Q2 2024 Earnings Summary
- The company expects to exceed its 5-7% growth target over the next five years due to strong returns on projects and a robust pipeline of opportunities extending into 2027 and beyond.
- Significant growth opportunities in the Deepwater Gulf of Mexico are anticipated to drive high incremental cash flows, with major projects like Shell's Whale and Chevron's Ballymore coming online with minimal capital investment required.
- Recent acquisitions in the DJ Basin are outperforming expectations, providing integration benefits in processing and gathering, and are expected to continue growing for a long time.
- Low natural gas prices are challenging the dry gas sector, leading producers to make month-by-month decisions on gas volumes and consider temporary shut-ins. This situation has resulted in over 1 Bcf of delayed TILs (turned-in-line wells), potentially impacting WMB's gathering volumes.
- 2025 is expected to be price sensitive, indicating potential volatility in production volumes and WMB's revenues due to commodity price fluctuations, as producers may adjust output based on price signals.
- Producers have drilled and completed wells that are ready but not producing, waiting for better prices. This dependence on producer decisions adds uncertainty to WMB's operations.
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Growth Targets
Q: Can growth exceed 5-7% target?
A: CEO Alan Armstrong believes there's a high probability they can exceed their 5–7% growth target over the next five years due to strong project returns and increasing demand from data centers and power generation. They have projects coming online in 2025–2027 and see accelerating growth into 2027 and 2028. -
Production Outlook
Q: How is production trending across assets?
A: WMB is comfortable with current forecasts for production profiles. While dry gas is challenged by low pricing, rich gas basins are outperforming. They have over 1 Bcf of delayed TILs and over 1 Bcf of DUCs ready to bring online when price signals improve. -
M&A Strategy
Q: Updates on M&A and JV consolidations?
A: WMB recently acquired the remaining interest in the Discovery joint venture from Phillips 66, viewing it as a core asset with significant growth ahead. They sold their interest in Aux Sable to Pembina, optimizing their portfolio by focusing on strategic assets with stable, contracted cash flows. -
Storage Opportunities
Q: Thoughts on storage rates and expansion?
A: WMB has seen storage rates exceeding expectations and believes storage value will continue to increase. They are approaching rates that justify both brownfield and potentially greenfield expansions but require more contract depth before investing in expansion. -
Gulf of Mexico Upside
Q: Potential upside in the Gulf projects?
A: WMB is excited about deepwater projects like Shell's Whale and Chevron's Ballymore, with risks largely retired. They expect high incremental returns as producers develop reserves around existing infrastructure, utilizing latent capacity in their systems. -
LEG Project Status
Q: Progress on LEG after FERC request?
A: WMB has responded to FERC's data request regarding the LEG project and anticipates FERC will dismiss the matter or confirm LEG as a gathering system. They have no concerns and continue construction. -
Regulatory Environment
Q: Impact of court decisions on permitting?
A: WMB's General Counsel, Lane Wilson, believes the recent DC Circuit decision on REA and potential reversal of Chevron deference will not significantly change their approach to permitting. They expect to continue operations without concerns and anticipate defending FERC's certificate successfully.