Williams Companies, Inc. (The)

Good day, everyone, and welcome to the Williams Third Quarter 2022 Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Danilo Giovanni, Vice President of Investor Relations. Please go ahead.

Thanks, Gina, and good morning, everyone. Thank you for joining us and for your interest in the Williams Company. Yesterday afternoon, we released our earnings press release and the presentation that a Alan Armstrong, and our Chief Financial Officer, John Porter, who will speak to us this morning. Also joining us on the call today are Michael Dunn, our Chief Operating Officer, Lane Wilson, our General Counsel, and Chad Demeron, our Senior Vice President of Corporate Strategic Development. In our presentation materials, you'll find a disclaimer related to Florida Liquor Statements. This disclaimer is important and integral to our remarks, and you should review it. Also included in the presentation materials are non-GAAP measures that we reconcile to generally accepted accounting principles, and these reconciliation schedules appear at the back of today's presentation materials. So with that, I'll turn it over to Alan Armstrong.

Great. Thanks, Danilo, and thank you all for joining us today. Williams reported another great quarter, and John will walk through the details in a moment. But the punchline is that Williams delivered exceptional results in the third quarter with adjusted EBITDA up 15% compared to the same period last year, driven by strong performance across all of our core businesses and our JV 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. These results really speak to the strength of our assets and our long-term approach to this business. 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. Not only is this strategy delivering in the current environment, but the signals coming from the market show that it is going to continue to deliver substantial growth for the long term as well. We expect strong fundamentals to drive attractive growth opportunities for Williams, including higher demand for US LNG exports and a faster pace of coal to gas conversion, with the lion's share of these projects residing along the Transco corridor. Natural gas demand across various sectors continues to increase in the face of higher natural gas prices. This speaks to the continued inelastic demand for natural gas, both here and abroad, and the fact that domestic natural gas remains a bargain versus alternative fuels. We continue to see strong growth 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, and other Transco projects that are currently in execution. And speaking of execution, Our attractive high return growth backlog in the Gulf of Mexico remains intact. With the six previously announced deepwater projects set to increase EBITDA by over $300 million beginning in 25. And we recently began pipeline operations on the well projects here just recently. Our business continues to fire on all cylinders, driving our financial strength and stability. And despite the current inflationary environment, we will actually see a lift in margins as many of our contracts allow for adjustments that exceed the impact of expenses. For instance, in our GMP business, our contracts are built with inflation escalators that bolster our margins in the current environment. And within our transmission business, we are able to recover costs via rate cases, which minimizes the impacts of inflation over time. I'll note that Northwest Pipeline recently reached a settlement on its rate case, and we remain on track to file a Transco rate case in 24. The benefits of our long-term approach to business also extend to the current interest rate environment, and in fact, all of our debt is fixed rate. John is going to provide some more detail on this in his section, but we are extremely well positioned in this current environment. Also worth noting, Our business is well positioned for a recessionary environment. Recall that in 2020, Williams faced a host of challenges, including rapidly declining commodity prices, major producer customer bankruptcies, and impactful hurricanes in our Gulf of Mexico business. In the face of these challenges, the company still exceeded the of the guidance we set well before COVID raised its ugly head. Our business today remains positioned to thrive even in the face of potential recession. In fact, we announced that we expect to be near the high end of our previously raised guidance, putting us on track to achieve four-year earnings per share CAGR of 22% and an EBITDA CAGR of 8%. This again underscores just how well our natural gas strategy is translating into solid financial results for our shareholders. And while we will not be providing our 23 guidance until the next quarterly call, There are some drivers that you should think about for 23. So let me go through those here. First of all, in the Northeast GMP business, we expect higher volume growth and higher cash flows from expansion projects that are currently underway, and many of those are nearing completion. And we do provide some details of those in the appendix. In the West GMP segment, We expect continued contributions from the large number of Haynesville expansion projects that are nearing completion, and as well the trace midstream acquisition. But equally important are the expected contributions from our upstream JVs, which should provide incremental volume growth in both the Haynesville and in the Wamsutter area, proving that our strategy to fill up latent midstream capacity is working. We expect modest growth in other basins as well. For instance, in the Eagleford, which has been under the radar recently, we also see a very bright spot here next year as we expect increased activity in the rich gas part of the basin to drive volumes well above the minimum volume commitment level for this segment of the business, which will be a welcome rebound and extend our earnings above that MVC level. The Eagle Board should represent upside longer term as well as new capital will likely be deployed to further develop both the acreage that is already dedicated and some undedicated acreage that we are well positioned to serve. In the transmission and Gulf of Mexico business, the growth drivers here include the incremental earnings from our recent production that has been connected along our existing deepwater assets. So this is new production that's been recently connected and will start to show up here in the fourth quarter. It does not include those projects that will start coming on towards the end of 2024. The Nortex acquisition is also will be included in our transmission in Gulf of Mexico business and the continued expansion of our fee-based services on our interstate gas pipeline systems that continue to grow. Within our upstream JVs, volume growth will remain the story. In the Haynesville, we've stated that we expect an ownership reversion in the first half of 23, where Williams will own 25% of the PUDs, but we will retain a 75% interest in the PDPs. I want to be clear about this. Our interest in the existing flowing production does not get reduced. only our interest in the undeveloped acreage will be reduced. We designed this structure to minimize significant volatility in earnings, and to this end, we expect the Haynesville to remain a source of growth. In the Wamsutter, where we have a much larger acreage footprint, our JV is just now beginning to complete wells from the 2022 drilling program, and these will begin to contribute this volume growth next year. And this, we believe, is going to prove up the benefits of the contiguous acreage in this basin. And we're excited about the Crowhart operations out there and what we're seeing from those recent drilling and completion operations. Our primary goal of getting the volumes and cash flows up on these latent midstream assets will be more than met. But the icing on the cake has been the higher than expected pricing for these producing reserves. Over the longer term, we see a steady increase in net cash flows as the drilling capital obligations revert more and more to the JV operator and the benefit of the growing volumes build our midstream cash flows. Ultimately, we expect to find a long-term owner for these upstream properties that we can rely on to further grow production, which will translate into even higher midstream free cash flows for Williams. Looking beyond 2023, we believe that our projects are supportive of a 5% to 7% long-term EBITDA CAGR. The annual growth rate may fluctuate a bit given the timing of new large projects like regional energy access and our big deepwater projects coming on at the end of 24 and into 25. But the bottom line is that we see a clear trajectory to continued earnings growth based on the opportunity set of our footprint today. Finally, as we think about value chain integration, we are further advancing our integrated clean energy value chain strategy. Our acquisition of the Nortec storage facility and last week's approval from the FERC for Transco's Washington Storage Facility in Louisiana enables us 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. We are also making strides in advancing our wellhead to end user strategy with our agreement with Penn Energy Resources to support the marketing and delivery of certified low emissions gas that we refer to as next-gen natural gas. This 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. This is another exciting step to grow the delivery of next-gen gas to markets across the U.S. as well as overseas. So with that, I'll pause and turn it over to John to walk through the quarter and our year-to-date results, and then we'll open it up for your questions. John?