Executive Summary / Key Takeaways

• Williams Companies is strategically positioned to capitalize on accelerating natural gas demand driven by LNG exports, power generation (including data centers), and industrial reshoring, leveraging its extensive, high-return infrastructure footprint.
• The company delivered strong Q1 2025 results, with Adjusted EBITDA up 3% year-over-year (5% excluding marketing), setting records in the Transmission & Gulf of America segment, and is raising its full-year 2025 Adjusted EBITDA guidance midpoint to $7.7 billion (9% growth over 2024).
• A robust backlog of fully contracted, high-return expansion projects across its transmission and gathering systems, including significant Transco and Deepwater Gulf of Mexico projects, underpins confidence in achieving and potentially exceeding its long-term 5-7% EBITDA growth target.
• Strategic bolt-on acquisitions and investments, such as Gulf Coast Storage, Discovery consolidation, Rimrock, Crowheart, and Cogentrix, enhance market position, create synergies, and provide insights into emerging demand sectors like power generation for data centers.
• While facing regulatory and permitting risks, particularly for new infrastructure, Williams' focus on brownfield expansions, strong customer relationships, and efforts in emissions reduction and tax policy advocacy aim to mitigate these challenges and support continued growth and shareholder returns, including a well-covered and growing dividend.

Setting the Scene: Powering America's Energy Future

The Williams Companies, Inc. (NYSE: WMB) stands as a cornerstone of the North American energy infrastructure landscape, primarily focused on the vital role of natural gas in fueling the economy. With operations spanning the United States, Williams' core strategy revolves around maximizing the utilization of its expansive pipeline network and midstream assets to connect abundant natural gas supplies with growing demand centers. This strategy is built upon a history of developing and operating large-scale infrastructure, evolving over time to prioritize resilient, fee-based businesses and strategically located assets in prolific supply basins and key markets.

In the competitive energy infrastructure sector, Williams faces established giants like Kinder Morgan (KMI), Enbridge (ENB), TC Energy (TRP), and ONEOK (OKE). While KMI boasts a larger overall pipeline network, and ENB offers broader diversification into renewables, Williams differentiates itself through a focused, highly natural gas-centric portfolio and strategic positioning in key growth regions like the Gulf Coast, Appalachia, and the Rockies. This focus allows Williams to leverage its expertise for efficiency gains in specific areas, such as potentially lower operating costs in the Gulf of Mexico or enhanced processing efficiency in the Rockies compared to some competitors. The company's strategic acquisitions, like the consolidation of Discovery in the Gulf and the purchase of Gulf Coast Storage assets, underscore its commitment to strengthening its position in high-demand areas and critical storage hubs.

Williams' competitive moat is further reinforced by its strategic asset locations and financial stability. Its presence in major supply basins provides advantages in transportation costs, contributing to superior margins compared to some peers. While some competitors like OKE may exhibit lower debt levels, Williams' strong cash flow generation supports its investment strategy and provides financial flexibility. However, the company is not immune to vulnerabilities, particularly its dependence on regulatory approvals for new projects, a challenge shared with peers like KMI and TRP, but potentially more impactful given WMB's organic growth focus.

The energy landscape is undergoing significant shifts, presenting both opportunities and challenges for infrastructure providers. Accelerating demand drivers, including the build-out of LNG export capacity along the Gulf Coast, the ongoing transition from coal to natural gas in power generation, the reshoring of energy-intensive industries to the U.S., and the explosive growth in power demand from data centers, are creating unprecedented needs for natural gas transportation and related services. These trends are driving demand for reliable, low-cost energy and the infrastructure to deliver it, directly aligning with Williams' core capabilities.

Financial Performance Reflecting Strategic Strength

Williams' financial performance demonstrates the resilience and growth potential inherent in its natural gas-focused strategy, even amidst challenging market conditions like low natural gas prices in recent periods. For the three months ended March 31, 2025, the company reported total revenues of $3,048 million, an increase from $2,771 million in the same period of 2024. This growth was primarily driven by higher service revenues, notably from expansion projects and acquired assets in the Transmission Gulf of America segment, and increased product sales and commodity consideration, particularly from marketing activities and upstream operations benefiting from acquisitions like Discovery and Crowheart.

Adjusted EBITDA, a key metric for evaluating segment performance, saw a 3% year-over-year increase in Q1 2025, reaching $1,989 million, and a 5% increase when excluding the marketing business. The Transmission Gulf of America segment achieved record Adjusted EBITDA of $858 million, up from $829 million in Q1 2024, fueled by record contract gas transmission capacity and strong fee-based revenues from gathering, processing, and storage. The West segment also saw a notable improvement in Adjusted EBITDA, rising to $354 million from $327 million, benefiting from strong margins, higher Overland Pass Pipeline volumes, and contributions from the Rimrock acquisition. While the Northeast GP segment's Adjusted EBITDA saw a more modest increase to $514 million from $504 million, it demonstrated resilience despite the impact of the Aux Sable divestiture. The Gas NGL Marketing Services segment's Adjusted EBITDA increased significantly to $152 million from $101 million, primarily due to favorable changes in unrealized commodity derivative gains, although commodity margins were lower.

Operating and maintenance expenses increased, largely due to incorporating operating costs from recent acquisitions and higher electricity and fuel costs, which were substantially offset by corresponding revenue increases. Depreciation, depletion, and amortization expenses also rose, reflecting assets placed in service, including those acquired. Interest expense remained relatively stable, impacted by recent debt issuances and retirements, and the absence of imputed interest on prior acquisition obligations.

Williams maintains a focus on strong liquidity and a healthy balance sheet. As of March 31, 2025, the company had $100 million in cash and cash equivalents and $3.428 billion available under its credit facility, providing total available liquidity of $3.528 billion. While the company had a working capital deficit of $3.73 billion, it expects to manage its businesses with sufficient liquidity based on forecasted cash flow from operations and other sources. Net cash provided by operating activities increased in Q1 2025, driven by favorable changes in working capital and margin requirements. The company's credit ratings have seen positive momentum, with Moody's assigning a Positive Outlook and S&P Global Ratings and Fitch Ratings also providing positive outlooks or stable investment-grade ratings, reflecting confidence in the business model and financial strength.

Strategic Execution and the Project Pipeline

Williams' strategy is vividly demonstrated through its active project execution and expanding pipeline of growth opportunities. The company has a proven track record of bringing large-scale projects online, often ahead of schedule and under budget, which directly translates into earnings growth. Recent successes include placing Transco's Regional Energy Access into full service and completing the Southside Reliability Enhancement project, both of which are operating at full contracted capacity and are critical for serving demand in the Northeast and Mid-Atlantic. In the Deepwater Gulf of Mexico, the Whale expansion project and new fields on the Discovery system (Anchor, Winterfell) are ramping up, expected to drive significant cash flow.

Looking ahead, Williams has a robust backlog of contracted gas pipeline projects, totaling 5.3 Bcf per day as of Q3 2024, which are expected to drive growth over the next five years. This includes major Transco expansions like the Southeast Supply Enhancement (SESE), a 1.6 Bcf/d project expected in service in Q4 2027, and the Dalton Lateral expansion in Northern Georgia, expected in service in 2029. These projects leverage existing infrastructure for high returns and are fully contracted, demonstrating the strong demand for capacity on the Transco system. Significant projects are also advancing on the Northwest Pipeline and MountainWest systems in the West, driven by growing demand in the intermountain region.

Beyond traditional pipeline expansions, Williams is actively pursuing opportunities in emerging energy sectors. The Socrates Power Solution Facilities project in Ohio is a prime example, representing a ~$1.6 billion investment to provide 400 MW of committed onsite power generation and associated gas pipeline infrastructure for a data center customer. This project, backed by a 10-year fixed-price PPA, is expected to generate earnings consistent with a 5x EBITDA build multiple, showcasing a new model for direct service to power-hungry customers. Williams is already pursuing two other similar projects, having ordered equipment, indicating confidence in this new venture. The investment in Cogentrix also provides valuable market intelligence in the power sector.

Strategic acquisitions have played a key role in optimizing Williams' portfolio and enhancing its growth trajectory. The Gulf Coast Storage acquisition expanded its footprint in a critical storage market, while the consolidation of Discovery and Crowheart interests allows for better integration and optimization of midstream and upstream assets, capturing value across the full energy value chain. The Rimrock acquisition further strengthens its position in the DJ Basin. These bolt-on transactions are accretive and align with the strategy of focusing on high-return opportunities within or adjacent to the core business.

Outlook and Guidance

Williams' management is optimistic about the company's future prospects, driven by the confluence of accelerating natural gas demand and its strategically positioned assets. The company has raised its full-year 2025 Adjusted EBITDA guidance midpoint by $50 million to $7.7 billion, with a range of $7.55 billion to $7.9 billion. This updated guidance implies a 9% growth over the 2024 Adjusted EBITDA and a 9% compound annual growth rate from 2020. Management expects growth over the prior year to accelerate in each subsequent quarter of 2025.

The increased guidance is supported by a solid start to the year, contributions from recent acquisitions like Cogentrix, and high confidence in the numerous expansion projects scheduled to come online throughout 2025 and beyond. Key drivers include the full-year impact of projects completed in late 2024 and early 2025 (REA, Southside, Whale, TLEP, Southeast Energy Connector), contributions from projects expected in service later in 2025 (Shenandoah, Salamanca, LEG, Haynesville Gathering Expansion, Overthrust Westbound, Commonwealth Energy Connector, Alabama Georgia Connector, Gillis West, Ryckman Creek Loop, Stanfield South), and the anticipated benefits from the Transco rate case settlement.

While the outlook for commodity-exposed businesses like upstream and marketing has been adjusted downwards slightly due to price expectations, the fee-based nature of the core transmission and gathering segments provides stability. Management believes the company is well-positioned to deliver at least 9% growth in 2025 and potentially exceed its long-term 5-7% Adjusted EBITDA growth target over the next five years, citing the strength of the current project pipeline and the favorable macro environment.

Capital expenditures for growth and investments in 2025 are expected to range from $2.58 billion to $2.88 billion, excluding acquisitions. This includes significant investments in the Socrates Power Solution Facilities, projects supporting growth in the Haynesville Shale (LEG), Transco expansions, and Northeast GP projects. The company intends to fund substantially all planned 2025 capital spending with cash available after paying dividends, maintaining financial discipline. The current guidance for Available Funds From Operations (AFFO) assumes approximately $300 million in cash taxes, with potential upside of about $0.12 per share if 100% bonus depreciation is restored.

Risks and Challenges

Despite the positive outlook, Williams faces several risks and challenges inherent in the energy infrastructure sector. Regulatory and permitting hurdles remain significant, potentially causing delays or denials for new projects. The permitting process, particularly under NEPA, is susceptible to litigation from environmental opposition, which can tie up projects and impact timelines. While there is momentum for permitting reform in Washington D.C., legislative changes are needed for a more permanent solution. The DC Circuit Court's decision regarding the REA certificate highlights the ongoing legal risks, although Williams is taking steps to address concerns and ensure continued operation.

Market conditions, including potential global recession, volatility in commodity prices, and unexpected changes in customer drilling and production activities, could impact volumes and margins, particularly in the gathering and processing segments. Inflation, interest rates, and supply chain disruptions could lead to unexpected increases in capital expenditures or project delays. Physical damage to facilities from weather events or other operational hazards also poses a risk.

Williams is involved in various legal proceedings, including royalty matters and construction litigation related to the Atlantic Sunrise project, which could result in financial liabilities. Environmental matters, including remediation activities and compliance with new regulations, present ongoing costs and potential liabilities, although the company expects to recover prudently incurred environmental costs through rates for its regulated businesses.

Contingent features in commodity derivative contracts could require Williams to post collateral in the event of credit rating downgrades, potentially impacting available liquidity. While recent credit rating actions have been positive, a future downgrade remains a risk.

Conclusion

The Williams Companies is strategically positioned to thrive in a dynamic energy landscape characterized by accelerating natural gas demand. Its core business of providing essential natural gas transmission and midstream services, underpinned by a vast network of strategically located assets, offers a resilient, fee-based revenue stream. The company's recent financial performance, marked by record segment results and upward revisions to its 2025 Adjusted EBITDA guidance, underscores the strength of its base business and the positive impact of its strategic initiatives.

Williams' robust backlog of fully contracted, high-return expansion projects, coupled with its ability to identify and execute accretive bolt-on acquisitions, provides a clear runway for continued growth. The company is actively capitalizing on major demand trends, including the burgeoning needs of LNG exports, power generation (especially for data centers), and industrial reshoring, leveraging its unique positioning in key basins and markets. While regulatory hurdles and market volatility present ongoing risks, Williams' focus on operational excellence, financial discipline, and strategic adaptation positions it to navigate these challenges. For investors seeking exposure to the growth potential of natural gas infrastructure, Williams offers a compelling narrative of consistent performance, strategic expansion, and a commitment to delivering shareholder value through a well-covered and growing dividend.