Good day, and thank you for standing by. Welcome to The Williams Second Quarter Earnings 2024 Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Danilo Juvane, Vice President of Investor Relations, ESG and Investment Analysis. Please go ahead.

Thanks, and good morning, everyone. Thank you for joining us and for your interest in The Williams Companies. Yesterday afternoon, we released our earnings press release and the presentation that our President and CEO, Alan Armstrong; and our Chief Financial Officer, John Porter, will speak to this morning. Also joining us on the call today are Micheal Dunn, our Chief Operating Officer; Lane Wilson, our General Counsel; and Chad Zamarin, our Executive Vice President of Corporate Strategic Development. In our presentation materials, you'll find a disclaimer related to forward-looking statements. This disclaimer is integral to our remarks, and you should review it. Also included in the presentation materials are non-GAAP measures that we reconcile to generally accepted accounting principles. And these reconciliation schedules appear at the back of today's presentation materials. So with that, I'll turn it over to Alan Armstrong.

Great. Well, thanks, Danilo, and thanks for joining us today. The story that John and I get to lay out for you this morning is one of consecutive growth as Williams continues to deliver on a long-term trend of per share growth and resilience regardless of the macro environment. In fact, we delivered record second quarter results, driven by the strong performance of our Transmission and Storage business this quarter, even our Gathering and Processing business held up very well despite challenging natural gas prices. The good news is that a meaningful increase in natural gas demand that continues to exceed our expectations will take advantage of these abundant supplies driving growth for years to come, and the supply side is poised to respond with over 1 Bcf a day of volumes from delayed TILs and temporary shut-ins to return to our gathering systems. And before we get deeper into the financial metrics, I want to hit on a few key themes from the quarter, namely our crisp execution of key projects that are positioning us for continued earnings growth and the ongoing focus we are optimizing our portfolio and ensuring sustainable operations. So starting here on Slide 2. Our teams have executed on an extraordinary amount of strategic priorities, including placing projects into service in the Northeast, West and the Deepwater, Gulf of Mexico. Just to run down the list quickly here. Last week, we placed Transco regional energy access into full service ahead of schedule and under budget once again, ensuring clean and reliable natural gas is available to serve the Northeast region for the upcoming winter heating season. And while the DC Circuit Court did issue a decision last week to vacate the FERC certificate for ARIA, we believe the court's concerns about the FERC process is flawed and will be fairly easy for the FERC to resolve. In the meantime, we are taking the necessary legal and regulatory steps to address the court's concerns and ensure that this much-needed firm transportation capacity continues to be available to serve the needs of our customers without interruptions. I'll remind you that our industry has seen court rulings in the past with projects such as Sabal Trail and the fires expansion. With both of these projects operating today, we see limited risk on a disruption of REA operations and are prepared to help the FERC in reaffirming the merits of this important project. Other notable expansions we've recently completed include the Marcellus gathering expansion that serves Southwestern rich gas zone in the Marcellus and the fully contracted Basin transmission expansion. In the Deepwater, there are two new fields that will increase EBITDA in the third quarter on our Discovery system, which we now fully own. So we're excited about the acquisition of the additional interest in Discovery, and we're really excited about the kind of growth that we're seeing both here in the near term and the long term. So first of all, Chevron's large anchor development and Beacon's Winterfell 5-well program are both fully connected and will drive a large increase in EBITDA for 2025 as well as for the balance of this year. Additionally, brought on their prospect on June 25 that will grow EBITDA on our Eastern Gulf assets. We were also active on advancing construction for several key projects. We initiated construction activities on the Louisiana Energy Gateway gathering, treating and carbon capture project as well as Transco's Texas to Louisiana Energy Pathway project, which we call TLEP. TLEP project provides our anchor shipper EOG resources with access to the LNG corridor in higher-priced markets on the Transco Pipeline and specifically all the way into the Louisiana market. So we're excited about getting started on that fairly significant project for us. And then recently, we also signed a precedent agreement on Transco's Gilles West expansion. This will bring new, reliable and low-cost supplies to CenterPoint Energy Houston area markets from Louisiana, so this is effectively a backhaul on Transco, helping CenterPoint to reduce their dependence on the Texas intrastate gas pipeline systems. Importantly, this quick turn project will add meaningful EBITDA with very little capital required on our part to place it into service. I also want to call out the significant emissions reductions and cost savings accomplished in the quarter as part of our system-wide emissions reduction program. Thus far, we have replaced 57 transmission compressor units and are on track to meet our goal of 112 units to be replaced by the end of this year, so that we can begin recovering on these investments in our listed rates. And on that note, we will file our new rates on Transco at the end of this month and the new rates will go into effect in March of '25. So a tremendous amount of work has been done by teams to replace a lot of these old units with modern low-emission equipment on the system. A lot of times, those kinds of projects get overlooked, but there has been a tremendous amount of effort and great execution going on by the teams on that front as well. Looking at the second column, we continue to take steps to optimize our asset portfolio. We sold our stake in the Aux Sable joint venture and an attractive gain and consolidated our ownership interest in the Gulf of Mexico Discovery system at an attractive value given both the very near and long-term growth on this asset. From a financial perspective, we remain on track to achieve the top half of '24 EBITDA guidance and we also reaffirm our expectations for 2025, which translates into a 5-year EBITDA CAGR of 8%. More importantly, the growth in our per share metrics will be just as strong over this 5-year period with AFFO per share CAGR of 7% and our EPS CAGR of 12% over this 5-year period. Of note, the fundamentals to sustain and even improve on this industry-leading earnings and cash flow growth beyond '25 actually continue to improve. Our Southeast project is just a few projects we expect from the secular end of increased demand for power generation, and we remain in the best position to secure additional infrastructure solutions in and around our Transco pipeline footprint. And finally, we continue to prioritize being a responsible operator in all that we do. And this is clearly outlined in our 2023 sustainability report that we published last week. This report provides a deep dive on how we focus on doing business the right way, and one area I'll call out is our efforts in progressing on our decarbonization goals. We are focused on proving up that the natural gas industry can play an even more important role in providing affordable and reliable energy while also continuing to reduce greenhouse gas emissions here at home and around the world. And so with that, I'll turn it over to John to walk through the second quarter financials.

Thanks, Alan. Let's start with a review of our year-over-year financial performance on Slide 3, focusing first on adjusted EBITDA, which increased by about 3.5% year-over-year despite a 5% drop in natural gas prices compared to the second quarter of 2023, averaging close to -- for the second quarter of 2024. This 3.5% growth in adjusted EBITDA is compared to an 8% increase in the same quarter last year. Despite low natural gas prices, our resilient business has continued to grow, even as customers implemented significant temporary production cuts, such as not completing drilled wells or not bringing on-stream wells prepared for flow as prices rise. As we will observe on the next slide, our adjusted EBITDA growth was primarily fueled by strong performance in our large-scale natural gas transmission and storage sectors, aided by the positive impact of our recent acquisitions. Year-to-date, our adjusted EBITDA has risen by 6%, which aligns with our long-term growth target of 5% to 7%. For the second quarter, our adjusted EPS increased by 2%, and year-to-date EPS rose by approximately 3%. We are experiencing slower EPS growth in 2024 compared to the 19% compound annual growth rate we achieved through 2023. However, as Alan pointed out, we anticipate a compound annual growth rate of over 12% looking ahead to 2025. For the second quarter, available funds from operations (AFFO) grew by 3%, with a year-to-date increase of 4%. This also follows a slower growth rate in 2024 after an 8% compound annual growth rate through 2023. When looking toward 2025, we expect a 5-year compound annual growth rate of 7%. Additionally, our second quarter dividend coverage based on AFFO was robust at 2.16, with a dividend that rose by 6.1% from the previous year, resulting in 2.38 times coverage year-to-date. Our debt to adjusted EBITDA ratio stood at 3.76, meeting our expectations, and we anticipate slightly higher leverage in 2024 before reducing it to a guidance of 3.6 or better in 2025. Before moving to the next slide for a deeper analysis of our adjusted EBITDA growth for the quarter, I will provide an update on our financial guidance. In general, our second quarter update remains consistent with our first quarter earnings presentation. Based on our strong start to 2024, we are guiding towards the upper end of our adjusted EBITDA range of $6.95 billion to $7.1 billion, and believe we are well positioned for upside to reach the high end of this projection. We also reaffirmed our ability to meet our adjusted EBITDA target for 2025, which is between $7.2 billion and $7.6 billion. Given our improved outlook for 2024 adjusted EBITDA and other changes, we expect our key per share metrics, adjusted EPS and AFFO per share, to land at the high end of their ranges for 2024. There are no significant changes from the first quarter update, except that we are increasingly confident we can surpass the $7 billion mark for 2024 adjusted EBITDA, while not relying on any additional support from Sequent. We are also excluding the anticipated $150 million gain from the Aux Sable sale as we do not factor in gains and losses from asset sales in our adjusted EBITDA calculations. Now let's turn to the next slide for a closer look at our first quarter results. Transitioning from last year's $1.611 billion to this year's $1.667 billion, we notice that our transmission and Gulf of Mexico operations improved by $64 million, or just over 8.5%, due to the combined benefits of a full quarter contribution from the Hartree Gulf storage acquisition, which has been performing as expected following a smooth integration effort. We also experienced higher revenues from Transco, including partial in-service from the Regional Energy Access project, although segment growth faced challenges from last year's Bayou ethane divestiture and planned downtime in the Eastern North of Mexico. The Northeast G&P business saw a $36 million unfavorable variance compared to a strong quarter last year that included a one-time $15 million positive gathering revenue adjustment. This year, lower Northeast gathering volumes were influenced by temporary producer reductions, which were consistent with our annual plan, although these reductions were partially mitigated by rate increases across several franchises in the Northeast. Meanwhile, the West region grew by about $7 million, benefiting from the DJ transactions completed in the fourth quarter of 2023. The gains in the DJ Basin were roughly equivalent to the losses from hedge gains in 2023. Segment performance was positively affected by higher results from NGL service, including volumes from the Highland Overland Pass pipeline, as low natural gas prices facilitated greater ethane recoveries. Overall, West gathering volumes were reduced due to temporary producer cuts primarily in the dry gas Haynesville area. We experienced a $2 million lower marketing loss, aligning with our strategy based on the expectation of a loss in natural gas marketing during the second quarter. Our joint venture operations included in other segments saw an increase of about $2 million compared to last year. Therefore, this second quarter once again exceeded our business plan, reinforcing our ability to grow despite a challenging natural gas pricing environment, and boosting our confidence in surpassing $7 billion in adjusted EBITDA for 2024. With that, I'll turn it back over to Alan.

Okay. Well, thanks, John. Just a few closing remarks before turning it over to your questions. I'll end where I started with my remarks, and that is to emphasize what Williams has been able to deliver in the current environment and how well positioned we are for the future as natural gas demand continues to grow. As we think about our long-term strategy, we are confident in the role our valuable natural gas infrastructure will play in meeting both today's energy demand as well as the projected growth from power generation and LNG exports. We are seeing demand grow at an unprecedented pace, and expansions of our uniquely placed infrastructure will demand a premium. Simply put, no other midstream company today is set up better than Williams to capture this demand growth. We are the most natural gas-centric large-scale midstream company around today, and our natural gas-focused strategy continues to deliver growth quarter after quarter. To that point, we've now seen 11 consecutive years of adjusted EBITDA growth and an 8% compound annual growth rate of our adjusted EBITDA since 2018. In addition, we have realized a 19.5% return on our invested capital during the last four years, and our steadfast project execution led to record contracted transmission capacity and will continue to drive per share growth in 2024 and beyond. In fact, our current projects in execution have higher returns than this prior four years. So in closing, we've built a business that is delivering record profitability and strong financial returns in the present, but is positioned for an even faster-growing future. And so with that, we'll open it up to your questions. Thank you.

Our first question comes from Praneeth Satish of Wells Fargo.

Maybe I'll start with data centers here. So you mentioned that you're looking at just the first and maybe a handful of other data center projects. I have two questions here. Can you give us a sense of the size and scope of some of the other projects that you're looking at in the backlog? And how do you think about the returns on future projects for SES? I mean, we're estimating around a 5x EBIT Delta. Do you think that some of the future data center projects that are in the backlog could earn similar types of returns?

Yes. Well, first of all, Praneeth, thank you for the question and important issue. First of all, on actually, our return is even better than that, probably, as we've mentioned, the best return we've ever seen on a large-scale project on Transco and actually any of our transmission expansions over the long history for Williams. So pretty extraordinary return opportunity there. In terms of the data center load, we are right in the throes of that. We have a very long backlog of projects. I will tell you that particularly in the Southeast and Atlantic, those expansion opportunities that we have, we frankly are kind of overwhelmed with the number of requests that we're working on and trying to make sense of those projects. Obviously, we're not going to start or announce another expansion project on top of this because that would force a combination of projects. It doesn't make sense for us to be making any announcements when a large project has been committed to our customers to do everything we can to get that permitted cleanly and push that ahead. So extremely critical expansion for our utility customers in the Mid-Atlantic and the Southeast, and we understand that. We’re going to ensure that we deliver on that first to our customers. But despite the attention in the Southeast and the Mid-Atlantic, we're actually seeing strong demand response, a lot of projects that we're dealing with and trying to find how we can respond to in the Rocky Mountain states, particularly in Eastern Washington, the Quincy area, in Idaho, and the Salt Lake City region. There’s a lot of demand going on everywhere. The big developers are looking to find where they can go because time is of the essence more than we can imagine in our business. They are looking for where the permitting regime is right, where there's access to abundant natural gas supplies, and frankly, where expansions on our systems are available. This has moved from being focused on cloud-based data centers, where latency into fast broadband networks was key, to where they are now focused on the speed to market for power generation and gas resources, which is now front and center along with the local air permitting issues. It's an exciting time for us, with a steep learning curve on how we are going to make the best use of our assets. There's certainly not a dearth of opportunities for us in that regard. In fact, as I said, it's a bit overwhelming, and we need to ensure we make the best use of our assets. We're making sure that we’re only going to pursue high-return projects. We're not going to put a number on it because I hear people putting numbers out there. Frankly, that's a large guess. And in a timeframe that's out there, if you're not speaking to the returns that you're making on the project, I'm not really sure quoting those numbers serves any purpose. I can tell you that if anybody else has more opportunity than we do, I wish them luck because we're going to have a hard time keeping up with the opportunities in front of us right now. So hopefully, that gives you some color, but it's not particularly meaningful to quote volumes on expansions if you're not talking about returns and the timeframe for those opportunities.

Got it. No, that's helpful. That's great. And maybe just switching gears, can you help us understand what the next steps are for REA following the DC Circuit Court's decision? Have you filed for an emergency petition to keep the pipeline in service? Is there gas flowing today? Just trying to understand whether this impacts the early in-service at all?

Yes. Well, first of all, yes, gas is flowing. Kudos to our team for being able to respond so quickly to that. Incredible project execution on that project in a difficult area. I'm going to turn it to Lane Wilson, our General Counsel, to speak to the legal proceedings.

Yes. The next step will be seeking a temporary certificate. This is not new to FERC. They've dealt with this issue before. We fully anticipate they'll be defending the certificate. We'll be seeking rehearing in a timely manner, which is probably about 35 to 37 days out at this point. We don't have any concerns that we'll continue to operate or that we'll get a temporary certificate or defend what FERC has approved on this project.

Our next question comes from the line of Jeremy Tonet of JPMorgan.

Just want to look at the guidance here and what the current thoughts are with regards to producer production expectations over the balance of the year and into 2025. Is the expectation that we've kind of hit the lows and there’s kind of a growth from here? Just how you see production trending across your gathering assets?

Jeremy, it's Micheal. Yes, I think right now, we feel good about where we're at regarding our current forecast for the production profiles coming from our customers. You've got to look at it between the rich basins and the dry gas. Obviously, the dry gas is challenged by pricing now. Producers are making month-to-month decisions on gas volumes that they might shut in. I think you probably saw Cutera's announcement where they were shutting in $300 million for the month of August. It's really a month-by-month decision for all the producers. Right now, we've anticipated this, as you've probably seen through the first half of the year. The team did a good job anticipating where the production shut-ins would occur, along with delayed TILs. I would say right now, we've got over 1 Bcf of delayed TILs in the queue across our customer base, meaning that the producers have drilled the wells, completed them, and are ready to go when the price signals are there. There’s also over 1 Bcf that has been drilled but not completed on our systems. So there are definitely a lot of opportunities to bring on gas as a producer when we see a price signal. Our rich basins are still outperforming. We're seeing good pricing netbacks for the producers there, which buffers the dry gas situation we have right now. Overall, we feel good about our end-of-year forecast, and certainly, 2025 looks promising as well. The announcement regarding the Golden Pass LNG facility suggests they will be in service by the end of 2025, which the market should have anticipated already. Producers will be making decisions as pricing elevates, and they’ll hedge into that to keep their volumes flowing. So we're really comfortable with our forecasting.

Got it. That's very helpful. And I just wanted to pivot towards LEG, if I could. I wanted to see your latest thoughts on moving forward there regarding FERC requesting more information. Would you could update us on how you think about that?

Yes. We've responded to the FERC data request, and we fully anticipate that FERC will either dismiss this matter or find LEG to be a gathering system. We don't really have any concerns there. There's really nothing for us to do right now except to continue down our current trajectory, which is in construction. Again, we feel confident about where we are in this project.

Our next question comes from the line of Spiro Dounis of Citibank.

Alan, I want to go back on your closing comments there and maybe if we could tie power generation demand with how you're thinking about the EBITDA outlook longer term. One of your slides points to ten times the amount of electricity demand growth over the next 10 years versus the last 10 years. You mentioned in your comments that you have been able to grow at about an 8% CAGR historically. So as you think about the go-forward here, do you see that potentially moving higher in this environment, which you probably didn't contemplate when you laid that out?

Yes. Spiro, it's a great question. I do think that there is plenty of potential, even in the face of just the law of big numbers and continuing to put an absolute level of growth against a bigger and bigger number, that has grown faster than we've expected over the last three or four years. I do think that given the strength of the return on our projects and the kinds of opportunities that are coming at us right now, we could potentially expand beyond that growth rate. Particularly as we get into the 2027-2028 time frame, I think that the data center load and power generation load will result in capacity sales on our transmission systems. That will take time to construct because we are completely contracted out on our existing capacity. As we look out, I do think we will see a very strong impact from the demand we’re experiencing right now. We have a lot of current projects in construction, with a clear runway of growth. I don't remember a time when we've looked out and thought we've got this kind of accelerating growth into the next few years. We just completed our long-range plan and strategic planning, which was encouraging with a lot of demand on the horizon. We've been conservative in marking that into our plan, and there's high profitability that could exceed our projections over the next five years.

Great. That's helpful color. Second question, just going to M&A. Could you provide an update on the landscape? Are you seeing the same value proposition you saw over the last two years, or could we expect you to look a bit more inward now and consolidate some of these other JV positions?

Yes. I mean, there's certainly an inventory of opportunity. The discovery joint venture that we bought recently was important for us, particularly where we're seeing growth. As we look at the free cash flow that this business generates, we are looking for places to invest that capital. This certainly represents a target opportunity for us in terms of joint ventures. We have great partners like the Canadian Public Investment Fund that has helped us in the OVM area and expanded that area significantly, and we are excited to have them as partners. There will be a time when they may want to monetize that. It's a good example of how this worked out perfectly and now provides us with an investment opportunity. We’ll be patient and need the right circumstances to make those investments.

Our next question comes from the line of Manav Gupta of UBS.

Quick follow-up on the lines of Spiro. It looks like you bought some assets from PSX, about $170 million you paid for it. So help us understand the strategic rationale for buying at this point and from PSX? And obviously, I think PSX is in the market with some other assets; would you be interested in those also?

Yes. This is Chad Zamarin. I'd say, again, we owned 60% of the Discovery joint venture with Phillips 66, and they've been a great partner for us. However, it's certainly a core part of our business, and a very attractive growth profile ahead. It's core for us; I think you'd probably hear it's not core for PSX. As Alan mentioned, where we have joint venture interests, we understand the operations of those facilities. It's a low-risk investment for us. We see growth coming. In this quarter, if you think about Discovery, we were able to acquire that at what we think is a low multiple on a go-forward basis as you'll see the growth in Discovery ramp up for the rest of this year and even more impressively into 2025 and beyond. On the other hand, Aux Sable is an asset that has a more volatile commodity-exposed cash flow, and Discovery is a contracted asset that’s going to grow. That shouldn’t be seen as indicative of any other assets that PSX may own. It represents us rotating and optimizing our portfolio in a way that creates incremental value, and that’s our strategy when looking at transactions.

Perfect. My quick follow-up is about storage. What's your thought process on current storage rates and expansion opportunities? Could you talk about the set of opportunities as it relates to storage?

Sure. Yes, this is Chad again. We've only owned the Hartery storage assets for just six or seven months, and we've already seen attractive recontracting of storage at rates that have exceeded our expectations. We have been determining whether we're seeing those rates and the tenor of terms approach expansion economics. We've seen the storage market certainly growing in value. That's why we acquired Nordex, the Gulf Coast storage, and we acquired Clay Basin, the largest storage asset in the Rockies as part of the MountainWest acquisition. In all cases, we've seen an increase in value in storage over the last few years. We're still climbing the curve to what we think makes sense from an expansion perspective. We think we're approaching the rates required for both brownfield and potentially greenfield expansions, but we still need more depth in erosion rates for us to put substantial capital to work in expanding those facilities. The signs are positive; we haven't grown storage as a country over the last ten years while gas demand has grown significantly and will continue to grow in more volatile markets. We're confident that storage will continue to increase in value, and we will reach a point at which expansions make sense.

Our next question comes from the line of Neal Dingmann of Truist Securities.

Could you talk about the continued upside there, specifically? It seems like you have numerous opportunities for additional projects. I believe you've mentioned the 2-to-0 CapEx tiebacks you announced after the acreage dedication. I’m wondering about the upside potential in '25?

Yes, great question. There’s a lot of exciting activity in the Deepwater. We've seen so much execution. I think it’s easy to overlook the amount of execution that’s gone on with projects like the Shell project most of our work has retired at this point. For the most part, our work's been completed. The second largest is Chevron's Ballymore project, and that’s been accelerated a bit from our original plans in terms of timing. We’re excited about seeing that project come online. That’s a very large project, and we need no capital from our side. Those are the projects we favor, adding incremental value with no additional capital. There's a lot of drilling activity around our assets that will continue to drive value. A big change in the Deepwater is that, previously, large platforms were created at incredible engineering feats, but we’re seeing producers work hard to find and develop reserves around existing infrastructure. With that approach, we’re seeing very high incremental returns due to our established infrastructure. A lot of activity is happening in and around our asset base today. As I mentioned earlier, there's ongoing work involving large prospects that will be coming onto our discovery system next year. We look forward to maximizing those opportunities as they come in.

Fantastic details. Just one quick one on the West. Specifically, there’s been a lot surrounding the DJ with considerable activity around the acquisitions. How’s the near-term upside looking around those acquisitions?

Sorry, do you want me to comment on Curtin and our Rock?

Yes. I would say that area continues to perform and, frankly, outperform. We're pleased with the positioning we have. We’re not only seeing integration value but are able to optimize processing and gathering in basin. Because we also market and transport the NGLs, we see a lot of margin growth from that. Yes, you’re already seeing those important contributions, and we expect that to continue to grow for a long time. We expect our performance to remain strong.

Our next question comes from the line of Zack Van Everen of TPH & Company.

Shifting to the Northeast. You mentioned rates on the Susquehanna and Bradford ticked up this quarter. I know you have cost of service contracts, at least on the Bradford side. Was that part of the dynamic? Or was this something else? Is this a good run rate going forward? Or is this a one-time revenue makeup like we saw last year?

This is Micheal. With the cost of service agreement we had in Bradford, it has reverted to a fixed fee for the contract terms. That has been completed and negotiated with all the customers on the Bradford side. We did have a one-time drop last year that affected the comparison for this year. Other than that, you should expect to see this as a run rate with escalation being the variable there going forward. Any expansions we do would be negotiated through the capital invested in those expansion opportunities.

You primarily see in the numbers you’re looking that as we see more activity in the rich gas, you see our margins in that area are almost double what they are in the dry gas. As we've seen drilling move into these rich gas developments, our average rate increases. In addition, there’s an inflation adjuster that hits every spring, which also raises rates. So a lot of positive momentum on rates. Importantly, as the dry gas area is challenged, typically, we see the rich gas responding, and we gain somewhat higher margin on the rich gas thanks to the additional services we provide on it, which helps offset declines in the dry gas.

Got you. That makes sense. Quickly shifting to the Rockies. One of your peers announced they’d be converting their crude pipeline out of the Bakken that flows into Wyoming into NGL service. Probably a bit far out, but is there a space on Overland? Would you be interested in those volumes if they were to approach you?

Chad, do you want to take that?

Yes, sure. This is Chad. There is indeed capacity on Overland Pass, and we do see that as an opportunity. We think it's beneficial for Bakken producers to have takeaway diversity, and we're focused on being a good option for taking NGLs from both Bakken and Powder River Basin. So yes, we believe there's an opportunity there. We're not going to rush this, but we're hopeful to see those barrels moving south. We have capacity in Overland Pass that would be available to accommodate that.

Our next question comes from the line of Robert Catellier of CIBC Capital Markets.

Could you provide insight into your progress regarding flow rates by the end of the month on Transco? What are the likelihoods of a settlement? What’s your interpretation of shipper appetite to support modernization investments in light of your new methane intensity targets?

We would love to see a settlement there. At the end of the month, we'll file our rate case, and then we'll look to see if we can initiate a settlement. We have been discussing modernization efforts with customers for some time, and they shouldn't be surprised when we make our filing and they see the investments made. We believe this will facilitate a modernization tracker, so we can smooth out some increases in the Transco assets similar to what we did on the Northwest pipeline. That's the intent. We have a good opportunity to tell customers what to expect in this rate case. Once we get it filed, we’ll start settlement discussions, but the rates will go into effect on March 1 of next year, subject to refund once we either get a settlement or fully mitigate the outcome on the rate case.

Okay. Then next question here concerns the legal realm. How does the DC circuit decision in REA and the Chevron difference case reversal impact your approach to permitting?

Lane, do you want to take that?

Yes, it’s Lane Wilson. Regarding REA, I don’t think the decision changes our approach to future permitting activities. We feel FERC's active certificate order was defensible. The decision is unfortunate, but the DC Circuit typically lays out a path for FERC to fix the certificate, and we expect that to happen. I don’t believe the Chevron case impacts how we’ll approach certificates going forward.

Our next question comes from the line of Tristan Richardson of Scotiabank.

On the Gillis West project, can you outline some differences between this project as a Transco expansion versus, say, a LEG from a permitting standpoint or right-of-way standpoint? It seems like this is a smaller project, but offers several efficiencies from a capital and permitting perspective.

Tristan, thanks for the question. This is important because CenterPoint has faced several high price spikes in the Texas intrastate market for multiple reasons. This project allows them access to gas supplies associated with Henry Hub pricing, giving them reliable access to supplies from Louisiana without being dependent on the volatility that the Texas intrastate pipes and markets bring, both for power generation and normal residential loads. It’s an important project for CenterPoint, and really, all we need to do is an interconnect to provide gas supplies coming into the Louisiana market, specifically places like Giles, which is becoming an important pooling point for supplies. This project enables them access to those supply points from Haynesville, diversifying their supply and relieving some volatility. It's a great project for us because we’re getting paid for transporting capacity flowing back into Texas while requiring variable capital on our part, mostly just the interconnect. We're excited to see this significant improvement for Texas as they deal with the volatility they’ve been facing due to suppliers into that market.

I appreciate it, Alan. Regarding a broader question on the regulatory environment, it's been two years since we’ve had a full board of commissioners, and we're at a time seeing significant demand in the Southeast and Mid-Atlantic. Could you address what you would like to see on the permitting side in terms of streamlining or anything better to accommodate the demand you're seeing?

It’s a great question. The primary issue with permitting isn’t with FERC. I think they've been a responsible agency, especially under Chairman Phillips’ leadership. They’re trying to properly see responsible infrastructure developed, aware of the challenges we’ll have in the grid if we don’t have incremental natural gas supplies available for powering the grid and backing up renewables. The main challenges lie with the NEPA process that allows environmental opposition to raise issues unrelated to construction. Addressing NEPA reforms is likely the most significant aspect of improving permitting. There’s excitement about the Supreme Court reviewing the NEPA process. That could reform permitting in a meaningful way, helping to prevent arbitrary project delays. Moreover, reforms regarding the state's authority on 401 water quality certifications, which give states the ability to stop projects unjustly, is important. We’re closely monitoring that situation as well.

Our next question comes from the line of Theresa Chen of Barclays.

Based on recent market trends, particularly related to the data center-driven brownfield expansion on natural gas transmission, implied rates seem to be significantly higher than existing tariffs and economics. Is that consistent with your expectations as the process of addressing the numerous requests unfolds? Is this a key hurdle in getting these projects completed along with the urgency of speed to market?

Theresa, this is Micheal. Yes, we expect to see negotiated rate contracts that exceed our baseline tariff rates; that's likely what you're asking. We have several opportunities to explore, not just on Transco but on Northwestern Pipeline, MountainWest Pipeline, and the Overthrust pipeline. Allocating resources diligently has become critical over recent months. We anticipate actually nice returns on these projects. We’re not entering projects at 6x or 5x multiples. That is not the trend we’re seeing lately.

Got it. A follow-up question on the regulatory front. As we approach the election season in the fall, what are your thoughts related to your assets within your business? Any key considerations?

That's a complex topic. First, taxes are critical; they significantly affect our ability to invest in high-return projects because tax considerations are very real for us related to free cash flow. Beyond that, remember that even during the Trump administration, we witnessed projects like Constitution and Nesi halted due to the 401 water quality certifications that allowed states to obstruct projects arbitrarily. There's pressure to reform the 401 certificate issue as well. We need to keep a close eye on Congress and legislative actions as potential opportunities for more involved reforms on the permitting front. Noteworthy is the recent bipartisan bill that didn’t quite aid pipelines directly. We believe there’s room for improvement in the legislative setup, creating an investment-friendly infrastructure environment.

Our next question comes from the line of John Mackay of Goldman Sachs.

I wanted to discuss data centers briefly. Regarding your speed-to-market comments, could you elaborate on what that entails? Is it specific to Transco? Does it involve non-FERC jurisdictional avenues? Any insights would be valuable.

Yes. Well, John, thank you for the question. We're witnessing a change as developers are realizing they are up against a wall regarding extracting more generation from the grid. They’re now exploring areas where natural gas resources and the capacity for it are available, alongside favorable permitting opportunities. Micheal pointed out that the speed to market is paramount for hyperscale developers. They need to get online quickly, which gives us leverage in negotiations. I think we’ll see ongoing indirect loads from our utilities as we advance both conventional and electrification projects across those regions. These developments are contributing to the growth of our business, leveraging natural gas supplies, generation capacities, and availability.

I acknowledge we are nearing the end. One last point: Given the dynamics around moving gas from Texas into Louisiana for LNG, is this more of a macro trend, or could it just be a one-off with this customer? Any framing around Louisiana demand trends would be appreciated.

I would just suggest that the abundance of supply from Haynesville and other resources will be developed as pricing permits. It's logical for utilities to search for more reliable sources to shield themselves from the pricing pressures they’ve faced in Texas. This should be seen as a continuing trend, especially given the volatility we've observed in the Texas markets, emphasizing the importance of reliable access to Louisiana resources as they prepare for greater stability in supply.

This concludes the question-and-answer session. I would now like to turn it back over to Alan Armstrong, President and CEO, for closing remarks.

Okay. Thank you all for joining us today. An exciting time for us at Williams as we continue to execute a long list of projects and recognize the growing demands we have the opportunity to address. We're excited for the challenges ahead and what we can deliver together as we work to meet future demands. So with that, thank you very much for joining us today.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.