Williams optimistic about a turnaround in natural gas prices

Williams in Tulsa is planning no change in the guidance ranges for the rest of 2019 after reporting strong increases in net income for the first three months of 2019. The company also believes there will be a turnaround in prices as demand for natural gas grows.

CEO Alan Armstrong told investors and analysts after releasing the results, “I’m pleased to confirm that despite unforecasted changes, we are maintaining our guidance ranges for adjusted EBITDA DCF (discounted cash flow) and dividend coverage ratio.”

As he noted, the company experienced a 12 percent increase in cash flow from operations. Armstrong said it demonstrated significant free cash flow in the quarter when compared with the 46 percent reduction in capital expenditures.

“In summary, 1Q adjusted EBITDA was within 1% of our business plan overall. And as we’ve said before, we see the overall 2019 growth be weighted more toward the second half of the year, due primarily to the shape of the Northeast EBITDA growth,” said Armstrong.

During the Thursday conference call, the CEO explained a lot changed since the company issued its 2019 guidance nearly one year ago.

“From a macro perspective, we’ve seen our producer customers pressure to pull back on capital investment and we’ve seen a significant downward shift in NGL margins.”

The company recently completed the sale of its Niobrara business in Colorado. And it intends to lower its CapEX in the Northeast as a response to the producer activity in the region. Overall, the company intends to revise its CapEx guidance to a new midpoint of $2.4 billion, down from the $2.8 billion midpoint that was provided with the fourth quarter earnings of 2018.

Armstrong is still optimistic that the downturn in natural gas prices will eventually change.

“We don’t believe that the current downturn in pricing is sustainable giving the continuous growth in natural gas demand, coupled with the discipline we have seen from the producer community,” he said.

One challenge is building the infrastructure to get the large amount of natural gas produced in the Permian Basin out to meet the growing demand.

Armonstrong also touched on the changes in oil and gas industry laws in Colorado where Williams has operations in the DJ Basin area.

“Ultimately, the new legislation seems to be a much more balanced approach than what we saw last fall—with the vast majority of oil and gas activity occurring in the industry friendly wealth county area. We welcome the shift and authority to local counties and municipalities and we will continue to monitor as regulations are developed.”