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Williams Companies Inc Earnings - Analysis & Highlights for Q4 2024
Overview
PositivesNegativesOutlook
- The company has consistently strong performance through various commodity cycles, with a business that is primarily levered to the growth of natural gas volumes and reserved pipeline capacity.
- The company reported another year of record adjusted EBITDA, which marks the 12th consecutive year that it has grown its earnings.
- The company has placed 17 large-scale projects in service in the past four years and has 14 projects in execution today.
- The company is facing challenges with the speed of expansion of the grid, cost, and public concerns around reliability and cost to the consumer.
- The company pulled back significantly in some of the dry gas areas versus its original guidance.
- The company is likely to face a constraint hit on power generation equipment.
- Adjusted EBITDA guidance is moved from $7.4 billion to $7.65 billion, an increase of $250 million.
- The company has one more expansion project that it is working on for its midstream infrastructure that will add additional value for its Haynesville core business.
- The company is taking a pretty optimistic approach, but pragmatic as well in regard to what its guidance is embedded in it.
Q&A Highlights from Williams Companies Inc Earnings Call Q4 2024
- Analyst asked about the gas to power side of things, specifically related to data centers, and the opportunity to capture economic value in this theme.
- Alan S. Armstrong, CEO of Williams Companies, explained that the company is working to acquire major equipment and long lead items for the project, but the process is complex and requires land siting, air permits, and regulatory approvals. He stated that the company is focused on making the projects successful, rather than beating someone to the punch with an announcement. Chad J. Zamarin, COO of Williams Companies, added that the company is well-positioned to provide a full suite of capabilities within the natural gas value chain, and that they are developing projects to the point where they will be effectively shovel-ready to start those projects.
- Alan S. Armstrong, CEO of Williams Companies, explained that the company is working to acquire major equipment and long lead items for the project, but the process is complex and requires land siting, air permits, and regulatory approvals. He stated that the company is focused on making the projects successful, rather than beating someone to the punch with an announcement. Chad J. Zamarin, COO of Williams Companies, added that the company is well-positioned to provide a full suite of capabilities within the natural gas value chain, and that they are developing projects to the point where they will be effectively shovel-ready to start those projects.
- Analyst asked about the gas storage projects and how much expansion capability the company has remaining across its footprint.
- Micheal G. Dunn, Executive Vice President of Williams Companies, explained that the company has a lot of opportunities within its Gulf Coast storage, including the 10 Bcf expansion project recently acquired. He also mentioned opportunities in the West, such as the Clay Basin storage facility. He stated that the company is exploring these opportunities and that prices have come up, especially in the Gulf Coast area, making it a good time to invest in brownfield storage expansions and get good returns.
- Micheal G. Dunn, Executive Vice President of Williams Companies, explained that the company has a lot of opportunities within its Gulf Coast storage, including the 10 Bcf expansion project recently acquired. He also mentioned opportunities in the West, such as the Clay Basin storage facility. He stated that the company is exploring these opportunities and that prices have come up, especially in the Gulf Coast area, making it a good time to invest in brownfield storage expansions and get good returns.
- Analyst asked about the company's willingness to flex CapEx higher in 2025 if the BTM project goes through or if some of the 30 potential front-of-meter projects are pursued.
- The company has plenty of capacity and will remain disciplined in its capital allocation, considering the attractive returns on investment and the limitation of not stretching the balance sheet. The company will continue to look at projects based on risk-adjusted returns and will not go after projects that do not meet their criteria.
- The company has plenty of capacity and will remain disciplined in its capital allocation, considering the attractive returns on investment and the limitation of not stretching the balance sheet. The company will continue to look at projects based on risk-adjusted returns and will not go after projects that do not meet their criteria.
- Analyst asked about the company's competitive advantage in the power generation opportunities, given that the main supply chain constraint is turbines.
- The company has an advantage in the power generation opportunities due to its large compressor systems, which can be used as power generation turbines. The company's purchasing power on that front puts it in a very advantaged position.
- The company has an advantage in the power generation opportunities due to its large compressor systems, which can be used as power generation turbines. The company's purchasing power on that front puts it in a very advantaged position.
- Analyst asked about the opportunities for Williams Companies Inc's servicing data center solution across different states, specifically in Pennsylvania, Texas, and Wyoming.
- Alan S. Armstrong explained that the company is well-positioned in these areas and has attractive features and attributes that make it an attractive option for hyperscalers. He mentioned that the Salt Lake market is a particularly good opportunity for the company, and that the company is excited about the development it's seeing in that area. He also noted that the company's grids and state politics will play a critical role in determining winners and losers in this market, and that the company is seeing a shift towards areas with both wind and gas resources, like Wyoming.
- Alan S. Armstrong explained that the company is well-positioned in these areas and has attractive features and attributes that make it an attractive option for hyperscalers. He mentioned that the Salt Lake market is a particularly good opportunity for the company, and that the company is excited about the development it's seeing in that area. He also noted that the company's grids and state politics will play a critical role in determining winners and losers in this market, and that the company is seeing a shift towards areas with both wind and gas resources, like Wyoming.
- Analyst asked about the progress of coal to gas switching opportunities.
- John D. Porter referred the question to Manav.
- John D. Porter referred the question to Manav.
- Analyst asked about the impact of the Huntingdon Connector on Williams' operations.
- The Huntingdon Connector is not expected to have a significant impact on Williams' operations, as it is a non-factor.
- The Huntingdon Connector is not expected to have a significant impact on Williams' operations, as it is a non-factor.
- Analyst asked about Williams' strategy on the E&P side, specifically regarding the JV buy-in.
- Williams' strategy on the E&P side is to focus on maximizing the value of its midstream infrastructure. The company is working to optimize its upstream development program to take into account the full value chain, and it may eventually decide to reposition the upstream asset with an upstream counterpart. The company has already achieved optimal development in the Haynesville, and is working on an expansion project to add additional value to its midstream infrastructure. It may eventually dispose of the Haynesville asset.
- Williams' strategy on the E&P side is to focus on maximizing the value of its midstream infrastructure. The company is working to optimize its upstream development program to take into account the full value chain, and it may eventually decide to reposition the upstream asset with an upstream counterpart. The company has already achieved optimal development in the Haynesville, and is working on an expansion project to add additional value to its midstream infrastructure. It may eventually dispose of the Haynesville asset.
- Analyst asked about the impact of the bonus depreciation extension on Williams Companies Inc's path to becoming a full cash taxpayer.
- The company clarified that the $300 million in AFFO guidance for 2025 would be halved if the bonus depreciation is restored, resulting in a reduction of $0.12 per share. The company also mentioned that corporate alternative minimum tax is under review, and there are proposals to review the energy-related firms' taxation. The company has assumed a gradual ramp in its cash tax rate, becoming a full cash taxpayer by the latter years of the decade, but this trajectory could be impacted by various factors, including the restoration of bonus depreciation and capital investments. The company is being conservative in its long-range plans and maintaining strong dividend coverage.
- The company clarified that the $300 million in AFFO guidance for 2025 would be halved if the bonus depreciation is restored, resulting in a reduction of $0.12 per share. The company also mentioned that corporate alternative minimum tax is under review, and there are proposals to review the energy-related firms' taxation. The company has assumed a gradual ramp in its cash tax rate, becoming a full cash taxpayer by the latter years of the decade, but this trajectory could be impacted by various factors, including the restoration of bonus depreciation and capital investments. The company is being conservative in its long-range plans and maintaining strong dividend coverage.
