Q4 2024 Earnings Summary
- Williams expects significant EBITDA growth without capital expenditure, driven by increased demand on their existing gathering systems, positioning the company for powerful growth and enhanced free cash flow generation.
- Williams has substantial opportunities to expand gas storage capacity with attractive returns, particularly in the Gulf Coast and Western regions, capitalizing on increasing demand and higher prices in these markets.
- Williams holds a competitive advantage in the power generation market, specifically in supplying turbines for behind-the-meter data center projects, due to their purchasing power and experience with large compressor systems that use similar equipment, enabling faster project execution compared to competitors.
- Williams Companies has significantly pulled back growth expectations in some dry gas gathering and processing areas compared to their original guidance, which could impact future earnings growth.
- The company's EBITDA growth may be uneven over time due to a lack of major new projects starting up in 2026 and 2027, potentially leading to slower growth in those years.
- There is uncertainty around the fruition of some of the 30 projects in Williams Companies' backlog, as the company acknowledges that they will "win some" and "lose some," which could affect future growth projections.
| Metric | YoY Change | Reason |
|---|---|---|
Consolidated Total Revenue | +277% (from $2.784B in Q4 2023 to $10.503B in Q4 2024) | A dramatic revenue surge driven by factors beyond core segmented performance—while segmented revenue remained nearly flat (–1.5%), the overall consolidated revenue jump suggests that extraordinary items such as significant acquisitions or reclassification of revenue streams greatly boosted the topline compared to the previous period. |
Operating Income | Increased from $1.087B in Q4 2023 to $3.339B in Q4 2024 | Robust margin expansion was achieved, likely due to improved operating efficiencies and favorable one‐time gains relative to the previous period, reflecting a stronger operating performance despite underlying market challenges. |
Net Income & EPS | Net Income more than doubled (from $1.168B to $2.346B); EPS nearly 100% improvement (from $0.94 to $1.82) | Enhanced profitability stemmed from the significant rise in operating income combined with improved margins and potential gains on asset disposals, resulting in roughly doubled net income and EPS compared to Q4 2023, even as cost pressures and tax changes remained factors. |
Segmented Revenue | Nearly flat (–1.5% change: $2.784B in Q4 2023 vs. $2.743B in Q4 2024) | Core business operations remained steady year over year despite the overall revenue spike, indicating that the substantial increase was driven by items outside the regular segmented revenue streams—highlighting a divergence between core operational performance and consolidated results. |
Capital Expenditures & Net Cash | Capital Expenditures at $768M; net cash declined by $2,090M with cash & cash equivalents falling to $60M | Tightening liquidity is evident as lower cash balances were driven by significant reinvestments and heavy spending, which, when coupled with a large decrease in net cash, underscored challenges in funding ongoing operations and future growth relative to the prior period. |
Balance Sheet Leverage | Long-term debt at $24.736B vs. shareholders’ equity at $12.436B | High leverage—with a debt-to-equity ratio approaching 2:1—reflects an increased reliance on borrowings compared to the previous period, which could pose future risks amid rising interest rates and tighter liquidity, even as the company benefits from improved profitability. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Adjusted EBITDA | FY 2025 | $7.4 billion | $7.65 billion | no prior guidance |
AFFO per Share | FY 2025 | $4.25 | $4.50 | no prior guidance |
Dividend | FY 2025 | no prior guidance | $2 per share | no prior guidance |
Leverage | FY 2025 | no prior guidance | 3.55x | no prior guidance |
Growth CapEx | FY 2025 | no prior guidance | $1.8 billion | no prior guidance |
| Metric | Period | Guidance | Actual | Performance |
|---|---|---|---|---|
Adjusted EPS | FY 2024 | Midpoint of $1.88 | EPS (Basic) came in at $1.82 | Missed |
-
CapEx Guidance and BTM Projects
Q: Will you flex CapEx higher in 2025 for BTM projects?
A: The behind-the-meter project is not included in our current capital plan and will be very meaningful, coming faster than typical projects. We have plenty of capacity and will remain disciplined, focusing on attractive returns well above our cost of capital. We'll evaluate opportunities based on risk-adjusted returns. -
Size and Scalability of BTM Opportunity
Q: How large is the BTM project and is it scalable?
A: This project will significantly impact our capital budget and will come pretty fast, much faster than typical transmission projects. Scalability may be limited by power generation equipment constraints, but our strong relationships help us manage this. We see potential to layer projects over time despite supply chain challenges. -
Competitive Advantage in Turbine Supply
Q: How do you stay ahead amid turbine supply constraints?
A: We have an advantage because the same drivers used for our large compressor systems are used for power generation turbines. Our significant purchasing power in this area positions us favorably against competitors. -
Long-Term Growth Target
Q: Any updates on the 5–7% long-term growth target?
A: Potential projects like data centers could push growth above 7%. We're already seeing growth from increased peak-day demand on Transco, not just individual projects. Our strategy accounts for both direct and indirect growth drivers. -
Gathering Volumes Outlook
Q: What's the outlook for gathering volumes in NE and Haynesville?
A: We have about 3 Bcf/day of deferred wells that could come online as prices firm up. Producers are exercising capital discipline; higher sustained prices are needed for increased activity. We're optimistic yet pragmatic in our guidance. -
Cash Taxes and Bonus Depreciation
Q: Update on path to being a full cash taxpayer?
A: In 2025, we expect $300 million in cash taxes. Restoration of 100% bonus depreciation would cut this in half, adding about $0.12 to AFFO per share. We assume a gradual ramp-up in cash tax rate toward the end of the decade. -
Project Backlog Details
Q: Can you detail the 30 projects in your backlog?
A: The 30 Transco projects cover industrial, power, and LNG customers but exclude behind-the-meter solutions. We consistently move projects from backlog into guidance. Each project has a probability weighting, and we remain disciplined in execution. -
Data Center Opportunities Across Footprint
Q: How do data center opportunities vary by location?
A: We're well-positioned in areas like Wyoming and Salt Lake due to our assets and supportive states. Opportunities differ by location, but grid constraints and state politics are key factors. We expect a series of opportunities to build over time. -
Coal-to-Gas Switching Progress
Q: How is coal-to-gas switching progressing?
A: Significant progress in the MountainWest region with conversions at the Jim Bridger and Naughton plants in Wyoming. We're capturing similar opportunities in the Southeast and Mid-Atlantic, including repowering an Alabama Power plant. -
Momentum in the Northwest
Q: Do you see continued growth in the Northwest?
A: Yes, demand for capacity expansions has grown faster than expected in the past 6–9 months. Recent service requests suggest this growth may accelerate further. We're excited about the strong demand outlook. -
E&P Strategy Post JV Buy-In
Q: What's your long-term E&P plan after the JV buy-in?
A: We're focused on driving value to our core business by optimizing upstream development to maximize downstream infrastructure. We'll develop optimal programs considering the full value chain, then decide on long-term ownership or repositioning. -
LNG Offtake and Partnerships
Q: Are you still pursuing LNG offtake opportunities?
A: Yes, we continue to explore these opportunities, ensuring they compete with attractive returns from our core business. We're focused on supplying LNG projects, like delivering gas to Gillis via our Lake Charles gathering system. -
Capitalizing on Pennsylvania Opportunities
Q: Can you leverage higher spark spreads in Pennsylvania?
A: We offer natural gas solutions more competitive than grid power, providing cost-effective, low-emission options. There's demand due to grid expansion challenges, and we see great opportunities along our footprint. -
Gas Storage Expansion Progress
Q: How are your gas storage expansions progressing?
A: We have significant opportunities, including a 10 Bcf expansion (about a 20% increase) in the Gulf Coast. In the West, we're exploring expansions like at Clay Basin. Rising prices make these brownfield expansions economically attractive. -
Returns on BTM Data Center Projects
Q: Do BTM projects offer mid-single-digit returns?
A: Returns depend on location and available capacity. Where we have capacity, we see low-multiple projects complementing BTM projects. In constrained areas, such opportunities are less likely. Overall, returns vary but can be attractive when considering the full enterprise impact. -
Constraints in Turbine Supply for BTM
Q: Is turbine supply a constraint for BTM scalability?
A: Yes, power generation equipment is a likely constraint. However, our large purchases of similar equipment for compressor systems give us an advantage in securing supplies for BTM projects. -
Haynesville Growth Drivers
Q: What drives your Haynesville growth outlook?
A: Meeting future demand, including 10+ Bcf/day of LNG growth by the end of the decade, necessitates significant Haynesville production increase. We anticipate around 10 Bcf/day growth over the next 8 years, also requiring growth from other basins. -
5–7% EBITDA Growth: Linear or Lumpy
Q: Will EBITDA growth be linear or lumpy?
A: While we have projects like [indiscernible], we don't include all projects driving 2027 growth yet. We expect strong growth from our existing assets without significant capital, driven by increasing demand and our strategic position.
Research analysts covering WILLIAMS COMPANIES.