Midstream giant Williams reported a jump in earnings and, during accompanying investor presentations, touted an expected spike in natural gas demand through this decade and into the next even if new political or regulatory roadblocks emerge.
“Under any scenario, a lot of growth is coming on the demand side,” CEO Alan Armstrong said during an analyst day the company held Wednesday after reporting fourth quarter earnings.
Williams, which specializes in natural gas processing and transportation, expects to capitalize on a coming surge in Gulf Coast LNG demand beginning in 2025.
American liquefied natural gas exports hovered near 14 Bcf/d early this month, close to available capacity. More than 20 Bcf/d of new U.S. LNG capacity is expected online by 2032, with multiple projects already in the works that account for more than half of that. This expansion comes in response to projected global demand as China and other major economies in Asia and elsewhere seek more gas to displace coal and support mounting energy needs.
Natural gas needs have also spiked across Europe since Russia’s invasion of Ukraine. The continent had depended on Russia for more than half of its gas supplies prior to the war. But the conflict hastened efforts already underway to diversify gas sourcing in Europe, with U.S. LNG playing an outsized role.
The Biden administration this year paused approvals of future LNG infrastructure, pending a review. But this does not impact projects underway.
“We are certainly going to see a lot of growth,” Armstrong said. “We are in the very early innings” of an LNG boom that represents “a major shift for our country.”
The CEO emphasized that demand is rising elsewhere in the United States, too. He said electricity needs are growing three times faster this decade than the prior, driven by electric vehicle growth and the emergence of large load data centers. This boosts the need for natural gas to meet peak industrial demand as well as ongoing needs in the residential and commercial sectors.
What’s more, an enduring trend of domestic coal plant retirements will continue for years, Armstrong said, and natural gas-fired power generation is filling the void.
“I am more bullish today than I’ve ever been on natural gas,” Armstrong said.
His comments come at a time when natural gas prices are under heavy pressure amid mild winter heating demand and strong production that touched record levels above 107 Bcf/d this year.
The March natural gas futures contract fell below the $2.00/MMBtu level last week. It dropped further this week, reaching three-year lows. Cash prices are also struggling to find momentum. NGI’s Spot Gas National Avg. has traded below $2.00 in recent sessions, too.
Yet, the coming LNG wave justifies the robust production levels and, in time, should balance the market, Williams executives said. This, in turn, should bolster prices.
Global gas needs for coming decades present “a huge opportunity” and, because of its abundance of fossil fuel resources and expanding LNG complex, “the U.S. is extremely well-positioned” to meet that demand, Armstrong said.
Infrastructure Expansion
The Tulsa, OK-based company, which operates more than 33,000 miles of pipeline across North America, said the principal challenge ahead is ensuring the Lower 48 has enough infrastructure in place to feed gas to the Gulf Coast and other major gas-consuming markets, including the heavily populated East Coast.
Williams, which manages the Transcontinental Pipeline Co. LLC (Transco) system, said it pushed hard for expansion last year and will continue to build out its operations to accommodate gas demand.
A case in point: In 2023, Williams completed the first half of Transco’s Regional Energy Access project. It expands capacity from the shale fields of northeastern Pennsylvania to more delivery points in the Northeast region. When complete, the system would move another 830 MMcf/d. The company said the total project would be online by late 2024. Transco is the largest natural gas pipeline by volume in the United States. Williams also completed several other expansion projects last year, including build-outs of gas gathering systems in the Haynesville and Utica shales.
Additionally, Williams expanded in the Denver-Julesburg (DJ) Basin with the 2023 acquisition of Cureton Front Range LLC, whose assets include gas gathering pipelines and two processing plants to serve DJ producers across 225,000 dedicated acres. This land is north of Williams’ former joint venture system with KKR & Co. Williams in 2023 purchased KKR’s 50% ownership interest in the Rocky Mountain Midstream joint venture to give it full ownership.
This month, Williams filed with FERC for authorization to build its Southeast Supply Enhancement Project that would add another 1.6 Bcf/d of capacity to Transco for natural gas deliveries from Virginia to Georgia. Williams said customer interest was strong enough to already garner 20-year agreements of more than 1.4 Bcf/d. The project is among several underway in the Southeast.
Chief Operating Officer Michael Dunn said more storage capacity is also needed and Williams is looking at ways to drive that growth.
“We’ve been very bullish on storage,” Dunn said at the investor day event. "We are very confident that the need for additional capacity is going to continue.”
Dunn added, “The opportunity to grow our business is vast.”
Williams reported fourth quarter net income of $1.1 billion (94 cents/share), up from $668 million (55 cents) a year earlier. Cash flow from operations totaled $1.9 billion, up from $1.2 billion in 4Q2022.
For all of 2023, it posted net income of $3.3 billion ($2.68), up from $2 billion ($1.67) a year earlier.
Williams reported full-year, company-record gathering volumes of nearly 18 Bcf/d and contracted transmission capacity of 32.3 Bcf/d – up 6% and 32%, respectively, from 2022.
