The chief executive of Williams, a natural gas processing and transportation specialist, said mounting calls for LNG and robust summer cooling demand are driving exceptional activity levels on the Transcontinental Gas Pipe Line Co. (Transco) system, bolstering the company’s outlook.

Haynesville Prices

The past two months rank among the hottest Junes and Julys on record in the United States, respectively, while fallout from Russia’s invasion of Ukraine boosted already elevated demand for American supplies of liquefied natural gas. These demand drivers have catapulted natural gas futures above $8.00/MMBtu this summer, double year-earlier levels, with more heat on the way in August and no end in sight to the war.

“We continue to see strong fundamentals driving a great pipeline of growth opportunities, particularly increasing demand for U.S. LNG exports and power generation along the Transco corridor,” Williams CEO Alan Armstrong said during the company’s second-quarter earnings call Tuesday.

“Importantly,” he added, “we continue to see strong demand for our services domestically as …evidenced by a three-day peak summer delivery that we achieved on the Transco pipeline in early July this year, as we continue to see weather-driven demand for cooling.”

Armstrong said the midstream giant sees demand enduring and production beginning to ramp up to meet it. Indeed, output has climbed to a 2022 peak around 97 Bcf/d at points this summer, according to Bloomberg estimates. When it has dipped below that level, maintenance events have largely taken the blame, as opposed to producers intentionally pulling back. Armstrong said the lofty prices have enticed producers to boost output.

“Volumes on our systems have finally begun to respond to the higher prices that we’ve seen in the gas space,” Armstrong said.

Consumption, meanwhile, “continues to increase in the face of higher natural gas prices, which speaks to the continued inelastic demand for natural gas, both here and abroad,” he added.

No Recession Worry

Even as central banks in the United States and Europe hike interest rates to combat soaring inflation, creating the specter of recession, the Tulsa-based Williams expects demand for its services to endure given the multiple demand drivers. 

“We don’t expect much to change should a recession come to fruition,” Armstrong said.

Williams is in the midst of investing $1.5 billion to grow its natural gas transportation capacity by nearly 2 Bcf/d over the next few years to meet demand. Among six transmission projects the midstreamer is developing is a 364 MMcf/d expansion on Transco, the country’s largest gas system.

Williams earlier this year also closed on its acquisition of Quantum Energy Partners’ Trace Midstream. The purchase more than doubled its Haynesville Shale footprint to 4 Bcf/d-plus from 1.8 Bcf/d.

Executives were upbeat on activity in the Haynesville. “We’ve seen a rapid ramp in volumes that will continue through the remainder of the year,” CFO John Porter said on the earnings call.

[Want to know how global LNG demand impacts North American fundamentals? To find out, subscribe to LNG Insight.]

The company also recently announced it reached a final investment decision on its Louisiana Energy Gateway project, a 1.8 Bcf/d gathering system, creating additional customer access to “favorable pricing markets” along Transco, Armstrong noted.

Williams reported second-quarter gathering volumes of 17 Bcf/d and transmission volumes of 16.9 Bcf/d – up 13% and 2%, respectively, from 2Q2021.

Spate of Investments

The new growth projects come on top of a spate of expansion efforts in 2021 that Williams said are now paying off. These include a joint venture (JV) with private Haynesville producer GeoSouthern Energy Corp. Williams gathers all South Mansfield production.

This followed an upstream JV with Crowheart Energy in the Wamsutter field of the Greater Green River Basin of Wyoming. That pairing combined the legacy Crowheart, BP plc and Southland Royalty Co. LLC upstream assets into one contiguous footprint with more than 3,500 operating wells and 3,000 potential development locations.

Williams also completed the purchase of Sequent Energy Management LP and Sequent Energy Canada Corp. from Atlanta utility Southern Company.

Sequent was among North America’s largest natural gas marketers by sales volumes, and now Williams secures a top spot. Williams ranked No. 7 on NGI’s first-quarter ranking of top North America natural gas marketers.

Williams reported second-quarter net income of $400 million (33 cents/share), up from $304 million (25 cents) a year earlier.

Cash flow from operations reached $1.1 billion for the second quarter, up 4% from a year earlier.  

The company expects 2022 growth capital expenditures (capex) of between $2.25 billion to $2.35 billion. It projected maintenance capex of between $650 million and $750 million.