leader and thought partner for me and I'm grateful for the trust that you and our board of directors have placed in me and in our leadership team to carry Williams vision forward. Rest assured that there are no major sea changes here and no change in how the compass is set for Williams.
Jeff: Alan and I, together with the entire leadership team, have for years worked closely with our board to craft and continually tune our natural gas focus strategy.
Speaker Change: And as you've heard today, our strategy continues to deliver with abundant opportunities on the rise. I look forward to continuing to work with the board and with Alan in his role as executive chairman to continue to build on our success.
Speaker Change: Alan, on behalf of every shareholder and on behalf of every current and former employee that is proudly worn the Williams badge, I want to say thank you.
Speaker Change: It has been one of the greatest privileges of my career to work with you and to witness your unwavering dedication to this great company [inaudible]
Speaker Change: I know how much you love Williams and I know how much that you and Shelley have sacrificed for the company and know that we will strive every day to match your passion for Williams and we will always work to make you proud. I hope that you know how much you mean to us and I'm glad that you will still be close by in your role as Executive Chair.
And now we will open up the call for questions.
Speaker Change: Thank you. At this time, we will conduct a question and answer session. Please limit to one question at one follow-up.
Speaker Change: Our first question comes from the line of Praneeth Satish of Wells Fargo. Your line is now open.
Speaker Change: Good morning. First, let me offer my congratulations to both Alan and Chad and Chad. You have some big shoes to fill.
Speaker Change: Alan, I think you mentioned during your prepared remarks that Williams has ordered equipment for two more behind the meter of power.
Speaker Change: Projects, if I heard you correctly. Can you help us just understand if the size and returns for these potential projects are going to be similar to what we see saw with Socrates? Or do you think that the returns could be even better to the extent you're able to leverage your own existing infrastructure? And separately, given that you've already ordered the equipment, should we expect FID in the coming months? [inaudible]
Speaker Change: Yeah, I'm going to have Chad take that one, he's been right in the middle of that, so Chad
Sure, yep.
Speaker Change: We do expect these projects to reach full commercialization throughout the remainder of the year, and we also expect these projects to be contracted very similarly to Socrates and have...
Likewise, really attractive returns [inaudible]
Speaker Change: I think we'll hold to see if they're materially different than the products we have, but I think generally scope and scale will be similar, maybe a bit smaller as we get more efficient in how we design these solutions, but the most part will look similar to the Socrates.
Speaker Change: And then maybe if you can elaborate on the strategic rationale for the co-gentrics investment beyond, I guess, market intelligence do you anticipate this evolving into a platform for additional power generation investments? What's your appetite for increasing your ownership stake beyond the 10% or just making more investments into IPPs?
Yeah, Keith, I'll take that one.
You know, I think-
Speaker Change: People should realize that there is a lot of change of foot, particularly in the north, east, on.
Speaker Change: The powermark in the way that this is contracted has become very evident that...
The short-term power auction markets, don't provide for...
those merchant power plants taking out long-term firm capacity. [inaudible]
Speaker Change: And that's going to have to happen to maintain a reliable grid in those markets.
Speaker Change: So we are really watching that with a lot of close interest and this is a great way for us to really be in a position to help on the gas supply side of that so you really shouldn't see it as
An investment into the merchant power generation space.
Speaker Change: As a continuation, as a strategy, as much as you should see it, we recognize there's a lot of change that's going to happen in terms of the gas supply into that. This is particularly in the Northeast and we want to be front and center on what that's going to look like. And then finally, I would just say really excited to be working with the Quantum Energy Group. Thank you.
Speaker Change: Great parker in a lot of areas and we really like working with them and so this is great opportunity for us to do.
Speaker Change: to expand that relationship. So it's a not quite what people might think it is in terms of us thinking about going in the merchant power of business, and I appreciate that that couple along with going into the serving with data centers, people might get that impression, but that's not at all water strategy.
and Danilo Juvane.
Understood, thank you.
Thank you.
Speaker Change: Our next question comes from the line of Jeremy Tonet of JP Morgan. Your line is now open.
and Danilo Juvane.
High Good Mornings.
Big morning, Jeremy.
And yet congratulations both Alan and Chad Uh...
Congrats on that and... [inaudible]
Speaker Change: Maybe just moving into behind the meter as well with the question here. Just wondering, I guess, you know, Williams has provided a solution that I think a number of others in the market have looked to pursue but have not been able to deliver energy companies or IPPs rather. I guess what has enabled Williams to do this? [inaudible]
Speaker Change: You know, versus others, what do you see as your competitive advantage here? How big is this opportunity set for Williams as you see it?
Speaker Change: Yeah, thanks Jeremy, this is Chad. I mean, first thing I'd say is a huge shout out to the Williams team, you know, we are...
Speaker Change: Very focused on collaborating across the organization in driving growth within our core businesses. And frankly, I credit a lot of our success on the
to the team and to that collaboration.
Speaker Change: And then beyond that, it's just making sure we can put together solutions for customers and bring all of the different capabilities of the organization.
Speaker Change: We can provide gas supply solutions, we understand pipeline capacity, our own, and even third-party pipelines for our sequin market intelligence.
Speaker Change: We obviously build a lot of pipeline and urban facilities and so bringing all the different pieces together into a solution that is ready made for a customer I think has been truly a differentiator and again credit to the team you've been able to pull all that together.
and Danilo Juvane. Thank you. Thank you.
And then I would just mention that.
John Porter: John was mentioning earlier. We like this opportunity. We think it will layer in nicely over time. I know there's a lot coming at us really fast. The team is working on making sure that this complements our investment strategy. We've got a nice layering in a project over time. I would think of these next.
John Porter: Two projects that we're working to commercialize, in addition to other projects as layering in over the next few years and through the end of the decade.
Speaker Change: Yeah, I would just add Jeremy, you know, one of the things that I think we are really good at as a company is developing high trust relationships.
Speaker Change: and that reputation helps us, obviously, when we go into situations like this. But importantly, we also work to have that on the supplier side as well.
Speaker Change: And so, us having a long-term relationship with solar in a way that provides us a leg up on.
Speaker Change: Being able to get the equipment there is very valuable, so those relationships pay off in moments like this instead of just beating down vendors to the very last nickel all the time, but really trying to work with them to improve their product and service. [inaudible]
Speaker Change: in high-crush relationship really pays off dividends and in times like these and so I think you see that coming through as well.
and Danilo Juvane.
Got it, that's helpful there, thanks and...
Speaker Change: Just kind of shifting towards the gas markets, maybe a bit more, however, in the addition, what you said before. In thinking about your conversations with producer customers here, there's a lot of focus on oil directed drilling, but there's impacts on the gas market as well. And just wondering if you could comment a bit more.
Speaker Change: How you see the gas market on pooled and cured, given these dynamics and what it means for your systems, if the call on gas continues in this less associated gas or otherwise, just how you see this playing out and what are the impacts for Williams?
Speaker Change: Yeah, we certainly are seeing that call on gas right now and...
Speaker Change: You know, a lot of a lot of response in the dry gas basins for sure. And obviously it oil, you know, continues to soften.
Speaker Change: that will continue to see rigs rotate into the gas areas, I think. So, you know, it's going to be a little choppy because we're going to see big increases on the demand side and we're going to see.
Speaker Change: Supply responses that are not always directly in line with the market demands. So I think it's going to be kind of chopping on the way up, if you will, on the demand side, but we certainly are seeing responses on our system.
Speaker Change: saw that growth during the first quarter and certainly seeing that growth on our systems here in April and in the second quarter. So we are extremely well positioned for that call and and we're certainly seeing it come through our systems right now. So you know, that's been a strategic. Thank you very much.
Um...
Speaker Change: Decision for a long time to really focus on the gas directed basins because we think that they'll have to be called on in a growing gas demand. And I would just say that's come a little stronger than we even expected it to.
Speaker Change: So, very well positioned on that take, and we certainly are seeing a big column of gas supply in those cases.
Got it. Thank you for that
Thank you.
Speaker Change: Sort of constantly sort of percolating list of items coming in curious how youre thinking about elevated capex going forward is just going to be a feature over the next few years given all these projects starting to manifest themselves and are there any self imposed limits in any given year and how much you want to spend.
Speaker Change: Yes, thanks for the questions I think.
Speaker Change: As discussed in the past in our long range forecasting exercise, we do every year. We just continuously seen this 2025 26 timeframe has been a period of time, where the company was going to have really more and more balance sheet capacity again, reminding folks that our targeted leverage range of three five to four times and even with this firm.
Speaker Change: Socrates project our guidance. This year is for 365 times is still very comfortably within that range and as we've talked about before as we look forward into the future, we saw sort of an ever increasing capacity.
Speaker Change: Coming on the balance sheet, even with I think what are ultimately probably going to be pretty conservative cash tax assumptions going forward, we still still saw that sort of ever increasing level of balance sheet capacity and so.
Speaker Change: Going back over a year ago, or so that a lot of the focus has been whats going to come along to make a really good use of that balance sheet capacity.
Speaker Change: What we've seen I think over the last 12 months as our commercial teams are very busy.
Maybe as busy as I've ever seen them and of course, we've had the power innovation stuff come along as well and so really it's very exciting we are seeing a timeframe, where we have enormous opportunities in the business coming along at a time when we have really strong balance sheet capacity and I think with <unk>.
Speaker Change: Really excited is the stuff that's coming in is has a very strong return profile great credit long term terms and so we really like.
Speaker Change: The capital is coming at us organically and I think we have more than more than enough capacity to fund what's in front of us and we we've stress tested that and of course, we'll be very disciplined on the return and the credits and <unk>.
Speaker Change: Looking for the long term contracts, but we think we've got plenty of capacity are very excited about the projects, we're seeing it coming from our commercial teams.
Speaker Change: Yes, I would just add to that that it's.
Speaker Change: Very different the short cycle that we're seeing for these.
Speaker Change: For the power innovation projects are such a quicker turn on the capital of five times EBITDA multiple on a project. It takes 18 months to have online is very different than one that takes 36 months to add online. So.
Really strong returns from these projects that will continue to expand the balance sheet and our capacity as Jon said so.
Speaker Change: I would say great problem to have but but so far we feel like we have plenty of capacity you are taking on what's out there and very glad that.
Speaker Change: We've held our return thresholds so high against our projects because it is giving us that kind of capacity that we wouldn't otherwise have if we'd been investing at lower return projects.
Speaker Change: Got it helpful. Thanks, John now and second question, maybe just to quickly go back to the leadership change you. Both addressed this to some degree in your remarks, but maybe just to put a finer point on it Allen long successful tenure at Williams curious why now is the right time and Chad it sounds like not a lot.
Speaker Change: Will change going forward, but just curious what you think your mandate is going forward.
Speaker Change: Yes sure. Thanks for the question well I'll just say it.
Speaker Change: As such a great time, we have.
Speaker Change: I think our culture as a company is in great shape.
Speaker Change: The business is really running well right now very excited about the talent in both Chad and the team is coming up in the organization. So.
I think the.
Speaker Change: The mix is just right.
Speaker Change: And I think it's a great time to bring chat energy and passion to bear across all of these opportunities. So.
Speaker Change: Not necessarily.
Speaker Change: Anything other than just a very objective viewpoint from a shareholder perspective about what I think is the right time for for making the change and so I couldnt be more excited about this as a personal shareholder myself.
Speaker Change: And so I do think it's the right time and.
Speaker Change: We just got a great future in it but lot of passion and energy in Chad and I think he is going to do a fantastic job of.
Speaker Change: Taking the organization to the next level.
Alan Armstrong: As far as mandates go I still remember eight years ago. When I joined the company one of the first things Alan asked me to do is to facilitate our strategy process and we've built a process, where we work very collaboratively as a team across the organization and with our board of directors and.
Speaker Change: When you ask about our mandate I would expect more of the same this has been a strategy that.
Speaker Change: We've been very committed to we will continue to stay committed to stable predictable growth protecting the balance sheet, we do explore adjacent opportunities, but with a clear focus on driving growth in business back to our core business. Alan mentioned that <unk> is a great example, where not.
Speaker Change: Taking a large.
Speaker Change: Turn into a different strategic area, we're going to we're going to take a very small.
Speaker Change: <unk> that will allow us to be better positioned to drive business back to our core business because thats a strong fundamental tailwind that we see in the natural gas value chain. So I would expect that you would continue to see more at the same that this team has been very ingrained in our strategy process and the great news is analyzing going are going to be our exec.
Speaker Change: <unk> chair and will continue to work through that strategy.
Speaker Change: Strategy process that we have been now for eight years.
Speaker Change: Great I'll leave it there Alan don't be a stranger.
Alan: Okay. Thanks Pam.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Theresa Chen of Barclays. Your line is now open.
Theresa Chen: Good morning, I'd like to also.
Speaker Change: No offer.
Speaker Change: Congratulations to Alan for your announcement, congratulations as well to chat and Larry in your new roles.
Speaker Change: First following the.
Speaker Change: Transco Park suppress I'd like to know.
Speaker Change: What is the capacity at this point across Transco for additional <unk>.
Speaker Change: <unk> high returning projects using existing bright of ways to mitigate potential permitting delays and how much more capacity is there to bring on projects like power expressed and what are the next areas of growth and development on Transco.
Speaker Change: Sure you want to take them, yes, I'll take that one yeah. Great question. Obviously, we're excited to be able to deliver another great project by power Express, which is really building along our footprint across transco with easy brownfield expansions that provide us opportunity to kind of streamline through the permitting process I think the dynamics and the demand continued to.
Speaker Change: Grow across the footprint on Transco are finding new opportunities left and right.
Speaker Change: Seeing the growth right now in Virginia, that's driving power Express, we're seeing continued growth throughout the southeast markets as well as along the Gulf as we've seen rapid growth in the LNG space and so those dynamics changed quite a bit, especially as we see new supply coming into different parts of the system and so I think we will continue to find these opportunities to meet our customers' needs and I think.
Speaker Change: It's going to be dependent upon where the demand materializes and the supply that we can start targeting to bring into the into the system.
Speaker Change: And on the deepwater side of things with contribution distantly stepping up in the second half.
Speaker Change: What are you assuming at this point for annual contribution for this group of projects within guidance relative to that $300 million exit.
Speaker Change: John I'm not sure we disclosed.
Speaker Change: I don't think we really have a deepwater guidance number, but I would say.
Speaker Change: There's been some timing shifts in some of these projects over the last few years since we first talked about the overall contribution of these projects and that $300 million number, but ultimately by the time you get to 2026, you should be more at a run rate level relative to this group of projects.
Speaker Change: Yes, so just just to be clear on that.
Speaker Change: 300 <unk>.
Speaker Change: In addition to these projects is.
Speaker Change: It looks like we'll probably hit that stride towards the end of this year.
Speaker Change: At a run rate level.
Speaker Change: So that that remains I would say that some of these are looking even better I know chevron is really excited about.
Speaker Change: Valley more and how those wells are doing right now.
Speaker Change: So I'm really encouraged to see that well well is doing really well, even though it at a very slow start at the beginning of the year, but right now it is really getting on stride. So we may we may be on the higher end of that by the end of the year.
Speaker Change: But obviously the.
Speaker Change: Yeah.
Speaker Change: There is.
Speaker Change: A few few things left half non salad marker and Shenandoah that are hard to predict at this point, but so far looking really good and very encouraging.
Speaker Change: To hear Chevron's comments on on what their cost structure is looking like around developing more and more reserves around the infrastructure existing infrastructure, because obviously that will just continue to feed our downstream pipeline. So.
Speaker Change: Good great times in the deepwater both both in the current but but I think looking forward that producers have really learned take your cost down out there and thats all thats been benefit us directly out there.
Speaker Change: That's helpful. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Keith <unk> Moreen of Mizuho. Your line is now open.
Speaker Change: Hey, good morning, everyone and my congratulations to Alan and Chad as well May I wanted to start out sort of a different angle on the Socrates in data center projects can you talk about risk management overall for these projects given long term fixed price contracts on the power side.
Speaker Change: To what extent youre comfortable locking in gas and gas cost I guess for that long what happens in the event of a force majeure and also to what extent sequent may or may not be involved in helping you manage all this risk.
Speaker Change: Yes. Thanks, good questions first of all what I'd say is when we talk about a fixed price purchase agreement.
Speaker Change: As a fixed price effectively return on our capital and in pass through or the gas that we will be sourcing for the customers. So we are not exposed to commodity price and secret will be helping to source and deliver gas on behalf of our customer but.
Speaker Change: We arent taking commodity price exposure.
Speaker Change: On things like Forrester I would just say that.
Speaker Change: Allen said it we are and the team is building a very high trust relationship with these counterparties, we missed some of the best credit.
Speaker Change: Out there from a customer opportunity perspective, and the customer has been with us in lock step and making sure that we can go out and invest.
Speaker Change: In these projects in a bit of a new arena, albeit playing to our core strengths and capabilities and things we've done before but.
Speaker Change: We have very high degree of protection from a contracting perspective. So I think the team has done a great job mitigating the risks and capturing very attractive returns.
Speaker Change: I don't see any of that.
Speaker Change: Risk.
Speaker Change: Issues that at all.
Speaker Change: Our.
Speaker Change: Problematic for Us in fact, I would say.
Speaker Change: Say, we've mitigated risks on these projects beyond what would we need to see on some of our.
Speaker Change: Core Tran.
Speaker Change: Transmission products.
Speaker Change: Thanks, Chad and then maybe if I can ask a question kind of on gas storage just broadly what you're seeing right now.
Speaker Change: Where some of them may be potential expansions in your backlog.
Speaker Change: Hi.
Speaker Change: Just to give me an update there.
Speaker Change: Yes, we've certainly announced our pine prairie expansion and that we've seen significant interest in the market on pine Prairie.
Speaker Change: And that Gulf coast areas, we see this new wave of LNG and potentially even additional.
Speaker Change: LNG.
Speaker Change: That may not have been in a lot of forecast models.
Speaker Change: We're going to continue to see and we're seeing a lot of interest and frankly need for Gulf coast storage and so pine Prairie is underway, that's a 10 Bcf.
Speaker Change: Storage expansion, but we expect to continue to see very strong re contracting.
Speaker Change: Ross the board on our Gulf Coast storage assets and it will.
Speaker Change: Don't want to get too far ahead of making sure we locked down pine Prairie, but I would expect additional expansions that will be working on in particular, along the Gulf coast.
al: Thanks Al.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Jean Ann Salisbury.
Speaker Change: Your line is now open.
Speaker Change: Hi, congrats to everyone and good morning.
Speaker Change: Can you share a little more color on what the Transco Power Express project does is it taking that 950, and then the Cfe and Transcanada North from station 165, Thats, Northern Virginia, and I guess typically rely on mountain Valley pipeline expansion going forward in order to proceed.
Larry Larson: Yes, I can take this is Larry great question.
Larry Larson: 950 to expansion, primarily sourcing from station 165 going to or if it is not dependent upon a mountain valley expansion.
Larry Larson: Valley pipeline expansion at this point.
Alan Armstrong: It's really scalable as Alan had mentioned earlier I think that's a great thing about the.
Alan Armstrong: Ability to be able to move volumes to the Transco system and so right now it's primarily target we got more flow capacity.
Speaker Change: Great. That's very clear. Thank you and then as a follow up can you just update us on if you are pursuing constitution I think relatedly, there's an open season on millennium pipeline.
Speaker Change: Much like Constitution, so that goes far right what it replaces the need for consultation. Thank you.
Speaker Change: Yes, I would just say.
Speaker Change: Constitution really has a direct connection into those supplies.
Speaker Change: Or that project would so that that needs to happen one way or the other certainly an opportunity I think for.
Speaker Change: Pipelines to work together out there to piece together solutions to serve those markets. So we'll see.
Speaker Change: We certainly are.
Speaker Change: Working that project lots of.
Speaker Change: Lots of hurdles to overcome there and as you point out really it does require.
Speaker Change: A combination of pipeline solutions to get all the way into the end markets up there so.
Speaker Change: We may see that but certainly working that also working FC and excited about.
Speaker Change: <unk> and <unk>.
Speaker Change: Easier to pull the trigger on frankly, just a lot less complex and highly dependent on the state of New York.
Speaker Change: And the governor there deciding that they need low cost low emission energy into those markets. So we'll see what happens on that.
Speaker Change: Great Alright.
Speaker Change: Gotcha.
Speaker Change: That's too much do mentioned yet on on Constitution were continuing to work them.
Speaker Change: Great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of John <unk> of Goldman Sachs. Your line is now open.
Speaker Change: Hey, good morning, Thanks for the time and congrats to everyone as well.
Speaker Change: I wanted to start on permitting reform, we have seen some army corps announcements on kind of fast tracking there under the national emergency authorization just curious what your view is on.
Speaker Change: Momentum in Washington, whether we could think about some of the project timelines.
Speaker Change: From here thanks.
Speaker Change: Yes, I would just say we're encouraged we know both the administration is working hard to clear any barriers that exist.
Speaker Change: The FERC as well has been really working hard and I think FERC is really.
Speaker Change: A critical component for us, but they continue to work hard to clear the deck whatever obstacles they can control.
Speaker Change: But none of that really changes the fact of the permitting process being very exposed to litigation and two.
Speaker Change: Obstructive environmentalist.
Speaker Change: Throwing wrenches and projects and filing suits that the type of projects up so thats the piece Thats the judicial reform in the legislative process needs to be fixed and we're certainly going to work on that so we're encouraged it's nice to see some some people that are actually think their job is to help get infrastructure.
Speaker Change: <unk> as opposed to obstruct it and so we're encouraged by that.
Speaker Change: But it is going to take ultimately some legislative reform.
Speaker Change: To be more permanent land do you have anything to add to that.
Speaker Change: I think there is good momentum in DC.
Speaker Change: To get that reform that it's ultimately going to be required.
Speaker Change: I appreciate that thank you and maybe just go into the <unk>.
Speaker Change: Power projects should we think of Socrates in kind of whatever is coming next are your customers thinking about that as a effectively permanent power solution or is this kind of a.
Speaker Change: Phase one with some of these smaller turbines and then eventually you'd like to stand up something a little larger and.
Speaker Change: Maybe more permanent.
Chad: Yes, Thanks, John This is Chad.
Speaker Change: For these projects in particular generally customers viewing them as a permanent solution.
Speaker Change: We'll have the ability to if it makes sense for us and for the customer to make a grid connection and to optimize.
Speaker Change: The use of the equipment, we will have that capability, but I do think it's important to note.
Speaker Change: We've talked about just as an example on the first project.
Speaker Change: We do have a 10 year contract with an option for extension, but the customer has partnered with US on 15 years pipeline capacity to serve.
Speaker Change: This facility. So we view these as making sure that we can provide grid level of reliability, but with certainty and control for the customer to get online quickly and continue to operate these facilities for the long term.
Speaker Change: Yes.
Speaker Change: The things that I think is missed in this whole discussion on this topic is that.
Speaker Change: One of the things that kind of attracted us to this to these solutions in the first places we were seeing how much money was being invested in diesel fire backup generation for the full capacity of the facilities. That's an enormous expense on the one hand, and it's also a tremendous amount of emissions, even if you're only running a couple of days.
Speaker Change: And so we.
Speaker Change: We do see this ultimately.
Speaker Change: Great.
Speaker Change: Acknowledging how much money was being invested on standby.
Speaker Change: Puts these facilities at the kind of a worst case condition on this would be there has to be purchased at its original construction cost of the standby generation. So we think there is a very elegant solution versus all the money. That's been spent on diesel power generation is to have <unk>.
Speaker Change: Gas fired back up ultimately at these facilities, so that that would kind of be a worst case scenario our returns don't depend on that actually.
Speaker Change: To be clear, but that would be a huge home run it if that was the outcome.
Speaker Change: That makes sense, thanks, Alan Thanks, Chad.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Manav Gupta of UBS. Your line is now open.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Can you hear me now.
Speaker Change: Yes, Hello, Thank you.
Speaker Change: Sorry about that my question is on the Haynesville side, you, obviously have two attractive projects coming on later in the year, but ask you see this LNG growth happening on the golf course, what would be the demand pool on the Haynesville Basin and Hopkins Williams benefited from all these projects.
Speaker Change: Yes. This is Larry I'll take that question, Yes, obviously, we've got the Reg project, that's coming online here in the third quarter. This year, that's going to create a lot of additional delivery capacity out of the Haynesville and as we continue to see more and more projects get sanctioned as well as come online over the next few years, we do expect it to be a pretty significant demand pull.
Speaker Change: On the Haynesville supply and we're working very closely with our customers on potential other projects that could materialize I think over the next couple of years I think right now they're kind of growing back in brand building up the supplied into the existing capacity as we saw the pull back from last year, but I think if you look at that outlook over the next several years, we're seeing tremendous.
Speaker Change: Whole on the Haynesville.
Speaker Change: DCF over the next few years just to be able to meet the growing LNG demand.
Speaker Change: We anticipate there will be more projects to come.
Speaker Change: So I'll take my quick follow up is you have a long term guidance of 5% to 7% EBITDA growth.
Speaker Change: Project lineup is looking very attractive so I'm just trying to understand for 'twenty six 'twenty seven what could push this model looks like 7% versus 5% or even higher for 26% 27, what could drive you towards the top end of that guide. Thank you.
Speaker Change: Yes, I would just say we've had that 5% to 7% for quite some time and we have been outperforming on that.
Speaker Change: And the amount of high return projects that are coming at us right now.
Speaker Change: Would certainly drive us towards the higher end of that and so one of the challenges has been in the coming years, we continue to.
Speaker Change: To beat our prior year estimates.
Speaker Change: The percentage.
Speaker Change: Raise gets to be tougher and tougher, but I would say right now given the projects that we have coming at us I do think that we certainly have the ability to be towards the higher end of that even even acknowledging the law of big numbers.
Speaker Change: So it is a pretty exciting time to things that you can continue this pace at the scale that we're operating.
Speaker Change: Thank you for that response, and I am sorry about earlier life issues.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Zachman, Evan of Tpa <unk> co. Your line is now open.
Speaker Change: Hi, Thanks for taking my question and congrats to the team.
Speaker Change: Just sticking on the power projects could you remind us or give a little bit more details on the gas demand for soccer teams. How much do you expect that project to pull in whether it's sequent delivering either to sources of your pipelines.
Speaker Change: Yes.
Speaker Change: It's a fairly modest amount of gas, it's under 100 million cubic feet a day for Socrates.
Speaker Change: And we will be sourcing gas off of two different pipelines.
Speaker Change: In Ohio will be building.
Speaker Change: <unk>.
Speaker Change: Pipeline interconnections and laterals to connect.
Speaker Change: This occupancy sites there are two sides to connect to those pipeline supplies and yet sequent will be providing the services on behalf of the customer to make sure that we do.
Speaker Change: By that gas and deliver that gas for the customer.
Speaker Change: Got it that makes sense and then maybe one on <unk> should we think of these earnings as more of marketing style earnings higher in the winter or are there some fixed contracts on the gas side that will have a base earnings for this business.
Speaker Change: Yes, I would say more to come as we spend more time with the <unk>, but for the most part we do see these earnings is fairly stable.
They're going to be reported in our sequence.
Speaker Change: Marketing.
Speaker Change: But we would expect that the run rate earnings to be fairly stable based on what we've seen from historic performance, but also we like the fundamentals and the set up over time as we think we will continue to see increasing capacity pricing in spark spreads, but again the focus for us is on.
Speaker Change: On a stable.
Speaker Change: Early predictable addition to the sequent business, but a a vehicle that's really going to position us to understand those markets.
Speaker Change: We think drive additional core business.
Speaker Change: On that that engagement.
Speaker Change: Got it that makes sense. Thanks for your time.
Thank you.
Speaker Change: Our next question comes from the line of Keith Stanley of Wolfe Research. Your line is now open.
Keith Stanley: Hi, good morning, Thank you.
Keith Stanley: Wanted to ask on the pace of potential data center projects from here. So the website says you could provide a gigawatt of power solutions to data centers by 2027, which would be quite fast.
Speaker Change: Curious, if that's tied to supply chain constraints or any other inputs and then it seems on the call you were kind of implying more spacing in these projects with the next two years through the end of the decade. So just a sense of what's realistic as far as timing and stringing together more of these projects.
Chad: Yes. Thanks this is Chad again.
Chad: First I would say there is certainly going to be some tempering of pace based on supply chain, but we've done a really good job team has done a great job of getting out and securing.
Chad: Slots within within the.
Chad: The vendor community to make sure that we can deliver projects.
Chad: Putting exact numbers on is tough, but in that gigawatt range by the end of 2006, I think is reasonable I think layering that 11, sorry by 27.
Chad: It is certainly reasonable I think layering in that.
Chad: That kind of scale is absolutely doable I will say, we're also working with companies that have.
Chad: Purchased or have space from.
Chad: Turbine and power generation perspective, we are on these first projects during the entire project ourselves but.
Chad: Our goal is to bring whatever capabilities, we tend to put solutions together for customers and so I do think we've got the ability to work with others that may have equipment deliveries and find projects to put to work, but again our goal is to layer. This in a way that complements the balance sheet capacity that doesn't stress.
Chad: The credit metrics, and we will layer in projects and a year over year I think likely through the end of the decade.
Chad: And sorry to clarify on that.
Chad: One gigawatt by the end of 2027 is to have those projects online by the end of 'twenty seven or to <unk> by the end of 'twenty seven.
Chad: No those would be online.
Speaker Change: Okay, great. Thanks, Thanks for that.
Speaker Change: Second question I wanted to ask on northwest pipeline. There is a proposed larger project out there to add looping and compression and bring gas from Wyoming to the Pacific Northwest.
Speaker Change: Can you talk to the potential size of that investment for that project timing and how likely it is to move forward.
Speaker Change: Well I would just say.
Speaker Change: You're seeing it in our materials that obviously, there was a pretty good likelihood it will be moving forward because it has come through a pretty rigorous test to get to that point.
Speaker Change: But there is a number of parties to contract with on that project and.
Speaker Change: It is effectively some of those projects are effectively providing power generation in Idaho.
Speaker Change: <unk> power generation in Idaho for the benefit of Oregon, and Washington, because they don't want to put initiatives in their home state.
Speaker Change: But so that's just providing an opportunity for Idaho and for some of the power generation. There. So so we'll see how that goes I will say.
Speaker Change: Surprised over the last four or five months, how many new projects have started to emerge out west as they realize.
Speaker Change: How much they need power in those markets as well so both both on mountain West and the Salt Lake area, and then up to Idaho.
Speaker Change: And along even along the coast line, so more to come on that but I would say that's probably.
Speaker Change: One of my bigger surprises.
Speaker Change: Over the last six months in terms of all the facets of growth. We have is how much that's picking up in that area and people are starting to realize that that they are going to need.
Speaker Change: Reliable power generation in those markets. So I think one thing notice.
Speaker Change: Debt.
Speaker Change: Is something to keep your eye on is.
Speaker Change: A lot of big coal plants in those markets.
Speaker Change: And with the.
Speaker Change: The effort to maintain.
Speaker Change: Coal plants, which I think given the power demand issues, we have is not a terrible idea.
Speaker Change: That that we may see some some of that coal will remain online out there. So that's to be determined but with that as a potential shift in those markets out there, but the salt Lake area and the Idaho area are getting pretty hot in terms of power demand for it.
Speaker Change: Data centers in those markets and we absolutely are going to be a part of providing those solutions.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: That concludes the Q&A portion of our call I will now turn it over to President and CEO, Alan Armstrong for closing remarks.
Alan Armstrong: Okay, great well, thanks to everyone. Certainly appreciate your time today I'm, just going to wrap up by saying that I have seen firsthand. What this company can accomplish and I'm confident our best chapters are still ahead of us as demand for natural gas continues to accelerate and the value of our critical energy infrastructure is real.
Speaker Change: Our lives.
Speaker Change: You should be confident as I certainly am that the company is in the hands of trusted and capable leaders, who have a passion for Williams and its vision to be the very best energy infrastructure company in the U S and so with that I just wanted to say a final. Thank you to.
Speaker Change: Investors and the analysts that have followed us for so many years and appreciate your confidence in the company. Thank you.
Speaker Change: Thank you for your participation in today's conference. This concludes the program you may now disconnect.
Speaker Change: Okay.
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Speaker Change: Okay.
Speaker Change: Yes.
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Speaker Change: Okay.
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