MLPs: Williams Companies Inc. Sees a Once-In-A-Generation Opportunity in Natural Gas

The CFO ofWilliams Companies, Don Chappel, recently spoke at an investor conference where he talked about the once-in-a-generation opportunity in natural gas that's just waiting to be seized. Its this opportunity that is driving his company to merge the two MLPs it controls,Williams Partners L.P.andAccess Midstream Partners LP, in a deal that's expected to close early next year. By combining these two companies, Williams will be in a much better position to create value from the coming super cycle in natural gas.

Supply-side economicsChappel spent the early part of his remarks pointing out the growth potential for natural gas in America as well as for Williams. He extolled the virtues of natural gas by saying that,

As Chappel noted, natural gas supplies in the U.S. are abundant. Supplies are really more abundant than anyone ever expected. Unlocking natural gas from shale formations such as the Marcellus and Utica are opening up enormous supplies of cheap and clean energy. We see this in the next chart where the Northeast region of the U.S. is expected to deliver an incredible surge in natural gas supplies over the next 15 years.

Source: Williams Companies Inc. Investor Presentation.

Chappel then made some direct comments referencing this slide:

As he notes, Williams sees an incredible opportunity ahead of it to invest in attractive projects that will create a lot of value for its investors. As the slide above noted, the company is well positioned in every region that's expected to deliver growth in supplies of natural gas. Moreover, the overlap between Williams Partners and Access is particularly compelling in key growth regions like the Northeast and the Rockies, which is why combining these companies is important because it is expected to enable Williams to better compete for new opportunities as they arise. Mr. Chappel noted these two areas in particular as he followed up his previous comments by saying:

Clearly, the company sees itself as being well positioned to create value as it grows its asset base to service the supply side of the growth equation. However, there's another side of all this and that's the demand side where Williams also sees value creating opportunities.

Demanding growthThis next slide projects America's natural gas demand growth over those same 15 years.

Source: Williams Companies Inc. Investor Presentation.

Chappel commented on this slide by saying:

As he notes the biggest demand driver is expected to be from new natural gas power plants, which are replacing coal-fired plants in the U.S. However, he also points out that demand is coming from LNG exports as well as from industrial users. These end users will require plenty of natural gas pipelines to receive gas for consumption. Williams wants to be the partner chosen by these customers to meet those future needs as the company wants to capture value creating opportunities to invest in new natural gas infrastructure to support demand growth.

Investor takeawayWilliams Companies sees a very bright future in natural gas. That's why it could potentially invest upward of $30 billion through the end of the decade on growth projects as it captures new opportunities on both the supply and demand side of the equation. The company sees a once-in-a-generation industry super cycle in natural gas, and it believes it's in the right places and at the right time to deliver a lot of value to its investors in the years ahead.

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