Williams is plowing ahead to bring a large Southeast project online amid the “unprecedented pace” in natural gas demand growth. It is also turning attention to other burgeoning opportunities, including offshore in the Gulf of Mexico (GOM), executives said.
“The good news is that a meaningful increase in natural gas demand continues to exceed our expectations,” CEO Alan Armstrong said during the second quarter earnings call. The supply side is poised to return over 1 Bcf/d of volume to Williams’ gathering systems from completed but delayed wells and those temporarily shut-in, he said.
Armstrong said the optimistic view came regardless of the macro environment, as its businesses, specifically transmission and storage and gathering and processing, “held up very well despite challenging natural gas prices.”
His comments have come at a time when natural gas prices are under heavy pressure from stout supplies and moderate demand.
The September New York Mercantile Exchange futures contract settled back above the psychologically important mark on Tuesday (Aug. 6), up 6.8 cents at $2.010. It rallied another 10.2 cents on Wednesday, before settling higher at $2.127 Thursday. Cash prices, meanwhile, have struggled to sustain momentum. NGI’s Spot Gas National Avg. has been below $2.00 since late June.
To reduce the risk from natural gas price volatility, Williams sold its 14% stake in a joint venture with Calgary-based Aux Sable Liquid Products LP during the quarter for $1.6 million.
Also in the quarter, Williams purchased Phillips 66’s 40% stake in the Discovery pipeline in GOM for $170 million. Williams is now the sole owner of Discovery and its assets.
At the same time, the Tulsa, OK-based midstreamer, which operates more than 33,000 miles of pipeline across North America, is forwarding projects to support the influx of demand growth, much of it for power generation driven by data centers and artificial intelligence.
SES Expansion
“We’ve got a large project that we’ve committed to our customers to do everything we can to get that permitted cleanly and push that ahead,” Armstrong said.
The Southeast Supply Enhancement Project (SES) project would add about 1.6 Bcf/d of capacity to the Transcontinental Gas Pipe Line Co. (Transco) system for deliveries from Virginia to Georgia, where large data centers are being built. During the 1Q2024 earnings call, Williams estimated the power loads from data centers would climb to 30 GW by 2030.
The project is an “extremely critical expansion for our utility customers there in the Mid-Atlantic and the Southeast, and we understand that. And we’re going to make sure that we deliver on that first to our customers,” the CEO said.
Williams has a backlog of projects to support data center load, including in the Rocky Mountain states in Eastern Washington, Idaho and the Salt Lake City region of Utah. Armstrong said SES is the focus for now, and other projects remain on the back burner.
Deepwater Projects
Beyond power demand growth, “a lot of exciting things are going on in the deepwater,” Armstrong said. Much of the producer activity in GOM is centered around Williams’ asset base in the western Gulf. Some commissioning is left on the Shell plc-operated Whale project, which is expected to ramp up in the fourth quarter. Whale is Williams’ largest undertaking. “For the most part, our work there and the risk of our work has been retired,” Armstrong said.
Producers are also active around Williams central GOM assets. Chevron Corp.’s large Anchor development and Beacon Offshore Energy Development LLC’s Winterfell Five well program, part of the Discovery system, were fully connected there.
Beacon’s Shenandoah is the next to come online, according to Armstrong. Williams has planned to spend “a lot of time and effort” in 2025 preparing for Shenandoah because it is a “fairly large prospect coming onto our Discovery system,” Armstrong said.
Hess Corp.’s Pickerel prospect also was brought online in late June, growing Williams’ eastern GOM assets.
Armstrong said producers have been working hard in GOM to find and develop reserves around their asset base and existing infrastructure. Williams built much of its infrastructure with latent capacity because laying a line in that water depth is costly. “In the Deepwater, that is one of the really powerful things for us,” Armstrong said. “As that latent capacity fills up, we’re getting very high incremental cash flows off of that.”
Outside GOM
Williams’ Transco Regional Energy Access Expansion project went fully online in August. It expanded capacity from the shale fields of northeastern Pennsylvania to more delivery points in the Northeast region by 830 MMcf/d. Transco is the largest natural gas pipeline by volume in the United States.
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Several other Transco expansion projects also wrapped up during the quarter. They included the Marcellus South gathering expansion project, serving the southwestern rich-gas zone in the Marcellus Shale, and the fully contracted MountainWest Pipeline LLC’s Uinta Basin Expansion.
Construction activities were also initiated during the quarter on the Louisiana Energy Gateway gathering system project and Transco’s Texas to Louisiana Energy Pathway project (TLEP). TLEP provides Williams’ anchor shipper, EOG Resources Inc., with access to the LNG corridor in higher-priced markets on the Transco pipeline, specifically all the way into the Louisiana market. “So we’re excited about getting started on that fairly significant project for us,” Armstrong said.
Williams also signed an agreement on Transco’s Gillis West expansion. “All we need to do there is primarily just an interconnect, and that will allow us to provide gas supplies coming into the Louisiana market,” Armstrong said. He noted places like Gillis are becoming important pooling points for supplies.
The project is particularly important for CenterPoint Energy Inc. The Houston-based utility relies heavily on the Texas intrastate gas pipeline system. The Gillis West expansion is effectively a backhaul on Transco that would help to reduce that dependence.
CenterPoint has “been plagued with a number of very high price spikes in the Texas intrastate market for various reasons. And this allows them access to gas supplies from Louisiana that are more associated with the Henry Hub from a pricing point,” Armstrong said.
Williams reported net income of $401 million (33 cents/share) for the second quarter, down from $547 million (45 cents) a year earlier. Cash flow from operations totaled $1.2 billion, down from $1.3 billion in 2Q2023.
