Williams Earnings: Diversity of Operations Drives Growth Despite Low Gas Prices

Williams’ WMB second-quarter results met our expectations, as the firm reaffirmed 2023 EBITDA guidance of a midpoint of $6.6 billion, matching our forecast. After updating our model, we will maintain our $32 per share fair value estimate and narrow moat rating. The diversity of the firm’s operations, in our view, really allows it to drive growth in just about any natural gas price environment, including the current weak environment. Quarterly EBITDA increased 8% to $1.6 billion from last year’s levels, primarily due to contributions from the MountainWest and NorTex acquisitions and higher revenues from its Northeast G&P systems (for example, the Ohio Valley Midstream joint venture, the Susquehanna supply hub, and the Blue Racer joint venture). At this stage, the ongoing contributions from new projects and organic volumes should more than offset the expected weaker contributions from gas marketing in the second half of 2023.

The firm’s diverse operations help shield it from gas price weakness and provide it with a large set of growth opportunities. We count at least 12 major supply centers for its gathering and processing operations, with Transco, of course, the major driver on the transmission side. Looking forward, Williams has $7.8 billion of projects in the backlog, stretching across 25 projects (about 10 billion cubic feet per day) with in-service dates through 2031. Transco remains the key growth driver, helped by significant growth expected in U.S. LNG exports. However, several key deep-water projects in the Gulf of Mexico are expected to double William’s deep-water EBITDA (about 5% of the overall firm at this point) by the end 2025.