Williams’ long-term natural gas focus continues to bring in the returns, according to CEO Alan Armstrong, who said strong quarterly results were attributable to the company sticking to its strategy.
Speaking on a 3Q2022 conference call, Armstrong said the midstream giant's adjusted earnings before interest, tax, depreciation and amortization (EBITDA) was up 15% compared to the same period last year, which was driven by strong performance across all of the company's core businesses and joint venture upstream operations.
"Our natural gas strategy has proven that it can capture upside margins and weather commodity price cycles as we work to serve growing demand for clean, secure, and affordable energy," he said. "Williams is the most natural gas centric, large scale midstream company around today and there's a reason we've stuck with our natural gas focused strategy for as long as we have."
Furthermore, Armstrong said the company's current strategy likely has staying power, noting that market signals show that natural gas is going to continue to deliver substantial growth for the long-term. "We expect strong fundamentals to drive attractive growth opportunities for Williams, including higher demand for U.S. LNG exports and a faster pace of coal-to-gas conversion with the lion's share of these projects residing along the Transco corridor."
He added that gas demand across various sectors continues to increase even in the face of higher natural gas prices, adding that this speaks to the continued inelastic demand for natural gas, both domestically and overseas. It also indicates that domestic natural gas "remains a bargain" to most buyers compared to other competing fuels.
"We continue to see strong growth in the quarterly natural gas – in our quarterly natural gas gathering volumes and our contracted transmission capacity and we're seeing progress on important projects like our Regional Energy Access project, the Louisiana Energy Gateway (LEG) and other Transco projects that are currently in execution," Armstrong said.
The chief executive also emphasized the importance of adding infrastructure, especially due to the current global instability. "With the winter heating season now upon us, the need for secure natural gas supplies on a global scale has never been more pronounced, especially as the crisis in Ukraine continues to wreak havoc on energy markets and the global economy, which depends on access to affordable energy," he said.
Armstrong identified the United States, with its abundance of gas, as being well positioned to bring energy security to countries in need while at the same time reducing emissions, but that we have to have "comprehensive energy policies that allow us to build the infrastructure to connect these low cost supplies to growing demand here at home and abroad. If we don’t deal with permitting reform, we will continue to see higher utility bills at home and the unnecessary destruction of our allies' economies."
Looking at the company's gathering and processing (G&P) businesses by region, Armstrong said they expect higher volume growth and higher cash flows from expansion projects that are underway from the Northeast G&P business, while also seeing continued contributions from the large number of Haynesville Shale expansion projects, as well as the Trace Midstream acquisition in the West G&P segment. He added that they expect "modest growth" from the Eagle Ford Shale from increased activity in the rich gas portion of the play.
Williams said its Transmission and Gulf of Mexico business has seen 4% growth year-to-date, driven in part by Transco's Leidy South expansion project and strong 1Q2022 seasonal revenues and also higher Gulf of Mexico results due to less hurricane-related impacts in 2022 versus 2021.
Its Gas and NGL Marketing Services segment saw 12% growth year-to-date on favorable commodity margins as well as the new contributions from the Sequent Energy Management acquisition that closed on July 1, 2021.
Next-Gen Natural Gas
Williams also continues to implement its integrated clean energy value chain strategy, with the recent acquisition of the NorTex storage facility and last week's approval from the Federal Energy Regulatory Commission for Transco's Washington storage facility in Louisiana playing key roles.
Armstrong said these recent developments will help Williams to "offer competitive market-based rates to LNG, power generation, and other customers in the Gulf Coast area. This will be a critical element of our wellhead to water strategy as this combined 110 Bcf of working gas storage and our expansive Transco network are fortified with low emissions Haynesville production from the LEG project."
Williams said it is also making strides in advancing its wellhead to end user strategy with its agreement with PennEnergy Resources to support the marketing and delivery of certified low emissions gas, which Williams refers to as next-gen natural gas.
Armstrong noted that the agreement includes an independent third-party certification process that verifies best practices are being followed to minimize emissions and produce natural gas in the most environmentally responsible manner.
By the Numbers
For 3Q2022, Williams posted net income of $599 million (49 cents/share), compared to $164 million (14 cents/share). The company attributed the jump to higher service revenues from commodity-based rates, higher Haynesville gathering volumes including the Trace Midstream acquisition, and Transco’s Leidy South project being in service, higher results from upstream operations, as well as a favorable change of $344 million in net unrealized gains/losses on commodity derivatives. The gains were partially offset by higher operating and administrative expenses, including higher employee-related costs.
Cash flow from operations reached $1.49 billion for the third quarter, up from $834 million during 3Q2021.
The company said it is also maintaining guidance for 2022 growth capital expenditures between $1.25-1.35 billion, which excludes approximately $1.5 billion in total acquisitions and follow-on expenditures for Trace Midstream and NorTex Midstream assets.
