The Williams Firms, Inc. (NYSE:WMB) Barclays thirty eighth Annual CEO Vitality-Energy Convention September 4, 2024 12:40 PM ET
Firm Members
Alan Armstrong – President and Chief Government Officer
Unidentified Firm Consultant
Good afternoon, everybody. Welcome, and thanks for attending. It’s my pleasure to introduce our subsequent firm, Williams; and from Williams, we have now Alan Armstrong CEO. Welcome.
Alan Armstrong
Properly, thanks, and recognize everyone being right here right now. We have an incredible story to inform. And I’ll inform it right now sort of by way of the place we have been, the place we’re proper now, what is going on on with the enterprise proper now and the way shiny the long run is correct now by way of the basics supporting our enterprise. However as we begin off just a bit bit from a generalist perspective right here by way of what Williams does, we’re a really pure gasoline centered firm. We deal with about 1/3 of the nation’s pure gasoline. And we significantly have been specializing in being in locations the place we have rising markets on the one hand and the place we have provide basins that may assist progress for the long-term. So we very a lot run our enterprise for the long-term. And we actually have stayed with this pure gasoline centered technique now for about overcoming on 10 years now and the place we actually have divested of something that does not match tightly with our focus round pure gasoline.
And one of many causes we have accomplished that, clearly, is as a result of pure gasoline is a lot of a lower-cost gas, 6x decrease than crude oil merchandise, about half the emissions — greater than half the emissions of refined merchandise that might counter that. And we’re undoubtedly beginning to see that pull by means of by way of industrial masses and continued progress right here within the U.S. And so we’ll discuss concerning the robust fundamentals that proceed to assist our enterprise.
And as we take a look at the our efficiency right here, you are going to see that we actually have stood up and continued to develop by means of a wide range of commodity cycles throughout this era in addition to even by means of issues just like the pandemic. And so if we take a look at — the three durations I’ll cowl right now, to start with, the ’18 by means of ’23. So wanting again, that is the final six years, and actually once we had — after we had mixed and introduced in our grasp restricted partnership, and so the interval wanting ahead there and the sort of progress that we have been capable of generate on a per share, each on an absolute foundation and a per share foundation. We’ll discuss that.
We’ll discuss concerning the very clear line of sight that we have proper now. Lots of people are speaking about speculative progress. We have now contracted and actually all of the drivers of progress for our steering subsequent 12 months and for our 5% to 7% progress price that we proceed to speak about is absolutely contracted by means of this subsequent interval. After which as we glance into longer-term progress, very robust fundamentals supporting our progress in a really giant pipeline that is increasing very quickly proper now by way of even sooner progress than we have seen throughout these first two durations that I am going to stroll you thru.
So to start with, by way of the efficiency, you may see right here on an adjusted EBITDA foundation and eight% CAGR over this era in addition to we proceed to enhance our steadiness sheet throughout this era, clearly, and on an EPS foundation 19% and naturally, that is pushed our dividend progress at 6% CAGR on dividend progress and an 8% CAGR on our obtainable funds from operations per share. So large free money movement progress persevering with to be generated by the enterprise.
And one other factor that I feel generally individuals miss is how extremely predictable this enterprise has been. We at the moment are 34 quarters, so 8.5 years now of us persevering with to generate numbers which might be at or above Wall Road consensus for the quarter. We additionally, throughout this era from ’18 ahead, we have now exceeded our steering, our midpoint of our steering in each a kind of years. And in two of these years, we have exceeded the highest vary of our steering.
So not solely have we seen this sort of progress, we have been predicting this sort of progress and it has been very predictable. And that is for steering durations that had been effectively prematurely of the interval. So for example, in 2020, our steering was even forward of the pandemic, and but we had been nonetheless capable of are available above the midpoint of our steering even in a interval like that. So large progress throughout the interval. And that’s with out issuing fairness and that’s with bettering our steadiness sheet on the similar time. So, very constructive progress on the one hand and on the similar time, bettering our monetary power.
If we take a look at the identical three durations bracketed by way of the transmission enlargement it is a fairly attention-grabbing image right here. You possibly can see right here ’18 by means of ’23, 5 Bcf a day on this interval of now the absolutely contracted enterprise, 4.2 Bcf a day of recent contracted enterprise over this era. After which as we get out past what’s already contracted, we have now 11.5 Bcf a day of 30 initiatives. And so in case you do the maths on that shortly on a yearly foundation, it is about 0.8 Bcf a day for the primary interval there over — slightly over 0.8 — slightly over 1 Bcf a day on this near-term interval right here.
After which in case you take a look at the again over 2 Bcf a day of stuff that is within the pipeline proper now. And that final half is fairly spectacular as a result of usually, we would not have the road of sight but to that sort of progress. And in case you roll this clock again you’d see that we have really continued to do some higher than what our pipeline has stated by way of this forecast. And so — as a result of we actually solely embrace issues that we have a reasonably clear line of sight in that forecast. So a really robust interval now as we’re wanting ahead and we’ll discuss concerning the drivers of that.
That is that near-term interval I used to be speaking about. And that is — these are the initiatives you can see there which might be driving that. So very recognized progress throughout the enterprise. I feel a very vital factor to notice as you take a look at the 2025 uplift, there are some large initiatives approaching. And most of this capital is already spent all of these deepwater initiatives all the initiatives that we’re liable for to carry that manufacturing on-line, which will likely be a doubling of our deepwater Gulf of Mexico EBITDA. All of that capital has now already been spent and we have derisked the offshore work for our initiatives on that. So a really clear path to the robust ’25 progress.
After which you may see the opposite contracts which might be in execution and absolutely contracted. So nothing on this web page is speculative by way of us pondering the expansion goes to come back. This enterprise is absolutely contracted, driving this progress by means of 2027. And the one venture down there by itself on the backside of the transition, the Southeast Provide Enhancement venture is without doubt one of the actually robust drivers of progress even on the finish of this era.
And so slightly extra about this. We’re going to be submitting right here within the very close to future, the place we’re offering the submitting for what we name our SESE venture. That is the one largest ever earnings addition from a transmission venture, together with once we constructed Kern River. So — and this will likely be about — you do the maths on this, slightly beneath $1.5 billion, in a sub-four a number of on this. And so — and I am going to let you know that, that is not a singular state of affairs for us proper now. That’s the sort of pricing that we’re having the ability to drive in these markets and a few extraordinarily robust returns that we’re having the ability to generate.
And these are initiatives, I am going to remind you, these initiatives are contracted for 20 years. So this is not us speculating what the income goes to be on these initiatives. These are absolutely contracted, all of that capability is contracts. And one of many issues that I discovered actually attention-grabbing is the number of clients which were driving this enterprise for us. And so for example, one of many initiatives in Southern Virginia that got here on late within the venture really got here with the Governor’s request. There is a large 3,500 acre industrial improvement park within the southern a part of Virginia that wanted gasoline provides within the space to have the ability to proceed to draw manufacturing enterprise there.
And so in fact, we’d like all of the political assist we are able to get as of late, constructing pipeline initiatives and we had been very blissful to oblige that. However I feel it is vital, despite the fact that that is solely — that is a few 5 million cubic ft a day venture on the one hand, so not very a lot by way of — however in case you add up all of those initiatives to get to that 1.45 Bcf a day, fairly spectacular number of initiatives like this and the credit score that is standing behind this. So the bulk, the overwhelming majority of the contracts on this are A-rated contracts.
So go discover me one other piece of enterprise in every other business that’s bringing ahead initiatives with these sort of returns with out hypothesis, however with out — with full contracted enterprise like in this sort of progress, it is really very onerous to seek out these sort of returns on large capital with the sort of credit score assist that we have now behind these initiatives.
So actually enthusiastic about this venture, however SESE is a good instance of the sort of initiatives that we have coming ahead proper now. And I can let you know that the pipeline is filled with some very high-return initiatives like that. And so, in case you take a look at — wanting ahead to our fundamentals transferring ahead proper now and the issues which might be supporting that. To start with, S&P is forecasting that we will have 10x sooner electrical energy progress this decade versus the prior decade.
I am going to present you some math right here in a minute about why that is so vital to the gasoline enterprise and significantly to the pipeline transportation enterprise as a result of what you see is lots of annual common numbers for gasoline demand. What you do not see is what the peaking demand at these technology amenities are backing up renewables. And that is what we have now to promote is that full capability. And so a reasonably vital image for us.
And we definitely are seeing lots of renewable assist, however we will see what that is really been has meant to our enterprise. Really, the increasingly more renewable assist, the increasingly more capability we’re promoting as a result of individuals know they will should again up these intermittent assets.
On the LNG entrance, very simple to foretell right here with a 2x progress towards the present LNG. This isn’t too onerous to forecast as a result of the allowing is so troublesome, and it takes so lengthy to get these initiatives on. However once more, a really constructive image wanting ahead on this. And we have really been — as a result of we consider a lot within the progress of this enterprise we have been actually going after the storage enterprise. You noticed earlier in that web page, we’re as much as 405 Bcf a day of storage now. Most of our storage is in these areas the place LNG exports are going to be as a result of we predict storage goes to be completely crucial to each backing up renewables in addition to being there because the utilization as we begin to construct out the fleet of LNG exports right here within the U.S., we consider the utilization shouldn’t be going to be sitting at 100%. Will probably be coming off of that. And when you have got that, you are going to put lots of calls for on each quick injection storage and storage that is being near the place it could serve these amenities.
We are also very lucky on our property to have about 1/3 of the working coal vegetation are inside our footprint right now, and that equates to about 9.8 Bcf a day of progress. So actually throughout the board each by way of industrialization coming dwelling right here to the U.S. I imply we’re seeing issues like, for example, within the Trona mines in Wyoming proper now the masses there proper now that we have now, that we’re engaged on initiatives and this could be in that — most of that might be in that 30 initiatives for 11 Bcf, 200 million a day of recent initiatives proper now which might be being developed to serve the Trona mines, the place they’re coming off of coal they usually’re increasing as a result of manufacturing is being pushed dwelling right here and lots of that’s approaching to the gasoline transportation enterprise that Williams is so fortunate to serve.
In the event you take a look at the image now on renewables, that is an attention-grabbing slide that reveals what we have seen each by way of renewables. So over the past three years, the precise technology for photo voltaic and wind. And so we’re going to should have gasoline again up. The sooner the facility demand grows, the increasingly more we will see this peak. However in case you broke this down into area, as a result of once more, that is throughout the entire nation. In the event you broke this down into area and also you take a look at the peaking calls for per area, this will get much more exaggerated. If you concentrate on the shortage of transmission capability that we have now to attach this demand markets right now within the U.S. This quantity of peaking that goes on the pure gasoline aspect is much more extraordinary than this. And that’s what is driving lots of the pipeline for us proper now by way of gross sales of transmission capability.
That is one other means of taking a look at that very same situation. However that is extra of a ahead wanting image now. And you’ll see right here the pure gasoline technology, and that is from an S&P World forecast. And take a look at the hole that’s rising proper there.
In the event you assume that utilization for renewables is, continues to be what it’s right now, take a look at the hole that’s rising and never on an annual common foundation for pure gasoline, however on a peaking stage for pure gasoline. The larger that grey bar will get, the extra peaking there’s bought to be. And meaning extra pipeline capability gross sales, as a result of it actually does not do any good to place in a technology facility that has a capability and never have the pipeline capability purchased with it. And that’s precisely what we’re seeing right now.
In order effectively, I might let you know by way of different energy masses, clearly, everyone likes to speak about information facilities and AI. I can let you know we have now our fingers very full proper now making an attempt to maintain up with the variety of alternatives which might be coming at us proper now. We have now three main initiatives that we’re creating proper now in Virginia, Texas and Wyoming. However we additionally produce other builders that we’re working with which might be in some instances, like in Utah, are already permitted for a 300 megawatt facility that might be driving demand on our mountain west system.
And one other factor we’re very lucky about Williams is again once we owned a telecommunications firm, we laid a few of the largest fiber optic bundles alongside our pipeline and along side our proper of means, as a result of we had been in that enterprise. And so, although we do not personal that enterprise right now, our amenities and our pipelines to be co-located with a few of the greater fiber optic networks right here within the U.S. So we actually are in a primary place proper now.
One of many initiatives that I am really most enthusiastic about is what the state of Wyoming has to supply. The place we have now considerable gasoline assets, we have now carbon seize obtainable proper there in locations like Wamsutter. And we even have very important wind assets that so far, actually have not been tapped all that effectively as a result of there’s not sufficient native demand and there is not sufficient transmission capability out of the world.
And so while you begin speaking concerning the very giant amenities that persons are speaking about 2 gigawatts, precisely the sort of assets that you simply want in an space like that to have the ability to initially get issues began up, however over time, cut back the emissions of these amenities with each carbon seize expertise in addition to wind assets that can cut back the burn. It does not cut back the necessity for the amenities being put in by way of technology, but it surely definitely reduces the quantity of long-term emissions related to these amenities.
So we’re actually enthusiastic about how we’re positioned round this, the land positions we have now, the co-location with fiber, the gasoline assets and in addition to the carbon seize that we have now in a few of these areas. So so much happening. Our groups have been working this actually onerous and we hold sort of being increasingly more impressed with the chance. However I do need to say this. These are going to be large alternatives. They are not tomorrow. These aren’t going to indicate up subsequent 12 months.
Most of it isn’t going to indicate up the 12 months after that, apart from what we’re persevering with to supply for firms like Duke and Dominion and Southern, the place they’ve cloud primarily based information facilities that proceed to develop. These aren’t giant language mannequin AI facilities. They’re simply the identical fundamental information middle progress that we have been seeing from cloud primarily based software program techniques. And we’re seeing an amazing quantity of progress successfully on the utility stage. So it is not us capturing that market immediately, however frankly, we’re very happy to have the utilities seize that load and for us to serve the utilities. And in order that’s lots of what’s driving a few of the progress that we’re seeing from our utility clients proper now.
So ultimately, I might simply let you know, in case you just like the pure gasoline story and also you just like the story of long-term efficiency, that is been confirmed by means of quite a lot of commodity cycles and the sort of progress that we have now the 5% to 7%, we laid out a 5% to 7% progress price again in 2018, and we really exceeded that at an 8% CAGR that we have produced by means of 2023 now. And we predict that we’re going to be on the excessive finish of that 5% to 7% vary transferring ahead. And sure, we perceive the regulation of huge numbers and the truth that that will get more durable and more durable to attain, however the reality is our enterprise is getting stronger and the pricing energy that we have now into these markets is getting stronger, as you may see from initiatives like SESE that we actually did not get pleasure from again once we first began on this technique.
So very enthusiastic about the best way Williams is positioned right now, enthusiastic about our worker base and their skill to proceed to execute on these initiatives and the joy that they’ve about doing issues proper, about operating our enterprise in a low emissions means and being a frontrunner in that house and in addition to that attracting increasingly more expertise to our group, as a result of individuals be ok with what they’re engaging in, and we’re persevering with to win financially and with our clients as effectively. Actually enthusiastic about what we produced right now, excited concerning the subsequent three years which might be proper in entrance of us proper now. And even past that, the basics are even stronger as we get past that.
So thanks to your consideration right now. I will be blissful to take a couple of questions.
Query-and-Reply Session
Q – Unidentified Analyst
Alan, how do you suppose the result of the upcoming election could impression Williams?
Alan Armstrong
Sure. Thanks. Properly, to start with, I would prefer to remind those who the 2 large initiatives that we have had stopped over time was throughout the Trump administration. So this isn’t one thing that the federal authorities essentially allowing points shouldn’t be one thing that the federal authorities essentially solves in brief order.
And I might simply let you know, I feel whereas we definitely hope that both administration takes severely the objective to enhance our allowing reform and that is actually what we predict will occur. I personally and paying extra consideration to the legislative elections in that regard as a result of if we’re really going to get deeper reform, we’re really going to place our nation able the place we are able to sustain with all this vitality demand that is coming at us proper now, we’re going to should have some fairly severe allowing reform.
And so from a Williams standpoint, I might let you know, it feels fairly good both means, frankly. I do not suppose we have now a lot in the best way of choices at this level by way of maintaining with the facility demand. Pure gasoline goes to should get that decision. So I am not too involved. However for the sake of our nation, I want to guarantee that we have now a legislature in each the Home and the Senate which might be severe about getting allowing reform. Very inspired to see the Supreme Court docket taking over the NEPA assessment course of, which I feel is basically vital. And positively, long-term, I feel the Chevron deference will likely be constructive by way of straightening out a few of the allowing lows that we have had.
So once more, I feel from a company perspective, I really feel fairly good in both course. However from a nationwide perspective, we undoubtedly must get our allowing reform consequence. Thanks.
Unidentified Analyst
May you discuss — you’ve got bought a reasonably large venture backlog. I am simply type of curious as to the way you see issues from a price perspective, whether or not there’s any gadgets on the market which might be beginning to get extra pricey labor key gadgets or if issues are fairly comparable as they’ve been — I am simply type of curious as to how the market is altering, if in any respect?
Alan Armstrong
Sure, nice query. I might say I feel the largest problem that we will have goes to be on the electrical aspect. So transformers to the diploma that we’re having to place in electrical drive items. I feel the provision chain on transformers goes to be troublesome in a few of these amenities. And admittedly, we’re already operating into that state of affairs if we’re pressured to should put electrical drives in, which, by the best way, is a very dangerous thought to place in electrical drives to ship gasoline to an influence producing station to carry the facility again to you as a result of in case you lose that do loop, that is not good for anyone.
And so we have been combating onerous concerning the significance of reliability of operating our amenities on pure gasoline relatively than bringing in electrical energy. However once we are having to usher in electrical energy, that is most likely the one space that we see — we’ve not seen a labor scarcity on pipeline laying. Our contractors proceed to maintain up with us very effectively. And we have not seen an issue on gasoline fired tools as a problem, however the electrical aspect, I would say, is the place we’re involved about at this level. Thanks for the query.
Unidentified Analyst
Alan, do you suppose battery expertise would possibly diminish the necessity for pure gasoline by way of fixing the intermittency drawback?
Alan Armstrong
Sure. I feel batteries will assist increase using renewables. And so for example, serving to transfer that peak manufacturing interval over an extended interval for photo voltaic, I feel, is basically vital. However — and we definitely keep very near that expertise. However to this point, we’ve not seen anyone keen to say, we’ll depend on the solar being there the following day if it wasn’t there right now earlier than.
So it does not actually work for seasonal storage. It does not even work for month-long storage. It is excellent at extending the day for solar energy and for capturing extra wind energy to place it into the market the following day, but it surely’s not likely an excellent resolution for long-term backup. And so — however we definitely hold our eye on that and I might suppose that over time, that expertise will enhance. To this point, we’re not seeing utilities keen to guess the farm on something like that. Nice query.
Unidentified Analyst
I am simply questioning about your ideas on steadiness sheet deployment and M&A specifically.
Alan Armstrong
Sure. Good query. I might say we definitely have been having fun with an atmosphere that we have been capable of proceed to do lots of bolt-on transactions. And people have been actually highly effective for us. In all probability the areas we focus essentially the most have been each storage and transmission. Even the Mountain West transaction has lots of storage related to it and lots of that’s expandable to market-based charges. And so lots of our acquisition has been across the technique of increasingly more gasoline storage.
So I might say that is an space we proceed to give attention to. To this point, we’ve not seen something that is engaging to us as bolt-on transactions the place we have now lots of synergies that we are able to apply on to these investments and that is the best way we take a look at it. We take a look at transactions they usually should compete with our capital, whether or not it is a bolt-on or a venture.
And so an enormous problem for us has been as a result of our property are absolutely contracted and we have now the flexibility to take a position fairly a bit in modernizing our price base like we did. And by the best way, I failed to say throughout the presentation that we did file on Friday for our Transco price base and that value of service, so the annual value of service submitting we elevated by about $400 million per 12 months, and that is on the idea of lots of the emission discount initiatives that we have been investing in.
So — however my level is, so long as we have now that pretty low danger, low return funding functionality in our price base. Something has to compete with that. And that is a reasonably powerful funding to compete with on a danger business return foundation, however that basically is what sort of retains us fairly sober within the M&A market, frankly.
Some other questions? Okay. Properly, thanks all very a lot. Admire you all being right here right now and have a great convention.
