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Without LEG, Williams Loses Kick to 2024 Earnings

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A delayed start to the Louisiana Energy Gateway (LEG) project will cost Williams (WMB) $20MM in earnings this year, according to East Daley Analytics’ company forecast. Nevertheless, we remain more positive than the Street on WMB’s 2024 outlook.

Williams CEO Alan Armstrong confirmed the project delay at the CERAWeek conference in March. WMB and Energy Transfer (ET) have been embroiled in a legal dispute over the use of rights-of-way that has set back the timeline for the 1.8 Bcf/d pipeline. WMB had planned to start operations on LEG in 4Q24, but is now targeting start-up in 2H25.

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East Daley models the LEG project to contribute ~$20MM of quarterly EBITDA in the WMB Financial Blueprint. The delay reduces our 2024 forecast for Williams by ~$20MM, and our 2025 forecast by ~$40MM.

In addition to the LEG delay, producers have been curtailing production in the Northeast and Haynesville, creating short-term headwinds for some midstream companies. Prior to these developments, EDA had modeled WMB earnings 5% above consensus for 2024 and 2025.

Despite these headwinds, we remain bullish on the outlook for Williams. In updates ahead of 1Q24 results, we estimate WMB will make EBITDA of $7.06B in 2024. Our forecast is on the high end of company guidance of $6.8-$7.1B, while consensus is for EBITDA of $6.97B in 2024 and $7.64B in 2025 (see figure from the WMB Financial Blueprint). Consult EDA’s latest WMB Blueprint and 1Q24 Earnings Preview for more information. Williams will report 1Q24 results on May 6.

The dispute between Williams and Energy Transfer centers around the use of ET’s easements to lay new pipelines. ET argues that WMB is effectively building an interstate pipeline rather than gathering, and should not be allowed to piggyback off its rights-of-way. In addition to LEG, ET has sued to block pipelines planned by DT Midstream (DTM) and Momentum Midstream in Louisiana.  

During WMB’s analyst day, management disclosed that the company has secured permits for the northern part of LEG, but has not finalized permits for the southern section. The southern segment of LEG follows closely to ET’s Gulf Run Pipeline, a major point of conflict with ET (see map).

In a petition filed with the Federal Energy Regulatory Commission (FERC), ET asserts that LEG will function as a transmission line and should be subject to the same federal regulations as other interstate projects. In the petition, ET notes that LEG crosses ET’s pipeline right-of-way 43 times but has not been subject to the same standard of regulation due to its classification as a gathering line. – Zach Krause Tickers: DTM, ET, WMB.


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