Q2 2025 Williams Companies Inc Earnings Call
Danilo Juvane: Good day, everyone, and welcome to the WILLIAMS Q2 2025 earnings conference call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Danilo Juvane, Vice President of Investor Relations, ESG and Investment Analysis. Please go ahead.
Good day, everyone and welcome to the Williams second quarter 2025 earnings conference call.
Today's conference is being recorded at this time for opening remarks and an introduction. So I would like to turn the call over to
Operator: Thanks, Steven, 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 the presentation that our President and CEO, Chad Zamarin, and our Chief Financial Officer, John Porter, will speak to this morning. Also joining us on the call today are Larry Larson, our Chief Operating Officer; Lane Wilson, our General Counsel; and Rob Wingo, our Executive Vice President of Corporate Strategic Development. In our presentation materials, you'll find a disclaimer related to forward-looking savings. This disclaimer is important and integral to our remarks, and you should review it. Also included in our presentation materials are non-GAAP measures that will reconcile the generally accepted accounting principles, and these reconciliation schedules appear at the back of today's presentation material. So with that, I'll turn it over to Chad.
Uh, Danilo javani vice president of investor relations, ESG, and investment an anal analysis. Please go ahead.
Hey, Stephen, 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 the presentation that a president and CEO Chad zamas, and our Chief Financial Officer, John Porter, who speak to this morning.
Also joining us on the call today are Larry Larson, our Chief Operating Officer; Lane Wilson, our General Counsel; and Rob Wingo, our Executive Vice President of Corporate Strategic Development.
In our presentation material, you'll find a disclaimer related to Lincoln State.
Disclaimer is important and integral to our remarks and you should review it.
Also included in our presentation materials, on non-gaap measures that will be reconciled to generally accepted accounting principles.
And these reconciliation schedules appear at the back of the day's presentation materials.
Chad Zamarin: Thanks, Danilo, and thank you all for joining us today. Before we dive in, I want to welcome Rob Wingo to the call. Rob joined WILLIAMS on July 14th, backfilling my previous role, and Rob has hit the ground running, and we are thrilled to welcome him to WILLIAMS and to welcome his family to Tulsa. With Rob now on board, we have successfully transitioned and settled the leadership team, and we are laser-focused on not missing a beat. Alan and I have had a very smooth transition, and last week, we held our first series of WILLIAMS board meetings with Alan as Executive Chair. It was a great set of meetings with our board, and we continue to benefit from what I believe is the very best board in the energy industry. It really is an incredible time to be at WILLIAMS.
So with that, I'll turn it over to chat. Thanks, Danilo, and thank you all for joining us today.
Before we dive in, I want to welcome Rob. Wingo to the call, Rob joined Williams on July 14th back, filling my previous role, and Rob has hit the ground running. And we are thrilled to welcome him to Williams, and to welcome his family to Tulsa.
Alan and I have had a very smooth transition. Last week, we held our first series of Williams board meetings with Alan as Executive Chair. It was a great set of meetings with our board, and we continue to benefit from what I believe is the very best board in the energy industry.
Chad Zamarin: Our teams are firing on all cylinders, and the fundamentals supporting our business are stronger than ever. We continue to see robust demand across our footprint, and you will see rising tides in our offshore business in the West, along the Gulf Coast, across the Northeast, and, of course, along our Transco corridor. As an example of these fundamental tailwinds, after posting record demand on Transco this past winter, in July, we set an all-time record for summer demand on Transco, delivering a record-breaking 16.1 bcf of natural gas on July 29th. In addition, nine of the 10 all-time highest peak summer days have occurred this summer, and you might think this is being driven by an abnormally hot summer, but in fact, on a cooling-degree-day basis, this summer has actually been 4.2% cooler than last year. And now to the quarter.
It really is an incredible time to be at Williams. Our teams are firing on all cylinders, and the fundamental supporting our business are stronger than ever. We continue to see robust demand across our footprint, and you will see Rising tides in our offshore business, in the west along the Gulf Coast, the Northeast, and, of course, along our trans scope corridor,
As an example of these fundamental tailwinds, we posted record demand on Transco this past winter. In July, we set an all-time record for summer demand on Transco, delivering a record-breaking 16.1 Bcf of natural gas on July 29th.
Chad Zamarin: Our teams continue to deliver strong, consistent performance across the business, and the second quarter is another example of how we are positioned to lead and grow in an evolving energy landscape. So let's begin on slide two. From deepwater developments to major pipeline expansions, our team has consistently delivered complex projects on time and on budget. In fact, oftentimes ahead of schedule and under budget, and this past quarter was no different. In total, we placed six major projects into service, including Transco's Southeast Energy Connector in Alabama and Transco's Texas to Louisiana Energy Pathway project along the Gulf Coast.
In addition, 9 of the 10 all-time highest peak summer days, have occurred this summer and you might think this is being driven by an abnormally hot summer. But in fact on a cooling degree day basis, this summer has actually been 4.2% cooler than last year.
And now to the quarter, our teams continue to deliver strong, consistent performance across the business. The second quarter is another example of how we are positioned to lead and grow in an evolving energy landscape. So let's begin on slide 2.
Chad Zamarin: In the deepwater, we successfully completed the expansion of our Gulf B system to serve Chevron's Ballimoore production, which started up in April, and we commissioned Shenandoah, which will drive significant cash flows across our Discovery offshore asset that is now wholly owned following last year's acquisition of our partner, P66's interest in Discovery. In the Hainesville, we brought the Louisiana Energy Gateway and Hainesville West projects online, enhancing our ability to deliver reliable energy across key markets, and we continue to strengthen our footprint in the Hainesville, completing the acquisition of Sabre Midstream at an attractive multiple and further enhancing our position as the largest gas gatherer in one of the most prolific natural gas basins in the country. As our new projects ramp up and serve our customers' needs, they will really show their power from an earnings perspective through the second half of 2025 and beyond.
From Deep Water developments to major pipeline expansions. Our team has consistently delivered complex projects on time and on budget. In fact, oftentimes ahead of schedule and under budget and this past quarter was no different in total. We play 6 major projects into service including Transco Southeast, energy connector in Alabama and Transco Texas to Louisiana Energy pathway project along the Gulf Coast.
In the deep water, we successfully completed the expansion of our Gulf. E system to serve chevron's Valley more production which started up in April and we commissioned shenandoa which will drive significant cash flows across our Discovery offshore asset that is now wholly owned Following last year's acquisition of our partner. P66 is interest in Discovery.
In the hanesville, we brought the Louisiana Energy, Gateway, and Hainesville West projects online enhancing. Our ability to deliver reliable Energy, across key markets and we continue to strengthen our footprint. In the Haynesville, completing the acquisition of saber, Midstream and an attractive multiple. And further enhancing our position as the largest gas gatherer in 1 of the most prolific natural, gas, basins in the country.
Chad Zamarin: As for projects in execution, we've accelerated the timeline for Transco's Southeast Supply Enhancement, or SESE project, which is the largest project ever from an earnings contribution perspective in the history of the company. Accelerating SESE shows our ability to move quickly and efficiently in response to customer needs and growing natural gas demand across the Mid-Atlantic and Southeast markets. We also began construction on the Socrates Power Innovation project, and we remain on track for bringing that project in service in 2026 as WILLIAMS supports our nation in winning the race for artificial intelligence and the next generation of technology. And in late-breaking news, just yesterday, our team finalized the commercial agreements for Transco's Northeast Supply Enhancement, or NESE project.
As our new projects ramp up and serve our customers' needs, they will really show their power from an earnings perspective through the second half of 2025 and beyond.
As for projects and execution, we've accelerated the timeline for the Trans Goes Southeast Supply Enhancement, or Cessi project, which is the largest project ever from an earnings contribution perspective in the history of the company.
Accelerating safety shows our ability to move quickly and efficiently in response to customer needs and growing natural, gas, demand, across the Mid-Atlantic and Southeast markets.
We also began construction on the Socrates Power Innovation Project, and we remain on track to bring that project into service in 2026, as William supports our nation in winning the race for artificial intelligence and the next generation of technology.
Chad Zamarin: This is a significant step forward in bringing increased energy reliability, affordability, and lower emissions to New York City, and we look forward to finalizing federal and state regulatory approvals. The country is waking up to the fact that when we lag in building natural gas infrastructure, we see increases in energy costs, a reduction in energy reliability, and a stifling of economic opportunity and growth. We're hopeful that we will continue to see constrained markets reopen and embrace natural gas as the very best solution for lowering emissions, reducing consumer costs, and delivering energy reliability and security with US-produced energy. Turning to our financials, we are increasing our 2025 adjusted EBITDA guidance midpoint by $50 million, and we're now guiding to $7.75 billion at the midpoint, which represents a cumulative $350 million raise since our original guidance was set in 2024.
And in late breaking news, just yesterday, our team finalized, the commercial agreements for Trans goes Northeast Supply enhancement or Nessie project.
This is a significant step forward in bringing increased energy, reliability, affordability, and lower emissions to New York City. We look forward to finalizing federal and state regulatory approvals.
The country is waking up to the fact that when we lag in building natural, gas infrastructure, we see increases in energy costs, our reduction in energy, reliability, and a stifling of Economic Opportunity and growth.
We're hopeful that we will continue to see constrained markets, reopen and embrace natural gas as the very best solution for lowering emissions. Reducing consumer costs, and delivering energy, reliability, and security with us produce energy.
Chad Zamarin: At our revised midpoint, our performance from 2020 through 2025 will deliver an impressive five-year EBITDA annual growth rate of 9%, and John will go through this in more detail in his remarks. And finally, we published our 2024 sustainability report last week, which outlines our progress in environmental stewardship, social responsibility, and governance, and we continue to lead the industry in this space. As I said at the top of the call, it is an exciting time at WILLIAMS, and I'm very proud of the team and equally excited about the opportunities ahead. And I'll now turn it over to John for a deeper dive into the financials.
Turning to our financials. We are increasing our 2025, adjusted, ibaa, guidance, midpoint by $50 million, and we're now guiding to 7.75 billion at the midpoint, which represents a cumulative. 350 million raise, since our original guidance was set in 2024,
At our revised midpoint, our performance from 2020 through 2025 will deliver an impressive 5-year EVA annual growth rate of 9%, and John will go through this in more detail in his remarks.
And finally, we published our 2024 sustainability report last week which outlines our progress in environmental stewardship, social responsibility and governance and we continue to lead the industry in this space.
John Porter: Thanks, Chad. Starting here on slide three with a closer look at our adjusted EBITDA performance, which was up 8% over the second quarter of 2024. Walking now from last year's $1.667 billion to this year's $1.808 billion, we start with our transmission and golf business, which improved $91 million, or 11%, setting an all-time record due to higher revenues from expansion projects. At Transco, we had increases from Regional Energy Access, Southside Reliability Enhancement, Texas to Louisiana Energy Pathway, and the Southeast Energy Connector projects. We also continue to see growth from our storage businesses on higher renewal rates at Gulf Coast Storage and Nortex, as well as incremental contributions from market-based rates at our Washington Storage facility. In the golf, we saw contributions from our Discovery acquisition, as well as contributions from our new service to Shell's Whale project.
Team and equally excited about the opportunity to head. And I'll now turn it over to John for a deeper dive into the financials.
Thanks, Jed. Starting here on slide 3 with the closer, look at our adjusted Ebitda performance, which was up 8% over the second quarter of 2024.
Walking now from last year's 1.667 billion to this year's 1.808 billion. We start with their transmission and golf business, which improved 91 million or 11% setting, an all-time record due to higher revenues from expansion projects.
At Transco, we had increases from Regional energy, access Southside, reliability enhancement, Texas to Louisiana, Energy pathway and the southeast energy connector project.
John Porter: Second quarter golf gathering volumes were up over 17% versus prior year, and NGL production was up about 77%. Lastly, for this segment, although our new Transco rates went into effect on March 1, we continue to maintain a conservative reserve pending the final settlement. Next, our Northeast GMP business improved $22 million, or 5%, primarily on higher revenues, including higher gathering and processing rates. This segment was unfavorably impacted by the OxSable divestiture that we made last August. Overall volumes ticked up about 5% over Q2 '24, and we've continued to see July volumes that are basically in line with the Q2 '25 averages. In the West, we were also $22 million, or 7% higher, driven by higher Hainesville volumes and growth in the DJ basin, including the Rimrock acquisition that closed at the end of January.
In the Gulf, we saw a contributions from our Discovery acquisition as well as contributions from our new service to Shell's whale project.
Second quarter, golf Gathering volumes were up over 17% versus prior year and NGL production was up about 77%.
lastly for this, Although our new Transco rates went into effect on March 1st pending the final settlement
Next, our Northeast GMP business, improved 22 million or 5% primarily on higher revenues, including higher Gathering and processing rates. This segment was unfavorably impacted by the oxal domestic that we made last August.
Overall volumes picked up about 5% over 2224 and we've continued to see July volumes that are basically in line with the 2225 averages.
John Porter: The West was negatively impacted by a stepdown in our minimum volume commitments at Eagleton. On the volume front, overall volumes grew about 13%, driven by growth in the Hainesville, including volumes from the Sabre acquisition acquired on June 2, 2025. Our sequence marketing business was flat versus the prior year, where contributions from the Cogentrix acquisition offset weaker realizations in the gas marketing business. And then finally, our other segment, which includes our upstream business, was up about $7 million, including higher upstream volumes partially offset by unfavorable price impacts from significantly lower oil prices versus the prior year. So that gets you to the $1.808 billion of EBITDA for Q2 '25, or 8% growth. Let's move to the next slide and discuss what we're seeing for the remainder of '25.
In the West, we were also 22 million, or 7% higher, driven by higher Haynesville volumes and growth in the DJ Basin, including the Rimrock acquisition that closed at the end of January.
The West was negatively impacted by a step down in our minimum volume commitments at Eagle Group.
On the volume front, overall volumes grew about 13%, driven by growth in the Haynesville, including volumes from the Saber acquisition, acquired on June 2, 2025.
Our secret marketing business was flat versus the prior year, where contributions from the Cogentrix acquisition offset weaker realizations in the gas marketing business.
And then finally our other segments which includes our Upstream business was up about 7 million including higher Upstream volumes, partially offset by unfavorable price. Impacts from significantly lower oil prices versus the prior year.
John Porter: As Chad mentioned, we are once again revising our 2025 adjusted EBITDA guidance upward from a previous midpoint of $7.7 billion to now $7.75 billion, and we're moving the top of the range to $7.9 billion. At $7.75 billion, we will see 9% growth in adjusted EBITDA over '24 and a 9% CAGR from 2020. Additionally, if you bridge back to when we first issued our '25 adjusted EBITDA guidance in February of '24, we are now up $350 million cumulative from the original guidance of $7.4 billion. Our current guidance update reflects a continued solid start to '25, the addition of the Sabre acquisition with an expected modest contribution for '25 of less than $20 million, 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.
So that gets you to the $1.8 billion of EBITDA for 2025, a few, 25, or 8% growth. Let's move to the next slide and discuss what we're seeing for the remainder of 2025.
As Chad mentioned, we are once again revising our 2025 adjusted evidence upward from a previous midpoint of $7.7 billion to now $7.75 billion, and we're moving the top of the range to $7.9 billion.
At $7.75 billion, we will see 9% growth in adjusted EBITDA over 2024, and a 9% CAGR from 2020.
Additionally, if you bridge back to when we first issued, our 25 adjusted debit dot guidance. In February of 24, we are now up, 350 million cumulative, cumulative from the original guidance of 7.4 billion.
John Porter: Speaking specifically to the segments, in our transmission and golf segment, we look forward to settling our Transco rate CAGR and seeing the contributions from the two transmission projects we recently placed in service, as well as completing four additional transmission projects by end of year, and we remain optimistic about continued upside from the re-contracting of our storage business. The revised guidance we are issuing today does include what we feel is a pretty good read on where we think the rate case will settle. Additionally, in the deepwater, we've now completed the Shenandoah, Whale, and Ballimoore projects and still have the Salamanca project to go for 2025. In the deepwater, we are only in the early stages of a volume ramp that will accelerate through the remainder of the year.
Our current guidance update, reflects a continued solid, start to 25. The addition of the saber acquisition with an expected modest contribution, for 25 of less than 20 million 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.
Speaking specifically to the segments and our Transmission and Golf segment, we look forward to settling our Transco rate case and seeing the contributions from the two transmission projects we recently placed in service, as well as completing four additional transmission projects by the end of the year. We remain optimistic about continued upside from the recontracting of our storage business.
The revised guidance we issued today includes what we feel is a pretty good read on where we think the rate case will sell.
Additionally in the deep water. We've now completed the shenandoa whale and Valley more projects and still have the Salamanca project to go for 2025.
John Porter: In our gathering and processing businesses, we continue to see overall strengthening in our volumes, reflecting our exposure to crucial natural gas-focused basins and our Hainesville expansions, including our large-scale Louisiana Energy Gateway project. Lastly, we are still well-positioned to deliver on plan for our upstream business, and the majority of our marketing business's plan was realized in the first quarter. Just a couple of notes on full-year '25 growth CAPEX and available funds from operations. First, for growth CAPEX, accounting for the favorable acceleration of the Southeast Supply Enhancement project and our planned spending on the Northeast Supply Enhancement project, we now see growth CAPEX coming in toward the high end of our current guidance of just under $2.9 billion.
In the deep water, we are only in the early stages of the volume, ramp that will accelerate through the remainder of the year.
And our gathering of processing businesses. We continue to see overall strengthening in our volumes, reflecting our exposure, to crucial natural gas focused basin.
Lastly, we are still well positioned to deliver on plan for our Upstream business and the majority of our marketing. Businesses plan was realized in the first quarter,
John Porter: You'll also see an increase in our per-share metrics, including our 2025 AFFO per-share guidance that includes our higher expected adjusted EBITDA, as well as lowering our 2025 current income taxes by about $100 million. We were very pleased with the restoration of 100% bonus depreciation in the One Big Beautiful Bill. As we've discussed, this creates significant cash tax deferrals that are tied to the in-service days of non-regulated capital investments like our Power Innovation projects, but also covering our other gathering and processing investments. So again, 2025 is off to a solid start toward meeting or beating our guidance, even after raising it a cumulative $350 million. Our '25 guidance delivers 9% growth at midpoint and would sustain a 9% CAGR for 2020 to '25.
just a couple of notes on full year. 25 growth capex and available funds from operations. First for growth capex accounting for the favorable acceleration of the southeast Supply enhancement project and our plan spending on the Northeast Supply enhancement project. We now see growth capex coming in toward the high end of our current guidance of just under 2.9 billion dollars.
You'll also see an increase in our per share metrics, including our 2025 adjusted funds from operations (AFFO) per share guidance. That includes our higher expected adjusted EBITDA as well as lowering our 2025 current income taxes by about $100 million. We were very pleased with the restoration of 100% bonus depreciation and the one big beautiful bill. As we've discussed, this creates significant cash tax deferrals that are tied to the in-service dates of non-regulated capital investments, like our power innovation projects, but also covering our other gathering and processing investments.
John Porter: Our backlog of fully contracted projects points to continued industry-leading growth in the coming years, and our recently completed annual 10-year forecast just keeps improving. All of this gives us confidence in the long-term sustainability of the strong financial performance. And with that, I'll turn it back over to Chad.
So, again, 2025 is off to a solid start toward meeting or beating our guidance, even after raising it a cumulative. 350 million. Our 25 guidelines delivers, 9% growth at midpoint, and would sustain a 9% carrier for 2020 to 2 5.
Our backlog of fully contracted projects points to continued industry-leading growth in the coming years, and our recently completed annual tenure forecast just keeps improving.
Chad Zamarin: Thanks, John. Before we turn it over to questions, I want to wrap with a clear message. This is the golden age of natural gas, and WILLIAMS is built for this moment. With an ever-expanding backlog of fully contracted projects now extending beyond 2030 and our proven ability to meet customer needs and capture new business in emerging markets, WILLIAMS is better positioned than any other company to benefit from the growing wave of natural gas demand. The world is quickly recognizing that natural gas is the backbone of reliable, affordable, and cleaner energy, and our infrastructure is essential to meeting growing demand here in the US and around the world. On top of the world's need for clean, reliable, and affordable energy, we have also seen the rapid emergence of the need for speed with respect to energy.
All of this gives us confidence in the long-term sustainability of the strong financial performance. And with that, I'll turn it back over to Chad. Thanks John before, we turn it over to questions. I want to wrap with a clear message. This is the Golden Age of natural gas in Williams is Built For This Moment.
With an ever expanding backlog of fully contracted projects. Now, extending Beyond 2030 and our proven ability to meet customer needs and capture new business. In Emerging Markets, Williams is better positioned than any other company to benefit from the growing wave of natural gas demand.
The world is quickly recognizing that natural gas is the backbone of reliable, affordable, and cleaner energy. Our infrastructure is essential to meeting growing demand here in the U.S. and around the world.
Chad Zamarin: The race is on for the next generation of technology, and the race can only be won if we get back to building the products, technologies, and energy of the future. This needs to be an urgent wake-up call. We've ceded ground in our ability to compete globally, and it's time to reclaim it. And it all starts with energy infrastructure, and we believe with natural gas infrastructure as the critical backbone of our nation's energy system. At WILLIAMS, we're investing in the infrastructure that will power America's future. Our teams are as active as ever and are working an exciting backlog of projects and growing pipeline of opportunities, and I look forward to us delivering for our customers and for our country. Our strategy is intentionally aligned with the world's growing demand for clean, affordable, and reliable energy, as well as for the need for speed.
On top of the world's need for clean, reliable, and affordable energy, we have also seen the rapid emergence of the need for speed with respect to energy. The race is on for the next generation of technology, and the race can only be won if we get back to building the products, technologies, and energy of the future.
This needs to be an urgent, wake-up call. We've seated ground in our ability to compete globally and it's time to reclaim it and it all starts with energy infrastructure and we believe with natural gas infrastructure as a critical backbone of our nation's Energy System.
Ed Williams we're investing in the infrastructure that will power America's future. Our teams are as active as ever and are working and exciting backlog of projects and growing pipeline of opportunities and I look forward to us delivering for our customers and for our country.
Chad Zamarin: The need is real, and the WILLIAMS team is rising to the challenge. And with that, we'll turn it over to your questions.
Danilo Juvane: Thank you. At this time, we will conduct a question-and-answer session. Please limit to one question and one follow-up. Our first question comes from the line of Pranith Satish of Wells Fargo. Your line is now open.
Our strategy is intentionally aligned with the world's growing demand for clean affordable, and reliable energy. As well as for the Need for Speed, the need is real and the Williams team is rising to the challenge and with that, we'll turn it over to your questions.
Thank you. Thank you.
At this time, we will conduct a question and answer session. Please limit to 1 question and 1 follow-up.
Rob Wingo: Thanks. Good morning. So you've increased EBITDA at a 9% CAGR over the last five years. I guess when I look at the opportunity set for the next five years, it looks dramatically better with CAPEX opportunities rising, power demand rising, and ROIC improving. So I get that you're going up against the law of large numbers, but do you think there's some upward bias here to the 5% to 7% EBITDA CAGR guidance that's out there? I mean, from our math, you could significantly surpass that, or are there some headwinds that we should be thinking about as we look out through 2030?
Our first question comes from the line of paneth. Satish of Wells. Fargo, your line is now open.
Thanks. Good morning. Um, so you've increased the data at a 9% K, go over the last 5 years, I guess when I look at the opportunity set for the next 5 years, it looks dramatically better with uh capex opportunities, Rising power demand, rising and roic improving. So I I get that you're, you know, going up against the law of large numbers. But do you think there's some upward bias here to the 5 to 7% ibida kager guidance? That's out.
Chad Zamarin: Yeah, no, I don't think there are headwinds, Pranith. I think you actually said it well. We've shown, I think, pretty remarkable growth over the last five years, and the company is even healthier now. The balance sheet is stronger, and I'd say the tailwinds are even better. And so we're going to remain disciplined and stay tuned, and we'll be, I think, laying out a bit more color on the longer-range opportunity set in our analyst day in early 2026. But I think you captured it well. We want to continue to invest in a disciplined manner, high-return projects, and do that in a way that generates predictable growth. But I think we demonstrated that the business is built to exceed kind of our historical kind of set growth rates, but I'd say more to come as we roll out the next five-plus years of projects.
There, um, I mean from our math, you could significantly surpass that. Are there some headwinds that we should be thinking about as we look out through 2030?
Rob Wingo: Got it. Thanks. And then on the last call, you had mentioned ordering some long-time equipment for two additional behind-the-meter projects beyond Socrates. Maybe can you provide any updates there on where those projects stand in development, when you expect to FID them? And maybe I'll try to push my luck here, but given that the majority of the behind-the-meter deals industry-wide so far have taken place in Texas and Ohio, can we assume that at least one of those projects is located in those regions? And then any further thoughts you could provide in terms of sizing and economics of those projects relative to Socrates?
Captured it. Well, um, we we, you know, want to continue to invest in a disciplined manner, High return projects and, uh, do that in a way that, that generates predictable growth. But I think we demonstrated that the business is built to, you know, exceed, um, kind of our our um, historical kind of set growth rates but um, I'd say more to come as we roll out the the next 5 plus years of projects.
Chad Zamarin: Yeah. You know, first, what I'd say is that I think we've said we expect to deliver commercial agreements for the next couple of projects in the second half of the year. And so the teams continue to do a tremendous job, I'd say, of meeting the customer's needs and tailoring kind of our solutions to what the market is looking for. So we have placed orders, as you mentioned, and I would expect that we're going to be fully commercializing the next couple of projects in the next few months. And we remain on track. We have talked about that looking like another, call it up to a gigawatt of capacity that we think we could bring online by the end of 2027.
Got it. Thanks. And then on, on the last call, uh, you'd mentioned, uh, ordering some long time. Equipment for 2, additional behind the meter projects, Beyond stock Ortiz. Maybe can you provide any updates there on on where those projects stand in development when you expect to FID them? And maybe I'll try to push my luck here but given that the majority of the behind, the meter deals industry-wide so far, have have taken place in, in Texas and Ohio. Uh, can we assume that at least 1 of those projects is located in those regions. Uh, and then any further thoughts, you could provide in terms of sizing and economics of those projects relative to Socrates. Yeah. Um, you know, first what I'd say is that you know I think we've said we expect uh to deliver um commercial agreements for the next couple of projects in the second half of the year. And so the teams continue to do a tremendous job, I'd say it's a meeting, the customer's needs and and tailoring kind of our solutions to
Chad Zamarin: And so I still think that's a good target, and we would expect the economics to look as attractive as the Socrates economics that we rolled out. Plus, I would say that we continue to look for opportunities that even better leverage our footprint and the full suite of capabilities that we have when we connect opportunities all the way from our gathering and processing business through to the end kind of customer need. And so we continue to feel good about those projects moving forward. And I'd also say we are continuing to see the potential to upsize even the Socrates project. And so I'd say stay tuned, but I think the second half of the year, we're feeling confident about our ability to deliver the next round of projects.
What the market is is looking for. Um, so we have a place orders as you mentioned, and, you know, I would expect that we're going to be fully commercializing the next couple of projects, uh, in the next few months. And um, you know, we remain on track. We we have talked about, you know, that looking like another call it, um, up to a gigawatt of capacity that we think we could bring online by the end of 2027. And so, I I still think that's a, um, a good Target. And, you know, we would expect the economics to look as attractive as the Socrates economics that we rolled out. Plus, I would say that, you know, we continue to look for opportunities that even uh better leverage our footprint and the full Suite of capabilities that we have when we connect opportunities all the way from, you know, our gathering and and processing business through to the end, kind of customer need. And so, we continue to feel good about those projects moving forward.
Rob Wingo: Got it. Thank you.
And I'd also say we, We are continuing to see the potential to upsize even, you know, the, the stock these projects, and so I'd say stay tuned. But I think the second half of the year we should, uh, we we're feeling confident about our ability to deliver the the next round of projects.
Danilo Juvane: Thank you. Our next question comes from the line of Jeremy Tonnette of JPMorgan Securities. Your line is now open.
Got it. Thank you. Thank you.
Thank you.
Jeremy Tonet: Hi. Good morning.
Our next question comes from the line of uh, Jeremy tonette of JP Morgan. Securities. Your line is now open.
Hi, good morning. Good morning.
Chad Zamarin: Can you hear me there?
Jeremy Tonet: Jeremy, can you hear me there?
Chad Zamarin: Yeah.
Jeremy Tonet: Great. Just wanted to kind of pick up with the opportunity set as you outlined previously. Just if we think about the back half of '25, do you see FIDs on the pipeline side more likely stemming from another Transco type of expansion, or do you see the possibility for an FID on something stemming from the Northwest system? It seems like there's a lot of irons in the fire, as you laid out in the slides there.
Can you hear me there?
Yeah.
Chad Zamarin: Yeah. I can start, and Larry can also weigh in here. Obviously, we've crystallized, I think, the scoping of Power Express on Transco. The announcement on NESE yesterday is a significant milestone, and I think it's reflective of markets that have been constrained reopening and recognizing the need for natural gas, as we've seen utility bills go up. We've seen reliability go down. And so we are seeing still across the entire footprint, including, as you mentioned, in the Pacific Northwest, an area that's been a bit quiet over the last few years from a gas pipeline expansion perspective. And so whether or not we see FIDs here in the second half of the year, kind of wait to see the pace at which Connect's round of projects roll out.
Great. Um, just want to kind of pick up with the opportunity to set, as you outlined. Um, you know, previously, just if we think about the back half of 2025, um, do you see FIDs on the pipeline side more likely stemming from another Transco-type expansion, or do you see the possibility, you know, for an FID on something stemming from the Northwest system? Uh, it seems like there's a lot of irons in the fire, as you laid out in the slides there.
Yeah, I I I can start and I'm Larry can also weigh in here, you know, obviously you know, we we've um crystallized. I think the the scoping of power Express on trans go the announcement on Nessie. Yesterday is a is a significant Milestone and I think it's reflective of markets that have been constrained reopening and recognizing the need for natural gas. As we've seen utility bills. Go up, we've seen reliability, go down. Um, and so we are seeing still across the entire footprint, including as you mentioned, in the Pacific Northwest, um, area. That's been a big
Chad Zamarin: But as I mentioned in my remarks, we continue to be as active as ever, and we really do see project opportunities in the Gulf Coast, in the Southeast, Mid-Atlantic, the Northeast, and in the West and Pacific Northwest. But Larry can also maybe give an update on the West opportunities.
Rob Wingo: Yeah. Thanks, Chad. This is Larry Larson. As a lot of people know, we do have an open season that's out there right now on our Rockies Columbia Connector project that's targeted to serve the Pacific Northwest, Washington, Oregon, and Idaho. That open season is non-binding. It closes tomorrow, and I think so far we've seen some great interest, having really good discussions with customers. I think we're optimistic we'll see something materialize just because we are seeing an increase in demand for natural gas. The system utilization on the Northwest pipeline continues to remain high, and so the team is working well with their customer group and working towards negotiations. So I think we'll just have to see the pace of how that comes together over the second half of this year.
Oregon. And Idaho.
Seasons. Non-bidding it closes tomorrow and, uh, I think so far we've seen some great interest, having really good discussions with customers. I think we're up to Mystic. We'll see, uh, something materialize. Just because we are seeing an increase in demand for natural gas, the system utilization on the Northwest Pipeline continues to remain high. And so, uh, the team is working well with the, uh, customer group and working towards negotiation. So, I think we'll just have to see the pace of how that comes together, uh, over the second half of this year.
Jeremy Tonet: Got it. Thank you for that. And a question for Rob, if I might. Rob, I was just wondering if you could talk a bit about your experience at EQT and what you're bringing to WILLIAMS here as far as any different thoughts on how to approach things strategically or any thoughts in general on what you're seeing so far.
Got it. Thank you for that. And, uh, a question for Rob, if I might. Uh, Rob was just wondering if you could talk a bit about your experience at EQT.
Rob Wingo: Jeremy, good to meet you. Yeah. So you know I've spent quite a bit of my career both on the midstream and on the upstream side, and so I'm bringing both of those perspectives to bear here. I would say that what I've seen here has a very robust, thoughtful strategy. It's comprehensive, and it's been proving to be very successful. My goal is to execute on the plan that's already in place and to tweak where necessary and to basically capture the robust opportunity set that's in front of us here. I've gotten a very warm welcome from the team, and I'm very grateful for that. I see an organization full of very strong performers bolstered by, frankly, one of the best cultures I've seen. And the team is excited.
And what are you bringing to Williams here as far as any different thoughts on how to approach things strategically or any thoughts in general? And what you're seeing so far.
Bear with me. Uh, good to meet you. Yeah. So
You know, I've spent quite a bit of my career both in the midstream and on the upstream side, and so I’m bringing both of those perspectives to Bear here.
I would say that what I've seen here has a, uh, very robust, thoughtful strategy.
Comprehensive and it's been proving to uh to be very successful. My goal is to execute on the plan that's already in place.
And a tweet where necessary to, you know, basically capture the robust opportunities that are in front of us here. I've gotten a very warm welcome from the team.
Rob Wingo: You know they're excited about Chad's leadership and the leadership from the rest of the executive team, and I think we're ready to go.
And I'm very grateful for that. I see an organization full of very strong performers. Bolstered by frankly, 1 of the best cultures I've seen and uh the team is excited. You know, there's excited about Chad leadership.
Jeremy Tonet: Got it. Great. Thanks for that.
And the leadership from the rest of the executive team, and, uh, I think we're ready to go.
Danilo Juvane: Thank you. Our next question comes from the line of Spiro Dounis of CITI. Your line is now open.
Got it. Great. Thanks for that.
Thank you.
Rob Wingo: Thanks, operator. Morning, team. I wanted to go back maybe to that project backlog. And as we think about that 2028 to 2030 timeframe, you know you've got Power Express not coming in 2030. You've got a few more, let's call it, longer cycle projects in the hopper. I guess I'm just curious, as we think about the mix of long cycle versus short cycle in that timeframe, are you leaning in any one particular direction right now as we anticipate some of these FIDs coming? And as you think about the CAPEX that's going to sort of fill that out, should it look similar to '25, or do you see that changing?
Our next question comes from the line of Spyro Dunis of City. Your line is now open.
Chad Zamarin: Thanks, Spiro. Good question. Yeah, I think generally, we've really tried to demonstrate our ability to layer in projects to create fairly predictable earnings growth, and we do see that opportunity over the next five years. And frankly, it's crystallizing, I think, pretty nicely. So you will see the Southeast Supply Enhancement project coming online in 2027. We've bookended the decade with Power Express that will come online in 2030. And then layering in, call it, singles and doubles on the transmission side of the business, but then also importantly, our Power Express projects that are pretty powerful because they turn from FID to in-service pretty quickly.
Thanks operator morning team. Uh, wanted to go back maybe to that that project backlog. And as we think about that 2028 to 2030 time frame, you, you know, you got power Express, not coming in 2030. You got a few more. Let's call longer cycle projects in the hopper. I guess, I'm just curious as you think about the mix of long cycle, over a short cycle in that time frame. You leaning in any 1 particular direction, right now is, is me anticipate, some of these coming as you think about the capex. Uh, that's going to sort of fill that out. You should have looked similar to 25 or do you see? Uh, see that changing
Chad Zamarin: And so I think you'll continue to see a pretty good layering in of demand pull projects, which is really great from a strategy perspective because we're connecting these projects to robust demand from LNG exports, power demand, industrial demand, and direct power or data center demand. And what that will do is ultimately pull supply to meet that demand. And so we do see the next five years an ability to continue to layer in transmission projects and power innovation projects, and then we will expect to see the supply response to meet that kind of demand that we're connecting to the system.
Thanks, bro. Good question. Um, yeah, I think generally, we, we really tried to demonstrate our ability to layer in projects, uh, to create, you know, fairly, uh, predictable earnings growth. And we, we do see that opportunity over the next 5 years. And frankly, it's crystallizing, I think, um, pretty nicely. So you will see, you know, the southeast Supply enhancement project coming online in 2027, we've booked ended the decade with, uh, Power Express that will come online in 2030, um, and then layering in of call it singles and doubles on the transmission side of the business. Uh, but then also importantly, our power Express projects that are pretty powerful because they they turn uh from you know, FID to inservice pretty quickly. And so I think you'll continue to see a pretty good uh layering in of demand pole projects, which is really great from a strategy perspective because we're connecting these projects to robust demand from
Chad Zamarin: And so I'd say you're seeing some of the larger projects, and as we announce the next round of power innovation projects, I think those will really fill significant growth through the end of the decade, but we'll layer in then the smaller projects along the way. And from a CAPEX perspective, you know I think John has mentioned we've been able to keep the balance sheet in an incredibly strong position. In fact, we've added quite a bit of growth without increasing the targeted credit metric for 2025. And if you look at the capacity that we have to invest over the next couple of years, I think we will see a bit more investment than we may have seen the last few years, although 2025 is shaping up to be a pretty healthy organic capital year.
LNG exports power, demand industrial, uh demand and and direct um Power for um for data center demand and what that will do is ultimately pull Supply to meet that demand. And so we do see the next 5 years, an ability to continue to layer in transmission projects and power Innovation projects. And then we will uh expect to see the supply response to meet that kind of demand that we're connecting to the
Chad Zamarin: But I think we feel really good about our ability to maybe pick up capital a bit, but well within the capacity of the balance sheet to maintain our strong credit metrics.
Rob Wingo: Yeah. And I think, Spiro, yeah, just maybe one more thought to that. I mean, what we're seeing with our long-range forecast and the opportunities that the commercial teams are bringing forward is a continued cadence of high-returning CAPEX projects too. So we've got the capacity. Commercial teams are busier than ever, but what we're seeing in the backlog continues to be high-returning projects. And as Chad said, many of those cycling to operations are pretty short timeframes. Got it. Thanks, John. Thanks, Chad. Second one, just on M&A, maybe a two-part question here. You know, first, with respect to Sabre, curious what kind of downstream opportunities there are now with Legg, whether this sort of fills this up beyond current levels and maybe even necessitates an expansion at some point. And then just looking at M&A more broadly, the recent deals have been a little bit smaller in scale.
Really good about our ability to maybe pick up capital a bit. But, you know, well within the capacity of the balance sheet to maintain our strong credit metrics.
Yeah, and I think, I think.
Spyro. Yeah, just maybe, one more thought to that. I mean, what we're seeing with our long-range forecast and the opportunities that the commercial teams are bringing for us is a continued cadence of high-returning capex projects too. So we've got the capacity; the commercial teams are busier than ever. But what we're seeing in the backlog continues to be high-returning projects. Um, and as Chad said, many of those cycling to operations are pretty, pretty short time frames.
Rob Wingo: And I guess I'm curious, is that a function of just the available assets out there right now tend to be smaller? Is that an effort on your part to keep that small and focus more on organic? Just curious how to think about your M&A strategy right now.
Chad Zamarin: Yeah. So first on Sabre, you know the Sabre footprint, it's a great set of assets underpinned by very high-quality counterparty credit and very strong minimum volume commitments. And it sits just north of our Hainesville footprint in Louisiana, which is nice. It extends our footprint north into an area where we currently don't operate, and we do see the ability over time to attract volumes through that system down into our southern infrastructure and towards markets along the Gulf Coast, which is what our Legg system provides. So we do think it's a very attractive acquisition from a value perspective, but also over time, we think has some potential upside potential to better integrate into our footprint than had it been just continuing to stand on its own. So we like it from that perspective.
Got it. Thanks, John. Thanks, Chad. Uh, second one. Um, just on M&A, maybe a two-part question here. You know, first, with respect to Sabre, I’m curious about the downstream opportunities there now with Leg. Whether this sort of fills this up beyond current levels and maybe even necessitates an expansion at some point. And then, uh, just looking at M&M more broadly, the recent deals have been a little bit smaller in scale. Um, and I guess I’m curious, is that a function of just the available assets out there right now tending to be smaller? Is that an effort on your part to keep that small and focused more on organic? Just curious how to think about your M&A strategy right now.
Chad Zamarin: And I think your point about the size of M&A, I mean, we continue to be very disciplined. I think we like our ability to layer in bolt-on acquisitions in a way that's very manageable from a pacing and an overall capital perspective. You know, on the one hand, we do respond to some degree to what's available in the marketplace, but more importantly, I think we're constantly looking for the right strategic opportunities that are unique to our footprint and our ability to capture outside value. And so we tend to think long-term, even from an M&A perspective, and plan those moves so that they layer into our overall program and not feel like we're in a position where we have to react to what's available in the marketplace.
Um, yeah, so first on Sabre, you know, that the saber Footprints, it's a great set of assets, underpinned by very uh, high quality counterparty credit and, uh, very strong minimum volume commitments. And it sits just north of our, uh, hanesville footprint in Louisiana, which is nice, it extends, our footprint, North into an area where we currently don't operate. And we do see the ability over time to attract volumes through that system, down into our Southern infrastructure and towards, you know, markets along the Gulf Coast, which is what our leg system provides. So we do think it's a, a very attractive um, acquisition from a value perspective. But also over time we think has some some potential upside potential to better integrate into our footprint than had it been just continuing to stand on its own. So we like it from that perspective and then I think your point about uh, you know, the size of m&a. I mean, we continue to be very disciplined. I think we like our ability
To layer in. Uh, bolt-on Acquisitions in a way that's very manageable from a pacing and an overall Capital perspective. You know, on on the 1 hand, we do respond to some degree of what's available in the marketplace. But more, more importantly, I think we're constantly looking for the right strategic opportunities that are unique to our, you know, footprint and our ability to capture outside value. And so, we tend to think long term even from an m&a perspective and plan those
Chad Zamarin: And so you know there are fewer, smaller companies today than there were five years ago, but we continue to have, we think, such strong positions across our footprint that if there are opportunities that make sense, in many cases, we can somewhat be patient, and we can layer those in when and where it makes sense.
Just moved so that they layer into our overall program and do not feel like we're in a position where we have to react to what's available in the marketplace. And so, you know, there are fewer smaller.
Rob Wingo: Great. I'll leave it there for today. Thank you, team.
Companies today have more opportunities than there were 5 years ago, but we continue to have, we think, such strong positions across our footprint that if there are opportunities that make sense, in many cases, we can somewhat, you know, be patient. And we can layer those in when and where it makes sense.
Right, I'll leave it there for today. Thank you, team.
Danilo Juvane: Thank you. Our next question comes from the line of Zach VanEvren of TPH & Company. Your line is now open.
Thank you.
Rob Wingo: Hi, all. Thanks for taking my question. Maybe just starting on Legg, great to see that online and flowing. It looks like it's flowing a decent amount of gas. I'm just curious if that gas was waiting behind pipe or if that's been kind of shifted around from other intrastate pipes within the basin. Yeah, I think that this is Larry Larson. I'll take that one. Good question. Yeah. We're, one, really excited to get Legg online. Obviously, we know that one has been a challenging project for us to get through on some fronts and excited to have first flow start last week.
Our next question comes from the line of Zack Van, Evan of TPH and Company. Your line is now open.
Maybe just starting on Lake, great to see that online and flowing. It looks like it's flowing. A decent amount of gas. I'm just curious if that gas was waiting behind pipe, or if that's been kind of shifted around from other intrastate pipes within the basin,
Rob Wingo: And I think you're going to see a mix of, yeah, we are seeing some ramp-up in productivity that's going to be driving growth on volumes to the system, but you'll also see some producers probably shifting from some other markets to be able to get access to the Gillis market and some of the growing LNG demand. And so we anticipate that to ramp up pretty quickly and hopefully see that being running pretty full here by the end of the year. Got it. That makes sense. Maybe sticking on the same theme, maybe just an update on your guys' overall macro view in the Hainesville and the Northeast. You know, we've seen prices come down a bit, but we've also seen some private producers around your system add quite a bit of rig.
Yeah exactly. This is Larry Larson. I'll take that 1. Good question. Yeah, but 1 really excited to get leg online. Obviously we know that 1 has been a challenging project for us to get to on some fronts and excited to have first flow start last week and I think you're going to see a mix of. Yeah, we are seeing some ramp up in productivity, that's going to be driving growth on volumes to the system. But you also see some uh, producers
Probably shifting from some other markets to be able to get access to the Gillis market and some of the growing LNG demand. And so, uh, we anticipate that to ramp up pretty quickly and, uh, hopefully, uh, see that being running pretty full here by the end of the year,
Rob Wingo: So maybe just a general view on the volumes across the systems through the rest of the year.
Chad Zamarin: Yeah. I'll start and then let Larry talk about producer activity. I think we tend to say this often, you know, lower prices continue to, I think, confirm the demand for natural gas. You know, today, natural gas is about a quarter of the cost of oil on an MMBTU basis and a quarter of the cost of electricity at the delivered retail level. And so you know, having an attractive price for natural gas, frankly, in a time when we're seeing utility bills increase across our footprint, I think is reaffirming the demand for natural gas. So that's a good thing from our perspective. And you know, we do see a very clear line of sight to growing demand.
Chad Zamarin: And so you know, I'll let Larry talk about current producer activity, but you know, we were, I think, already talking about the supply and demand balance for the end of the decade needing to call significantly on the Hainesville, call significantly on the Kerman, and then as much as we can out, you know, unlock from the Northeast. And that was before we started to see more in-base in demand start to materialize because of power generation growth really across the entire United States. And so you've seen projects like NESE. NESE was not in the supply and demand balance for the Northeast. And so you know, we're seeing projects that are being announced that are going to add demand to the footprint of our country, and we're going to need to continue to see a big call on gas.
Yeah, I'll start. And then let Larry talk about producer activity. I, I think we we tend to say this often, you know, lower prices. Continue to, I think confirm the demand for natural gas. You know, today natural gas is is about a order of the costs of oil on an mmbtu basis and a quarter of the cost of electricity, you know, at the delivered um retail level. And so you know having an attractive uh price for natural gas frankly in it in a time when we're seeing utility bills increase across our footprint, I think is reaffirming the demand for natural gas. So that's a good thing, um, from our perspective. And, you know, we do see very clear line of sight to Growing demand. And so, you know, I'll let Larry talk about current producer activity, but, you know, we, we, we were, I think already talking about the supply and demand balance through the end of the decade, needing to call significantly on the Haynesville call significantly on the permanent. And then as much as we can out, you know.
Chad Zamarin: And so I think you know, we like the fact that low natural gas prices are showing the power of natural gas to be that low-cost solution for our country, and we definitely think we will see that demand grow even beyond what was being modeled through the end of the decade. But Larry, maybe you can speak to current activity levels.
Unlock from the Northeast and that was before we started to see more Invasion demands start to materialize because of power generation growth. Um really across the entire United States and so you've seen projects projects like Nessie Nessie was not in the supply and demand balance for the Northeast. And so you know we're seeing projects that are being announced that are going to add demand to the footprint, uh, of of our country. And we're going to need to continue to see a big call on gas. And so, I think,
you know, we we um,
Rob Wingo: Yeah. We have seen an uptick in activity in the Hainesville, and it's been mixed between producers. We have seen some of the privates bring some of the activity into the Hainesville, and we expect the volumes to continue to ramp. We're obviously seeing demand pick up now with Legg coming into service and having access to the growing LNG demand and other markets down at Gillis. We anticipate through the back half of this year some continued growth compared to what we've seen in the first half. If you think about the Northeast, it's been somewhat mixed between producers as well. It's great to see Cotero, their announcement coming out, their continued activity in the Northeast PA. So we're anticipating volume growth in the Northeast and as well as in some of our development in the Ohio Basin.
Rob Wingo: And so it's a little somewhat more moderate probably in the Northeast just because you've got a mix between producers, but we are seeing some second half of the year volume growth anticipated.
we like the fact that low natural gas prices are showing the power of natural gas to be that low cost solution for our country. And we definitely think we will see that demand grow. Um, even beyond what was being modeled, uh, through the end of the decade. But Larry, maybe you can speak to current activity levels. Yeah, we we have seen an uptick in activity in the hanesville and and it's been mixed between producers. Uh, we have seen some of the private spring, some of the activity into the hanesville and we expect the volume to continue to ramp. Uh we're obviously seeing demand pick up. Uh now with leg coming in uh to service and have an access to the growing LNG demand and other markets down at Gillis. Uh, we anticipate uh, through the back half of this year's continued growth compared to what we've seen in the first half, is anything about the Northeast. It's been somewhat, mixed between between producers as well. It's great to see cotero. Their announcement coming out that they're continued activity in the northeast PA. Uh, so we're anticipating volume growth in the Northeast, uh, and uh, and
Chad Zamarin: Got it. I appreciate the time, everyone. Thanks.
As well as in some of our development in Ohio Basin. And so uh, it's a little somewhat more moderate probably in the Northeast just because you've got a mix between producers. But we are seeing some uh, second half of the Year, volume growth anticipated.
I appreciate the time, everyone. Thanks.
Danilo Juvane: Thank you. Our next question comes from the line of Jason Cableman of TD Cowan. Your line is now open.
Thank you.
Rob Wingo: Yeah. Hey, morning. Thanks for taking my questions. I first wanted to ask about the tariff impact on kind of CAPEX and build multiples, and as we think about new projects that you're going to build like NESE, how do those steel tariffs impact the CAPEX to EBITDA multiples, and how do you manage that risk moving forward? Yeah. No, great question. This is Larry. I'll take that one. Yeah, obviously, we're very engaged. Our supply chain is actively monitoring the impacts of this. As we look at it, I mean, the steel costs, I mean, they can, depending on the project, be somewhere between 5% to 15% of total project costs. And so as we see some of these tariffs, as we look at some of our projects right now, it could have anywhere from a 1% to maybe 3% impact on total project costs.
Our next question comes from the line of Jason cablemen of TD Cowen, your line is now open.
Yeah, hey morning, thanks for taking my questions. Um, I first want to ask about the Tariff impact on kind of capex and build multiples, and as we think about new projects that you're going to build like Nessie, um, how do those steel tariffs, impact, the capex to EBA multiple and, and how do you manage that risk? Moving forward?
Rob Wingo: And so nothing too significant at this point. I mean, a lot of that is managed within the contingencies. As you think about just ongoing management of projects, we're always navigating variability in steel prices, and so nothing's different here, but really just goes to a lot of the strategic sourcing that our teams do on the supply chain front and really trying to get ahead of any constraints that we see in the marketplace right now. But as we think about NESE and other projects near term, we don't see anything that's a significant impact to it.
Chad Zamarin: Yeah. And I would just add, I think we've talked about this and to put some numbers to it, NESE is a great example. I mean, the FERC has reinstated the environmental study that was done for NESE last go-around. That's an example of helping to lower costs. If costs, it can cost several hundred million dollars to get through the permitting phase of a project. So addressing permitting reform has a way bigger opportunity to impact costs. We were able to.Receive
Yeah no great question. This is Larry, I'll take that 1. Uh yeah. Obviously we're very engaged. Our supply chains actively monitoring impacts of this as we look at it. I mean the steel costs I mean they can depending on the project be somewhere between 5 to 15% of total project cost. And so as we see some of these tariffs as we look at some of our projects right now, it could have anywhere from a 1 to maybe 3% impact on total project costs. And so uh nothing too significant at this point. I mean a lot of that is managed within the contingencies. As you think about just ongoing management of projects, we're always navigating variability in steel prices and so nothing's different here but really just goes to a lot of the Strategic sourcing that our teams do on supply chain front and really trying to get ahead of any constraints that we see in the marketplace right now. But as we think about uh Nessie and other projects near term, we don't see anything that's significant impact to it. Yeah. And I would just add
Danilo Juvane: a favorable, permit allowance from the Army Corps of Engineers for, SWOIL for the Nessie Project. That was over $150 million cost that would have been borne by that project because of permitting restrictions in that area. So, you know, we're going to continue to beat the drum on the fact that we've got to, as a country, address permitting reform, and that has a much bigger opportunity for lowering costs for consumers in the US. And the tariffs, I think, as Larry mentioned, are something that we feel confident we can manage. But the real opportunity is going to continue to be getting back to making it more efficient to build infrastructure in the US.
John Porter: Yeah, great. Thanks for that, Color. My second one is on the LNG infrastructure build-out. And I noticed that in your slides, you increased the forecast for LNG export projects under construction and then pre-FID projects within your footprint. And I guess with that moving higher, the question is, how does that kind of impact your outlook for additional projects that you could build in the US Gulf Coast? And then also, how do you think about the storage opportunity with the LNG build-out continuing to move up and to the right?
Over 150 million dollar cost that would have been borne by that project because of Permitting restrictions in that area. So, you know, we're going to continue to beat the drum on the fact that we've got to as a country address permitting reform and that has a much bigger opportunity for lowering costs for consumers in the US. And the tariffs I think, as Larry mentioned or something that we feel confident, we can manage, but the real opportunity is going to continue to be getting back to making it more efficient to build infrastructure in the US.
Danilo Juvane: Yeah, so thanks for the question. And maybe I'll start. You know, first, we've certainly seen, I think, both with the negotiations that are happening around trade, but also just the fundamentals around natural gas, we've seen, I think, a lot of upside to the LNG demand case, which is great. We're seeing a pretty clear line of sight to that demand growth. I think you're seeing that already kind of play through in some of our early project announcements. But this is going to be a story that continues to drive additional projects. But Larry mentioned where we are on leg. And we've announced an expansion of our Hainesville gathering system that will move more volumes into leg over time. That project will come online in 2027. That's adding 400 million cubic feet a day of expansion capacity just from our South Mansfield gathering system.
Yeah, great. Thanks for that caller. Um my second 1 is is on the uh LNG infrastructure build out and I noticed that in your slides, you increased, um the forecast for LNG export projects under construction and then and then pref projects within your footprint and um I guess with that moving higher. The question is how does that kind of impact your outlook for additional projects that you can build in the US Gulf Coast? And then also, um, how do you think about the storage opportunity with uh, with with the LG buildout can continuing to move up into the right?
Yeah, so thanks. Good question. And um, maybe I'll start, uh, you know, first we'd certainly see, uh, I think both with the negotiations that are happening around trade, but also just the fundamentals around natural gas. We've seen, I think a lot of upside to the LNG demand case, which is great. Uh, we're seeing pretty,
Danilo Juvane: And so we do think that there will continue to be a pretty significant call. You know, most models had the Hainesville growing by an incremental 10 bcf a day over the next, call it, five to seven years. And that was before we added in these additional kind of demand holes from LNG. And so the largest gatherer in the Hainesville, you can imagine that we're going to continue to see expansions fill up projects like leg and have expansions beyond this current realm. But Larry, I don't know if you have anything you want to add to that.
Larry Larson: No, I think you hit it pretty well. I mean, on the storage front, we announced the plan for expansion early this year. And we've got a great footprint in the Gulf. And so as you continue to see LNG demand grow and some of the potential volatility that will create, we expect that will create more opportunity for more storage opportunities in the future. I think that'll be something we'll continue to monitor. And right now, we're just focused on getting planned primary expansion executed. And we'll continue to talk to some of both the producer market as well as the LNG market on what the needs for additional storage will look like.
Clear line of sight to that demand growth. I think you're seeing that already kind of play through in some of our early project announcements, but this is going to be a story that continues to drive additional projects. But Larry mentioned where we are on leg. You know, we've announced an expansion of our hanesville gathering system that will move more volumes into leg over time, that project will come online in 2027, that's adding 400 million cubic feet. A day of expansion capacity just from our South Mansfield Gathering system. Um, and, and so we do think that there will continue to be a pretty significant call. You know, most models had the hanesville growing by an incremental, 10 DCF a day, over the next call at 5 to 7 years. Um, and that was, before we added in these additional kind of demand holes from LG. And so, as the largest gatherer in the Haynesville, you can imagine that we're going to continue to see expansions fill up projects, like, leg and have expansions Beyond this, this current round, but I don't know if you have anything. You want to add to that? No, I think you hit a pretty well. I mean, on the storage fund we we announced
Danilo Juvane: Yeah, I think on that note, it's probably worth saying Pine Prairie, you know, as we announced that project, we've been able to pull together sufficient support for the project, but even have seen demand beyond that project capacity. And so teams are already working on the next round of storage expansion opportunities. So we do think that's going to be an added vector of growth over the next five, ten years.
The time prayer expansion early this year and we've got a great footprint in the gulf. And so as you continue to see LNG demand grow and some of the potential volatility that'll create, we expect that will create more opportunity for, uh, more storage opportunities in the future. I think, that'll be something. We'll continue to Monitor and, uh, right now we'll just focus on getting kind of primary expansion executed and, uh, we'll continue to talk to some of both the producer Market, as well, as the LG Market, on what the the needs for additional storage to look like,
John Porter: Great. Thanks for the answers.
Yeah, I think on that note, it's probably worth saying Pine Prairie. You know, as we announced that project, we've been able to pull together sufficient support for the project but even have seen demand beyond that project capacity and so teams are already working on the next round of storage expansion opportunity. So we do think that's going to be um, an added uh, Vector of growth over the next 5, 10 years.
Operator: Thank you. Our next question comes from the line of John McKay of Goldman Sachs. Your line is now open.
Great, thanks for the answers.
Thank you.
John Porter: Hey, everyone. Thank you for the time. I wanted to ask on two TransGo projects. Just on the first one, you talked on this briefly of being able to pull forward CESSI a little bit. I think you've mentioned the FERC filings, the ability to pull that even potentially more forward. Could you just kind of walk us through what you're thinking there and kind of what you're looking for to get a better sense of maybe earlier timing? Thanks.
Our next question comes from the line of John McKay of Goldman Sachs. Your line is now open.
Hey everyone, thank you for the time. Uh, I wanted to ask on 2 trends, go projects, just on the first 1. You talked on this briefly of being able to pull forward. Cessy a little bit. I think you've, you know, mentioned the ferc filings, the ability to pull that
Larry Larson: Yeah, so that's Larry. I can take that one. So yeah, it's great news as far as being able to have an environmental assessment versus going through a full environmental impact statement related to CESSI. And so that helps speed up the permitting timeline. And so hopefully we'll be able to get a notice to proceed on that project next year and be able to move that up a quarter in full in-service. We are anticipating some opportunities to have partial in-service come in at the beginning of 2021. We're still kind of finalizing the actual scope of that and how we'll end up contracting that from a revenue standpoint. But I think pretty exciting news to be able to bring that in and accelerate some value in 2027. So that's kind of the main feedback on it.
Even potentially more forward. He just kind of walk us through uh what you're thinking there and kind of what you're looking for to to get a better sense of maybe earlier timing. Thanks
Yeah, so I I just I can take that 1. So yeah, it's great news. As far as being able to have an environmental assessment versus going through a full environmental impact, statement related to, to sassy and so that's helped speed up the the permitting timeline. And so uh, hopefully be able to get a notice to proceed on that project next year and be able to move that up a quarter and full in service. We are anticipating some opportunities to have partial in.
John Porter: That's helpful. Thank you. And then the second one is it does look like Power Express, the size was kind of refined down a little bit. Maybe just walk us through the thinking there and, you know, capacity over time. Thanks.
Service come in at the beginning of 2021. We're still kind of finalizing the actual scope of that and and how we'll end up, uh, Contracting that from a revenue standpoint, but I think pretty pretty excited news to be able to bring that in, in an accelerate, some value in 2027. Uh, so that's that's kind of the main feedback on it.
Danilo Juvane: I'll start and see if anyone wants to add. But I do think, you know, anytime we were pulling a project together, you know, we went through the same process, I think, if you recall, on Southeast Supply Enhancement. We really, the teams worked to find the optimum, most efficient size of the project from a build and capital efficiency perspective and also from a market perspective. And we did see more demand than what we ultimately decided to contract for in this first round of the project. But we kind of found that point of efficiency. And I would say, you know, don't necessarily interpret the amount of volume to equate to the highest return and highest value project. And so we were looking, we're constantly looking for the sweet spot to find the point of efficiency from a capacity and capital efficiency perspective.
The size was kind of refined down a little bit. Maybe just walk us through the thinking there and you know capacity over time. Thanks.
Danilo Juvane: And I think we found it for Power Express. But I would say we continue to see along that entire corridor quite a bit of additional demand. And so that, you know, we don't expect that to be the last project along that TransGo footprint. And so we'll continue to work on the next round of opportunities.
I'll start and see if anyone wants to add. But I do think you know, anytime we uh we're pulling a project together. You, we went through the same process I think if you recall on on Southeast Supply enhancement we we really the teams work to find the optimum most efficient size of the project from a build and capital efficiency perspective. And also from a market perspective and we did see more demand uh, than what we ultimately decided to contract for in this first round of the project. But, uh, we we kind of found that point of efficiency and I would say, you know, don't uh it it isn't. Um, don't necessarily interpret the the amount of volume to equate to the highest returning highest value project. And so we were looking, we're constantly looking for the sweet spot to find the point of efficiency from a capacity in capital efficiency perspective. And I think we found it uh for power Express in in in but I would say we continue to see along that entire Corridor uh quite a bit of of
John Porter: Appreciate the time. Thank you.
Additional demand and so that, you know, we don't expect that to be the last project along that Transco footprint. So we'll continue to work on the next round of opportunities.
Operator: Thank you. Our next question comes from the line of Manav Gupta of UBS. Your line is now open.
Appreciate the time. Thank you.
Thank you.
Chad Zamarin: Good morning, guys. I wanted to talk a little bit about the Rockies-Columbia connector project. Can you get more details about it? It looks very interesting project. Talk about some benefits and what would be the path forward here?
Larry Larson: Yeah, this is Larry. I can hit on that. I mentioned a little bit earlier in the comment. So we went out with the non-binding open season, that closes tomorrow. Really, the big driver of it is increased demand and as we're seeing across Washington, Oregon, and Idaho in those markets. A lot of it's driven by power generation needs, but just also enhancing reliability as we're continuing to see the systems get fully utilized. And so I think as we think about those markets, it's been ones where they haven't really anticipated growth in natural gas. We're excited to see a shift in perspective and excitement around the need for additional infrastructure. And so we'll be working to close out that open season and hopefully work through negotiations with some of the anchor shippers and progress that forward to an FID at some point here shortly.
Our next question comes from the line of manav Gupta of UBS. Your line is now open. Uh, good morning, guys, I want to talk a little bit about Rocky's Columbia connector project. Uh, can you get get more details about. It looks very interesting project, talk about some benefits and what would be the path forward here.
Larry Larson: But so far, it's been really, I think, exciting interest in it. And it'll be a nice expansion for the Northwest pipeline system going into one of our key market areas.
Danilo Juvane: Yeah, I think it's important, Larry mentioned, and we've been talking about this, you know, we've seen peak power demand, peak natural gas demand across all of our transmission assets over the last several years. We just talked about seeing peak summer demand on TransGo in a summer that isn't abnormally hot. In fact, it's quite a bit cooler than it was last summer. That kind of activity across our footprint will be a precursor to additional expansions. I mean, that is a signal that these markets need more capacity. And we've talked about the fact that as the country continues to add intermittent resources to our energy system, that we're going to continue to need more natural gas infrastructure to meet peak demand. And so I think, you know, we're seeing that that theme play out across the footprint. And the PAC Northwest is certainly following that same fundamental.
Yeah, this is sorry I can hit on that. I mentioned a little bit earlier in the comments, so we went out with the non-binding Open Seas and that closes tomorrow. Uh, really the the Big Driver is is is increased demand and and as we're seeing across Washington, Oregon and Idaho, in those markets, a lot of its driven by power generation needs, but just also enhancing, uh, reliability, as we're continuing to see the systems get fully utilized and and so I think as we think about those markets, it's been ones where they haven't really anticipated growth in natural gas or excited to see uh, shift in perspective and excitement around the need for additional interest structure. And so we'll be working to close out uh, that open season and uh, hopefully work through negotiations with some of the anchor shippers and uh progress that forward to an FID at some point here shortly. But uh so far it's been really I think exciting interest in it and it'll be a nice expansion for the Northwest pipeline system going into 1 of our key Market areas. Yeah, I think it is important. Larry mentioned and we've been talking
Chad Zamarin: Thank you. And my quick follow-up here is it's been about like seven or eight months since we have had a new administration. I'm just trying to understand how things actually changed on the ground, permitting, and on people from this government reaching out to you. Do you now have a seat at the table in determining the policies which can drive, you know, energy independence of the United States? Thank you.
Talking about this, you know, we've seen Peak power demand, Peak Peak natural gas demand across all of our um, transmission assets over the last several years. We just talked about seeing Peak summer Demand on Transco in a summer. That isn't abnormally hot. In fact, it's quite a bit cooler than it was last summer, that kind of activity across our footprint will be a precursor to additional expansions. I mean, that is a signal that these markets need more capacity. We've talked about the fact that as the country continues to add intermittent resources to our, our Energy System that we're going to continue to need more natural gas infrastructure to meet Peak demand. And so I think, you know, we're seeing that that theme play out across the footprint and the PAC Northwest certainly, um, following that same fundamental,
Danilo Juvane: Yeah, I'm going to let Lane weigh in on that. But the first thing I'd say is that I think that our teams have done a great job having a seat at the table, kind of irrespective of administration. Our strategy is not designed to, you know, play to any one kind of administration or constituency. I would say that we have seen an increase in clearly support and recognition for the need for our infrastructure. Some of that is, I think, because of the new administration. But I think most of that is because it's just the recognition that we need low-cost, affordable, reliable energy. And natural gas is the tool that, you know, best provides that. But we are very active at the table. And Lane, maybe you can give an update on just the permitting reform and the general landscape as you see it.
Thank you and my quick follow-up here is. It's been about like 7 or 8 months since we have had a new Administration. I'm just trying to understand how things actually change on the ground permitting and and and and people from this government, reaching out to you. Do you now have a seat at the table in determining the policies, which can drive, you know, energy independence of United States. Thank you.
John Porter: Yeah, thanks, Chad. And I couldn't agree more with Chad's comments. I think we had a seat at the table previously, and we certainly have one now. And it's probably the biggest thing that could happen. And I think we've got some tailwinds. And I think the administration is certainly behind us with the permitting reform. They almost made it through the one big beautiful bill. Unfortunately, the Senate parliamentarian struck it near the end. But I think I think the energy costs in this country, the recognition of the need for more and more natural gas and more and more linear infrastructure sort of set the table for the possibility of a nice permitting reform package at near the end of the year. You know, it's politics, so we never know.
Yeah, I'm I'm gonna let Lane weigh in on that. But the first thing I'd say is that I think that our teams have done, a great job, having a seat at the table kind of irrespective of administration. Um, our strategy is not designed to, you know, play to anyone, uh, kind of administration or constituency. I, I would say that, uh, we have seen an increase in clearly support recognition for the need for our infrastructure. Some of that is, I think because of the new Administration, but I think most of that is because just the recognition that we need low cost, affordable, reliable energy and natural gas is the the tool that, you know, best provides that. But um, we are very active at the table and Lain. Maybe you can give an update on just the permitting reform and the the general landscape. As you see it.
That's comments. I think we have
a seat at the table previously and we certainly have 1 now. Uh, and and probably the biggest thing that could happen. I think we've got some some Tailwinds. I think the administration certainly behind us would be permitting reform.
John Porter: But I certainly think that we're in the game, and we're hopeful that that could happen and be a bipartisan effort because it truly would be good for all Americans.
Chad Zamarin: Thank you.
It almost made it through the 1, big, beautiful Bill. Uh, unfortunately the Senate parliamentarian Struck it near the end but I think I think the energy cost in this country to recognition of the need for more and more natural gas and more and more linear infrastructure sort of set the table for the possibility of a nice. Uh permitting reform package that near end of the year, you know, it's politics. So we never know if I certainly think that we're in the game. And and we're hopeful that that could happen via bipartisan effort, because it's truly would be good for all Americans.
Thank you.
Operator: Thank you. Our next question comes from the line of Teresa Chen of Barclays. Your line is now open.
Rob Wingo: Morning. In terms of the guidance increase, it looks like you bumped AFSO more than adjusted EBITDA at the midpoint. Was this the result of cash tax savings expected post-OBBB, or were there other drivers of this delta?
Thank you. Our next question comes from the line of Teresa Chen of Barclays. Your line is now open.
Danilo Juvane: Thanks for the question, Teresa. And I know there's been a few questions about the overall impact of the OBBDA on our cash taxes. So maybe I'll just hit that more comprehensively. I did note in my comments that, you know, restoration of the 100% bonus depreciation in the bill did create significant cash tax deferrals for us. And those will be tied to, in general, to the in-service dates of the non-regulated capital investments that we are making and that we will be making, including all of those power innovation projects that are coming as well as other gathering and processing investments. You know, for 2025, I discussed that we had basically moved our current taxes down by about $100 million.
Good morning. Um, in terms of the guidance, increase, it looks like, um, you bumped afso, um, more than just AA at the midpoint, was this, the result of cash tax savings expected to post obb or were there other drivers of this Delta?
Danilo Juvane: So specifically to answer your question, the two biggest impacts to the increase in the AFSO for shared guidance were the increase in the adjusted EBITDA and a lowering of the current income taxes. Again, seeing questions about kind of the impacts of this going forward as we think about, you know, for example, 2026, it'll be another year where we'll have significant growth in earnings in '26. And based on kind of what we're seeing now, we would expect that cash taxes would be at or below our '25 levels, given the benefits of the 100% bonus depreciation. So again, less than $200 million, even though we continue to consistently grow taxable income and earnings.
Thanks for the question Theresa and I know there's been a few questions about the overall impact of the obba on our cash taxes. So maybe I'll just hit the hit that more comprehensively. I did, I did note in my comments that, you know, restoration of the 100% bonus depreciation in the field. Did create significant cash tax deferrals for us and and those will be tied to in general, to the inservice dates of the non-regulated capital Investments that we that we are making and that we will be making including all of those power Innovation projects that are coming as well as other Gathering and processing Investments. Um, you know, for 2025, I discussed that we had basically moved our current taxes down by about a hundred million dollars. So specifically to answer your question, the 2 biggest impacts to the increase in the ffo per share. Guidance were the increase in the adjusted, Evita and a lowering of the current income taxes. Um, again, same questions about kind of the impact of this
Going forward as we think about, you know, for example 2026.
Danilo Juvane: And if you think about '25 and '26 cash taxes, those numbers that I've been discussing around $200 million, those are really tied more to the corporate alternative minimum tax, which is a reminder that the payments that we're making under the corporate alternative minimum tax can be used to offset future regular tax amounts of it. So you start looking beyond '26, and I think the overall effects of the bill will be largely dependent on the amount of non-regulated capital investments that we'll be placing in service in any given year. But I'm pretty optimistic that we're going to continue to see really significant cash tax deferrals beyond '26, especially when we look at the slate of power innovation opportunities that are out there for the team.
Uh, it'll be another year where we'll have significant growth in earnings, uh, in 26 and based on kind of what we're seeing. Now, we would expect the cash taxes would be at, or below or 25 levels, uh, given the benefits of the 100% bonus depreciation. So again, less than $200 million. Even though we continue to consistently grow taxable income and earnings,
Rob Wingo: Thank you for that detailed answer, John. And with the project runway on gas of power, power innovation, serving data centers and AI in particular, can you provide us an update about how you're using AI within your own organization at this point, whether it be on the cost-saving side or even on the commercial side, bringing this full circle?
Um, and if you think about 25 and 26 cash taxes, those numbers that I've been discussing around 200 million, those are really tied more to the corporate Alternative Minimum Tax, which is a reminder that the payments that we're making under the corporate Alternative, Minimum Tax can be used to offset future regular tax amounts of it. So, you start looking Beyond 26. And I think the overall effects of the bill will be largely dependent on the amount of non-regulated capital Investments that will be placed in service in any given year, but a pretty optimistic that we're going to continue to see uh really significant cash tax deferrals Beyond 26, especially when we look at the Slate of power Innovation opportunities that are out there for the team.
Danilo Juvane: Yeah, I'll start and then maybe Larry, you know, can chime in. I mean, we've certainly been adding capabilities within the organization. You know, our great Chief Technology Officer, Brian Letskis, retired last year, but we were able to hire his replacement. Naveen has been coming in with a lot of passion around AI and truly across the organization, both on the cost and efficiency side, but also on the way we transform how we do our business. You know, you think about the projects that we're taking on and the scale of those projects, in many cases being larger. And you know, our team, Claire Orman, who leads our product organization, is working closely with Naveen and bringing artificial intelligence capabilities to how we do that business. Our market intelligence functions are adding data analytics capabilities.
Thank you for that detailed answer. John. Um, and with the Project Runway, um, on gas of power power, power Innovation, um, serving data centers and AI in particular, can you provide us an update about how you're using AI within your own organization at this point? Whether it be on the Cog fitting side, or he's on the commercial side, bring this full circle.
Yeah, I I'll start and then, maybe Larry, you know, can can chime in. I mean, we, we certainly been adding, uh, capabilities within the organization. Um, you know, our great, um, Chief technology officer Brian. Levski is retired last year, but we were able to hire, uh, ah, ah, his replacement Naveen, uh, has been coming in with a lot of past.
Danilo Juvane: You know, you think about our footprint, both from a sequence perspective, but also from an infrastructure perspective. We've got such incredible knowledge and information across the organization. How can we better integrate that information and understand how markets are behaving? And then ultimately, how we can develop infrastructure solutions to provide, you know, support for those markets. But Larry, you might have some direct examples you want to share.
Sequent perspective, but also from infrastructure perspective, we've got such incredible knowledge and information across the organization. How can we better integrate that information and understand how markets are behaving? And then ultimately how we can develop infrastructure solutions to provide
Larry Larson: Yeah, no, that's I think you hit it pretty well. Right now, we're very focused on just getting the data into the hands of our teams to be able to make really smart decisions around it. And that's both on the commercial front, on the project execution, and in our day-to-day operations as we think about our maintenance strategies and practices and trying to find efficiencies in how we how and when we do maintenance on our facilities. And so I think there's some really good opportunities there. I think we're in the early stages of how we think about AI is going to complement that. But I'm excited about Naveen coming in and bringing the energy and working with our team to actually bring some of that to fruition.
Danilo Juvane: I'll just give you a little anecdote, and this will be for Rob Wingo to figure out how to make this happen everywhere. But last year, we did a test case where we had some of our young talent compete with one of our 10-year traders in our sequence business on a unique asset in the Dallas-Fort Worth area. And for a month, the young programmers, data analytics team was building AI models to figure out how to market energy in the Dallas-Fort Worth area. And after the end of a month, if you looked back and thought about what perfect execution would look like, and if it would have been 100%, you could have predicted whether price, supply, and demand. Our 10-year gas trader scored around 94%, and one of the AI modelers scored a 96%.
You know, support for those markets. Um but Larry you might have some direct examples you want to share. Yeah. No that's uh I think you hit it pretty well. Right now, we're very focused on just getting the data into the hands of our teams building to make really smart decisions around it. And that's both on the commercial front on the project execution and in our day-to-day operations. As we think about our maintenance strategies and practices and trying to find efficiencies and how we how and when we uh, do maintenance on on our facilities. And so I think there's some really good opportunities there. I think we're in the early stages of how we think about AI is going to complement that but uh excited about naban coming in and bringing the energy and working with our team to actually bring some of that to fruition and I'll just give you a little anecdote. And this will be for Rob, Wingo to figure out how to make this happen everywhere. But last year, we did a test case where we had some of our young Talent uh, compete with 1 of our 10-year uh, traders in our sequin business on a unique asset, in the Dallas Fort Worth area,
Danilo Juvane: And it gives you an idea of the power of, you know, someone who had never marketed energy before. You think about what we could do as a country to be just a, even just that initial case of being a few percentage points more efficient in how we market energy across the United States. It's given us a lot of, I think, excitement around our ability to bring our unique proprietary capabilities and knowledge and build smarter solutions for our customers.
And for a month, the, the, the young, uh, programmers data analytics, uh, uh, team was, was building AI models to figure out how to market energy in the Dallas World area and after the end of a month, if you look back and thought about what perfect execution would look like, um, and if it would have been a 100%, you can predicted weather price supply and demand our, our 10 year gas Trader. Scored around a 94, uh, percent and 1 of the AI models, scored a 96%. And it gives you an idea of the power of, you know, someone who had never marketed energy before you think about what we could do as a country, to be just a even, even just that initial case of being a few percentage points more efficient in how we market energy across the United States. It's giving us a lot of I think excitement around our ability to bring our unique proprietary capabilities, and knowledge, and build smarter Solutions. Um,
Rob Wingo: That is a fascinating exercise. Thank you both.
For, for our customers.
Operator: Thank you. Our next question comes from the line of Bert Senzivaro of Wolf Research. Your line is now open.
That is a fascinating exercise. Thank you both.
Thank you.
Jeremy Tonet: Hi, good morning. Just a quick one on Nessie. Just what are the next steps from here and what needs to happen on the approval side for the project to be in service by 4/T/27? And then how quick is the physical build timeline?
Our next question comes from the line of Burke sends a varo of wolf research. Your line is now open,
Danilo Juvane: Yeah. Yeah, look, I don't think you can understate the importance of Nessie. First, I want to give a shout out to our team. You know, that's a traditionally been a pretty tough place to develop infrastructure, but we are certainly seeing the market and I think even the political atmosphere shift in recognizing the benefits of natural gas. And so, you know, that yesterday signing the commercial agreements on Nessie was a huge signal from the utilities that they recognize the need and they believe are seeing support from the regulatory bodies in New York to move forward with the project. And so the next steps are we will file today the agreements with the FERC. And you know, we expect the FERC to act pretty quickly. You know, we've seen the FERC really, you know, do its job well over the last several months.
Hi, good morning, just a quick 1 on Nessie. Just what are the next steps from here? And what needs to happen on the approval side for the project to be in service by 427? And then how quick is the physical build timeline?
Yeah, yeah, look I I I don't think you can understand the importance of Nessie at first, but I want to give a a shout out to our team. Um, you know, that's a
Traditionally been a pretty tough place to to develop infrastructure. But we are certainly seeing the market and I think the even the, you know, the political atmosphere shift in recognizing the benefits of natural gas. And so, you know that that uh, yesterday signing, the commercial agreements on Nessie was a huge signal. And, you know, from the utilities that, um, they recognize the need and they believe are seeing support from the regulatory bodies, uh, in New York to move forward with the project. Um,
Danilo Juvane: And so we do expect the FERC to act quickly in reinstating the certificate. And then we still need to receive the New York water permit. And we are on file for the water permit, and the state has issued a notice of complete application. And we do expect the state to issue the water permit once the Public Service Commission affirms our customers' plans for the project. And so we expect that to happen within the next couple of months. And assuming that that all happens on time, I think everyone is very focused on trying to maintain that schedule. We would actually break ground this year and then be more active in construction next year, bring the project online. We're targeting right now a fourth quarter of 2027 in service for Nessie ahead of the 2027 winter heating season.
And so the next steps are we will file, uh, today the agreements with the FERC. And, you know, we expect the FERC to act pretty quickly. Uh, you know, we've seen the FERC really, uh, you know, do its job well over the last several months. And so we do expect the FERC to act quickly in reinstating the certificate. And then we still, uh, need to receive the, um, New York water permit, and we are on file for the water permit, and the state.
Has issued a notice of complete application and we uh, do expect the state to issue the water permit once, um the Public Service Commission uh, affirms our customers plans for the project. And so we expect that to happen within the next, uh, couple of months. And assuming that that all happens on time, I think everyone is very focused on trying to to maintain that schedule. We would actually break ground this year and then be more active in construction. Next year, bring the product online. We're we're targeting right now. A a fourth quarter of 2027 service from sea ahead of the 2027 winter heating season.
Jeremy Tonet: Thanks for that. And just for my second one, you mentioned a bit in prepared remarks on it, but if you could just please speak to how discussions are tracking on the TransGo rate case, latest expectations. And are you optimistic on getting some form of tracker for emissions reduction spend?
How discussions are tracking on the Transco rate case? Latest expectations.
Larry Larson: Yeah, this is Larry. I can take that question. And yeah, the team's been doing a great job engaging with the shipper group on the rate case settlement discussions. We're not quite there yet, but we're getting really close, optimistic we'll end up there. I think as most people know, when we filed our motion on it, we were seeking to have the modernization tracker in it. I think through the negotiations right now, I'm not optimistic that we'll have that in here. I think that we still think that's the right answer longer term as we think about the need for modernization. And so if we're not successful in this settlement negotiation, we'll continue to look at ERP projects going forward. But we'll kind of think about the timing of those as it relates to the next rate case.
and are you optimistic on getting some form of tracker for emissions reduction, spend
Yeah, so I can take that question. And yeah, the team's been doing a great job engaging with the shipper group on the, the the rate case, uh, settlement discussions. Uh, we're not quite there yet, but we're getting really close optimistic. We'll, we'll we'll end up there. I think, as most people know, when we filed our our motion on it, we were seeking to have, uh, the modernization tracker in it. I think through the negotiations right now. Um, I'm not optimistic that we'll have that in here. I think that we still think that's the right answer, longer term as we think about the need for modernization. And so if we're not successful in this settlement didn't negotiate and we'll continue to look at Erp projects uh going forward. But uh we'll we'll kind of think about the timing of those as it relates to the next rate case.
Jeremy Tonet: Thank you.
Operator: Thank you. Our next question comes from the line of Jean Anne Salisbury of Bank of America. Your line is now open.
Thank you.
Thank you.
Jean Ann Salisbury: Hey, good morning. I just have one. Can CESSI be expanded further? It seems like demand in the Southeast only continues to increase. What is the constraint on this current size of CESSI at 1.6 bcfd? Was that a customer contracting number, or was it more of a mechanical limit of compression that you could add?
Our next question comes from the line of Gene and Salisbury of Bank of America. Your line is now open.
Um, can see.
Danilo Juvane: Yeah, no, if we roll back the tape to CESSI's original FID, it was a timing and again, kind of finding that sweet spot from a capacity and efficiency perspective, but also from a timing perspective. We needed to kind of, you know, shut the book on that episode and chapter of the project so that we could maintain pace to get it in service in 2027. We do still see significant opportunity and demand along those corridors, both serving the Mid-Atlantic and Northeast from the South, but also bringing more volumes in across, you know, the Marcellus and Utica and attracting those to markets from the North. And so that TransGo in general along the Eastern Seaboard, we think will continue to have quite a bit of expansion opportunity.
It seems like demand in the Southeast only continues to increase. What is the constraint on this current size of CESY at 1.6 Bcf/d? Was that a customer contracting number, or was it more of a mechanical limit of compression that you could add?
Yeah, I know if you if if we roll back the tape to assess these original. Um, FID, it was a timing and and again kind of finding that sweet spot from a capacity in efficiency perspective. But also from a timing perspective, we needed to kind of, you know, shut the book on on that uh episode in chapter of the project. So we just maintain Pace to get it in service in 2027 uh we do still see significant opportunity in demand along. Those corridors both serving uh the Mid-Atlantic and Northeast from from the South but also bringing more volumes in uh across
Danilo Juvane: And so, yeah, CESSI, we won't, from a permitting and project execution perspective, we won't change the scope of CESSI, but there are additional expansion projects along that corridor that the team is working on every day.
You know, the the Marcellus and Utica and attracting those to markets, you know, from the north. And so that that Transco in general along the Eastern Seaboard, we think will continue to have. Um,
Jean Ann Salisbury: Great. Thank you, all. I'll leave it there.
Quite a bit of expansion opportunity and so, yeah, cessie, we won't we from a permitting and project execution perspective. We won't change the scope of cessie, but there are additional expansion projects along that Corridor that the team uh, the team is working on
Operator: Thank you. Our next question comes from the line of Robert Catelier of CIBC Capital Markets. Your line is now open.
Uh, every day great, thank you all. Um, I'll leave it there.
Thank you.
Robert Catelier: Hey, good morning. Chad, I think you mentioned in your early comments the need for speed, and you've already announced one project being accelerated. So I'm curious what you're seeing in terms of additional opportunities to either accelerate or upsize existing projects as we've seen with some of your peer group this quarter. And on a related note, what's your comfort level in terms of carrying temporarily higher leverage as a result?
Our next question comes from the line of Robert Cattleya of CIBC Capital markets. Your line is now open.
Morning, Chad, I think you mentioned your early comments. Um, the Need for Speed and you've already announced 1 Project being accelerated. So I'm curious what you're seeing in terms of additional opportunities to either accelerate or upsize existing, um,
Danilo Juvane: Yeah, you know, I'll let John weigh in on the higher leverage. I mean, I think we've demonstrated our ability to grow the business from a, frankly, from a pure leading perspective without straining the balance sheet. John can talk more about that. And then, you know, from a need for speed perspective, I mean, yes, I think you will continue to see us press the accelerator as much as possible on any project that we have underway, but also meeting the customer, you know, where their needs are. And that's why layering in, you know, a nice complement of longer-term projects over the long-range horizon of the plan, but also delivering power innovation behind the meter, creative solutions for customers that frankly can't wait for the longer-term build-out of the grid will continue to be our strategy.
projects as we seen with some of your peer group this quarter and I don't know, related note, what's your comfort level in um, terms of caring temporarily higher leverages a result
Yeah, I you know I'll let John weigh in on the the higher leverage may I think we demonstrate our ability to to grow the business from an frankly from a pure leading perspective without starting the balance sheet. John can talk more about that um and then you know from a from a Need for Speed perspective. I mean yes I think you will continue to see us press the the accelerator as much as possible on any project that we have underway but also meeting the customer, you know, where their needs are. And that's why layering in you know, a a a
Danilo Juvane: And so, you know, I mentioned adding another, you know, gigawatt of power innovation projects by the end of 2027. You know, that kind of speed to market, you know, I think unique and demonstrates the team's ability to pull together a lot of different capabilities and to do it very quickly. But yeah, we will continue to press to see what other projects can be brought faster. But John, maybe you can address the balance sheet.
John Porter: Yeah, thanks, Dan. Maybe just starting with 2025. You know, when we put out our original guidance for 2025 back in February of '24, we had a leverage target of 3.65 at midpoint of guidance. You know, since then, we've added, you know, all of the Socrates spend, which was over $900 million into 2025 and some other spend related to CESSI. It looks like we're going to be able to basically stay at that original leverage. So I think, you know, if you think about our overall leverage targets of 3.5 to 4 times, as we look out with our long-range plan, we see lots of capacity on the balance sheet to be able to add projects and not even begin to strain that four times top level.
Nice compliment of longer-term projects over the long range Horizon of the plan but also delivering power Innovation behind the meter. Um, Creative Solutions for customers that frankly, can't wait for the the longer term build out of the grid will continue to be our strategy. And so you know, I've mentioned adding another, you know, gigawatt of um Power renovation projects by the end of 2027, you know, that that that kind of speed to Market. Um, you know, is I think unique and demonstrates the team's ability to pull together a lot of different capabilities and and to do it very quickly. But yeah, we will continue to press to see what other projects can be. Can be brought faster, but John, maybe you can address the balance sheet. Yeah, thanks. And maybe just starting with with 2025, you know, when we put out our original guidance for 2025, back in February of 24, we had leveraged Target of 3.65 at midpoint of guidance, you know?
John Porter: So I think we feel very comfortable that we can operate within this three and a half to four times and pursue a very large-scale CAPEX budget. But again, we're very focused on the returns on these projects and being, you know, being careful that we continue to demonstrate that the investments we're making are really leading the industry in terms of cash returns. That's a very high priority for us. But the balance sheet's not going to be an issue, I don't believe, over the next few years, even though we are seeing as many of these opportunities as we've seen in a long time.
Robert Catelier: Okay, that's helpful. And last one for me. You've been active on GMP acquisitions over the last couple of years. I wonder how much more investment you might see there. And where do you see the gaps in the value chain or the regional capability?
And some other spin related discussion. It looks like we're going to be able to basically State at that original leverage. So I think, you know, if you think about our our overall leverage targets of 3.5 to 4 times as we look out with our long-range plan, we see lots of capacity on the balance sheet to be able to add projects and not even begin to strength uh, that 4 times top level. So I think, I think we feel very comfortable that we can operate within this 3 and a half to 4 times and pursue a very large scale, uh capex budget. But again we're we're very focused on the Returns on on these projects and being you know, being careful that we continue to to demonstrate that the Investments we're making, are really leading the industry in terms of cash returns. That's a very high priority for us, but the balance sheet is not going to be an issue. I don't believe, uh, over the next few years, even though we are seeing as many of these opportunities as we've seen in a long time.
Danilo Juvane: Yeah, I think the great news for us, and we've just been through our strategy process with our board, there really are, you know, no muscle gaps. We can deliver, you know, we think continue to deliver industry-leading growth without having to fill any holes. And so that's a great position to be starting from. So that means we can be very opportunistic, you know, across our footprint. We tend to focus on projects that are M&A that's within our footprint. I mean, at the end of the day, you know, we use the same capital allocation model for M&A as we do for capital projects. So those projects, those opportunities have to compete with high-return growth projects, which is why you tend to see us be very disciplined and opportunistic in pursuing targets that leverage our footprint and oftentimes have real synergy value.
Okay, that's helpful. And last 1 for me it's you've been active on GP Acquisitions over the last couple of years. I wonder how much more investment you might see there and where do you see the um, the gaps in the value chain or the regional capability?
Danilo Juvane: And so I think you'll continue to see more of that. We don't feel like we have a strategic hole that needs to be filled in order to achieve our, you know, really, I think, impressive growth outlook. But we'll continue to take advantage of our footprint and look for, you know, high leverage opportunities across the footprint.
Yeah I think a great news for us and we've just been through our strategy process with our board. They really are you know no no museville gaps. Um we can we can deliver, you know, we think continue to deliver industry-leading growth without having to to fill any holes. And so that's a great position to be starting from. So that means we can be very opportunistic, you know, across our footprint. We tend to focus on um, projects that are um emanate. That's within our footprint. I mean at the end of the day, you know we we use the same Capital allocation model for m&a that we as we do for capital projects. So those projects, those those opportunities have to compete with high return growth projects, which is why you tend to see us be very disciplined, and opportunistic in pursuing, um, targets that leverage our footprint and, and oftentimes have real Synergy value. And so I think you'll continue to see more of that, um, but we don't feel like feel like we have a, a strategic hole that needs.
Robert Catelier: Okay, thank you.
To be filled in order to achieve our you know, really. I think impressive growth Outlook but we'll continue to take advantage of our footprint and look for you know High leverage opportunities um across across the footprint.
Danilo Juvane: Thank you.
Okay, thank you.
Operator: That concludes the Q&A portion of our call. I would now like to turn it over to President and CEO Chad Zimmerman for closing remarks.
Thank you.
Danilo Juvane: Great. Well, thank you for joining us today. Thanks for the robust Q&A session and thanks for your interest in Williams. We look forward to speaking with you again soon. And in the meantime, we wish you well.
That concludes the Q&A portion of our call. I would now like to turn it over to President and CEO Chad Zamarin for closing remarks.
Operator: All right. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Great. Well uh, thank you uh, for joining us today. Thanks for the robust Q&A session and thanks for your interest in Williams. We look forward to speaking with you again soon. And in the meantime, we wish you. Well,
All right, thank you for your participation. In today's conference, this does conclude the program. You may now disconnect