The Williams Companies held their First Quarter 2024 Earnings Conference Call, where Danilo Juvane, Vice President of Investor Relations, ESG and Investment Analysis, welcomed participants and introduced the speakers, including President and CEO Alan Armstrong and CFO John Porter. The presentation materials included a disclaimer for forward-looking statements and reconciliations for non-GAAP measures. Armstrong highlighted the company's operational, financial, and strategic achievements, including setting a record for contracted transmission capacity and completing an acquisition of Natural Gas Storage assets.

The company's recent transaction included 6 natural gas storage facilities in Louisiana and Mississippi, which has been in high demand since 2010. The company is now considering expanding these facilities due to the strong interest from customers. In addition, the company announced the expansion of a project to serve the Mid-Atlantic and Southeast markets, which are experiencing increasing gas demand. The company also has 20 high-return projects in execution, including a 15% increase in fully contracted long-term capacity on Transco. Noteworthy accomplishments in these opportunities include a 3.1 Bcf per day expansion on Transco.

In the first quarter, the company saw an increase in revenue from the Carolina Market Link project and began construction on several new projects. They also received a FERC order for two projects and are making progress on their MountainWest Transmission System. The deepwater project is expected to be completed under budget and the team is also working on replacing 112 mainline compressor units. These projects are expected to generate additional earnings in 2025. Overall, the company is pleased with their first quarter financial performance.

In the fourth paragraph, the speaker discusses the company's quarterly EBITDA, which was 8% higher than the previous year despite tough competition and a decline in natural gas prices. They highlight the strength and resilience of their business and their ability to perform well even in a challenging commodity price environment. The company recently raised their dividend and remains confident in their ability to continue growing in the future. The next speaker, John, will walk through the financials for the quarter and year-to-date.

The company had a strong start to the year, with a 5% increase in adjusted EPS and a 4% increase in available funds from operations. Their Sequent Marketing business also performed well, although not as well as the previous year. The company's debt to adjusted EBITDA was in line with expectations and their dividend coverage was strong. They have updated their financial guidance, expecting to reach the upper half of their adjusted EBITDA range for 2024 and are well positioned to reach the high end of their original guidance. They also expect their adjusted EPS and AFFO per share to come in at the high end of their ranges for 2024. Their transmission and Gulf of Mexico business is tracking ahead of plan and they expect strong performance from their Gulf Coast storage acquisition.

The Northeast Gathering and Processing business had a good first quarter, with drilling and inflation adjustments offsetting lower volumes in some areas. The West also had a strong start, with DJ performance and preparation for winter weather leading to excellent execution. The Marketing business had a strong start as well, but beating the midpoint of their full year guidance does not rely on any additional help from Sequent. The upstream joint ventures also had a strong start, supported by winter weather preparation. Overall, the first quarter saw 8% growth over the previous year, with improvements in the Transmission and Gulf of Mexico business due to the Hartree Gulf Coast Storage acquisition.

The Transco segment saw higher revenues due to the Regional Energy Access project and the MountainWest Pipeline acquisition. The Northeast G&P business also performed well with a 7% increase in service revenues. The West segment saw a 15% increase, mainly due to the DJ Basin transactions and better Wyoming volumes. However, the Gas and NGL marketing business saw a decrease of 18% compared to the previous year's exceptional start.

The upstream joint venture operations in the Other segment of Williams were down $9 million or 15% from last year. However, the Wamsutter upstream EBITDA saw an increase of $8 million due to strong volume growth, which was offset by lower net realized prices. This was more than offset by lower Haynesville results. Williams had a strong start to 2024 with 8% growth in EBITDA, driven by core infrastructure business performance and strength from their marketing business. The demand for natural gas is accelerating, reaffirming its benefits as a low-cost, clean energy solution. Williams is uniquely positioned to benefit from this demand due to their concentration on natural gas infrastructure. Their recent acquisitions, such as MountainWest Pipeline, Hartree Storage, and NorTex Storage, further support their natural gas-focused strategy.

The Williams Companies has recently made deals that align with their strategy and have resulted in expected synergies and commercial opportunities. The company has seen consistent growth and strong financial returns, and has met or exceeded analyst estimates for 33 quarters in a row. They have also paid a dividend for 50 consecutive years. However, they have left room for potential volume reductions and have not changed their EBITDA guidance for 2025, indicating a potential slowdown in activity levels.

John Porter and Micheal Dunn discuss the company's cautious approach to natural gas prices and how they are confident in their volume expectations for the second half of the year. They also mention the diversity of their business, including rich gas and dry gas, and how it benefits them. In addition, they mention the growing demand for data centers, which has been a topic of discussion for several quarters.

Alan Armstrong discusses the potential impact of data center demand on the energy industry. He mentions that while each individual data center may not have a significant impact, the collective demand from multiple data centers will have a noticeable effect. He also mentions that there is a broader trend of reshoring industrial loads due to the low cost of natural gas in the US. However, he cautions that this growth may not happen as quickly as some expect due to the need for long-term planning and infrastructure constraints. Overall, he believes that data center demand will be sizable and impactful, but it may take some time for it to fully materialize.

The natural gas market is currently oversupplied and it will take time and planning to address this issue. Williams is working to take advantage of opportunities in this market and has a team dedicated to this effort. There is a strong contango in the market, leading to value in storage contracts, but this is also keeping rigs running and contributing to the oversupply. However, producers and demand are starting to respond to the oversupply and the market will eventually balance itself with lower prices.

The speaker believes that there will be a high demand for gas in mid-2025 and beyond, which will lead to a period of oversupply in the short term. They also mention updates on project progress at LEG and the challenges they have faced with pipeline crossings in Louisiana and other states, but believe that the legal issues are starting to be resolved.

The speaker discusses the recent appellate ruling in the DTM case and expresses confidence that their own pipeline project will ultimately be successful despite difficulties with an industry peer. They anticipate a second half 2025 in-service date and have experience in building FERC regulated pipelines. They are confident in their ability to finish the project and are looking forward to getting past legal issues and beginning construction. The speaker also mentions the expected growth in LNG demand in the Gulf Coast and the importance of their project in meeting that demand. The questioner congratulates the speaker on a strong quarter and has only one question.

In response to a question about the growth capital for 2025, John Porter and Alan Armstrong discuss the expected spending on the Louisiana Energy Gateway project, new Energy Ventures investments including a Carbon Capture and Sequestration project and solar projects, contributions to upstream JVs, and ongoing transmission projects. They also mention the potential for growth in deepwater projects towards the end of this year and into next year.

The company is expecting growth in their Transco division due to the rate case and emission reduction projects. They have 6 growth projects and 5 major Gulf of Mexico projects in service, as well as a Transco rate case that will begin in March of 2025. The company also sees potential for data center expansions along the Transco path, particularly in the Southeast, which could lead to higher return compression expansions. The Southeast supply enhancement project, which was announced and filed in the first quarter, will serve both the Mid-Atlantic and Southeast markets.

The utilities have been missing their growth targets by large margins, with Southern companies missing by 17 times. However, the company is well positioned to serve the increasing demand, with the Southeast Supply Enhancement project being the first example. The company plans to expand along existing capacity and restore pipeline pressures on derated systems. There are many ongoing discussions with customers to find solutions for their growth needs in the area. The transition to market-based rates on Transco is expected to bring significant uplift in rates, but the exact amount is not disclosed. An open season will determine how much capacity will be taken by third parties, and the shift to market-based rates is not reflected in the 2025 EBITDA guidance.

Mike Dunn, CEO of the company, answers a question about the Gulf projects and the timeline for their completion. He explains that the customers have until the end of May to decide on the length of their contracts and that rates will go into effect in 2025. He also mentions that the company expects full subscription from existing customers and that their part of the project is on schedule. There have been talks about delays in the Shenandoah project, but the company remains confident in their forecast and is not at liberty to discuss the details of their contracts with the producer.

The speaker is discussing the company's potential interest in acquiring a stake in an LNG export facility under construction. They mention their focus on high-return projects and connecting customers to international markets, but indicate that non-operated positions are not their primary focus. The next question asks about the company's conversations with their big three utility customers regarding the expansion of their AI team and if that has influenced the demand for natural gas in their contracted projects. The speaker responds by saying that the demand may reflect some AI components, but also general electrification.

The speaker explains that their work on a project was already in progress before it was announced, and the incremental demand they are seeing is not reflected in that project. They also mention that some customers are delaying sales until gas prices improve, but producers are managing their business to be ready to respond to the market. The speaker believes there will be upside to their business in 2025 as the market and supply respond, but warns that it may be difficult for the market to respond quickly.

The speaker discusses how the current contango in the market is causing producers to behave differently and have confidence in the fundamentals and visibility of the forward market. The next question is about the impact of contango on storage rates and the speaker mentions that storage has become more valuable in volatile markets and with an increase in renewable power and LNG. The company has seen a strong response from customers to maintain the benefits of the Washington storage facility.

The speaker believes that as the market shifts towards more hourly services, there will be a greater need for storage services. This is driven not only by contango, but also by increased volatility in power markets and the need for reliability. The speaker also mentions the potential for peak demand to more than double by 2040, creating a need for assets like storage in the future.

The speaker discusses the importance of storage value in the current market and the long-term need for reliability. They also mention the need for permitting reform and a more amenable regulatory environment to meet the increasing demand for energy supply.

The world is turning away from coal and relying more on natural gas as a baseload for energy. However, there is a growing concern about the reliability of natural gas and the need for more investment in gas infrastructure. This issue is being brought to attention by ISOs, utility commissions, and even tech companies who need access to gas for their data centers. There is a fear that if this issue is not addressed, it could lead to a catastrophe in some markets, as seen in the past winter when there were shortages and failures in gas supply.

The speaker discusses the management of gas service in heavily populated areas and the need for investing in infrastructure to keep up with demand. They also mention the impact of recent acquisitions on the company's growth.

The speaker discusses Transco's strong quarter, mentioning the impact of Regional Energy Access and seasonal revenues. They also mention factors that worked against them, such as the Bayou Ethane divestiture and planned downtime at Discovery. The next question is about the recent EPA updates on power plant carbon emissions and how it may affect their future plans. The speaker believes that the new rule will likely face litigation and may lead to accelerated coal plant retirements.

The speaker discusses the challenges of meeting the demand for energy with the increasing retirement of coal plants and the potential for using AI technology. They also mention the difficulties of building sequestration pipelines and the limitations of sequestering large volumes of CO2 in heavily populated areas. The speaker then addresses the gas storage opportunity and the potential for adding compression in existing areas, but notes that there are economic limits to this.

The speaker is discussing the company's plans to replace and expand storage capacity. They mention the need for storage contracts to shift from short term to long term before expanding. The speaker also mentions the company's strong performance and positive outlook, and the debate over how to best use the cash flow in the current environment.

The company has various strategies in place to add value, including dividend policy, share buybacks, and acquisitions. They have built capabilities to act quickly on bolt-on transactions and have seen success in making them immediately accretive. In the Northeast, they expect strong power gen loads this summer and have expansions in the works to take advantage of incremental supplies. This will benefit their ability to expand Transco at a lower cost and higher margin.

The speaker discusses the positive impact of high-pressure supplies on their system at 165 and expresses confidence in seeing significant expansions and taking advantage of them on the Transco system. The operator then concludes the question-and-answer session. The speaker thanks everyone for their participation and highlights the company's record-breaking quarter and strong future prospects. They credit the success to their strategy and the efforts of employees and management. The call ends with the operator thanking participants and disconnecting.

This summary was generated with AI and may contain some inaccuracies.