Market Commentary: “Williams Is No AI Pipe Dream. The Stock is A Winner”
- Yves Siegel
- 8 hours ago
- 8 min read
WILLIAMS COMPANIES FIRESIDE CHAT RECAP
The Street is bullish on The Williams Companies, Inc. (NYSE: WMB), and we concur. The market’s favorable sentiment is captured by the title of Barron’s recent article “Williams Is No AI Pipe Dream. The Stock Is A Winner”.
On July 7, we hosted a Fireside Chat with John D. Porter, Executive Vice President and Chief Financial Officer of The Williams Companies. Williams operates more than 33,000 miles of pipeline and delivers roughly one-third of the natural gas used in the U.S. every day. Our conversation focused on three topics: the demand outlook for U.S. natural gas, the scarcity value of the company’s regulated pipeline franchise anchored by the Transcontinental Pipeline (Transco), and Williams’ fast-growing “Power Innovation” business, which builds dedicated power plants for data centers.
Our conversation reinforced why SAM Partners continues to favor stocks tied to natural gas infrastructure. Two reasons stand out:
1. Natural gas demand is set to grow strongly for the foreseeable future.
2. The industry’s shift to financial discipline—prioritizing investment returns, strong balance sheets, and returning cash to shareholders—remains intact.
Williams pairs a scarce, difficult-to-replicate regulated pipeline franchise with an emerging power business that converts AI-driven electricity demand into contracted, fee-based cash flows with unusually short paybacks. Williams’ successful execution track record suggests that the company is well suited to navigate supply chain and other potential project management risks.
KEY TAKEAWAYS FROM THE WMB FIRESIDE CHAT:
Another inflection point for natural gas demand on the horizon. U.S. natural gas production has grown from roughly 50–60 Bcf/d early in Mr. Porter’s career to more than 100 Bcf/d today. The next leg may be just as dramatic. Industry forecasts cited by Mr. Porter call for approximately 40 Bcf/d of incremental demand by 2040. 80% or more of that growth is expected to come from just two sources: LNG exports and the electricity needed to power AI data centers and re-industrialization. One telling detail: U.S. natural gas prices did not spike during this year’s conflict involving Iran, reflecting the abundance and low cost of the domestic resource base.
An infrastructure business, not a commodity business. More than 90% of Williams’ business is fee-based; direct commodity price exposure is only about 5–10%. The model's clearest test came in 2020. While much of the industry slashed forecasts during the COVID-19 pandemic, Williams never withdrew its original guidance and kept growing through the downturn.
Source: The Williams Companies 1Q 2026 Earnings Presentation, May 5, 2026
Transco: Scarcity value equals pricing power. Transco is the only natural gas pipeline running up the Eastern Seaboard east of the Appalachians. Decades of development around its right-of-way makes competing pipelines nearly impossible to build, so utilities seeking additional capacity generally must negotiate expansions with Williams. In total, Williams is pursuing ~14 Bcf/d of regulated pipeline projects representing roughly $16 billion of potential investment. Two projects stand out:
1. The Southeast Supply Enhancement is expected to deliver the largest earnings contribution of any project in Transco’s history and to be among its highest returning. The project is tracking ahead of its scheduled fourth-quarter in-service date.
2. The Northeast Supply Enhancement should bring additional gas into Long Island within a couple of years.
Power Innovation—behind-the-meter power for data centers. Connecting a new data center to the electric grid can take six to eight years. Hyperscalers don't want to wait—and are willing to pay for dedicated on-site generation. Enter Williams. In roughly 14 months, the company has signed approximately $9.6 billion (including capitalized interest) of committed projects with the highest-quality hyperscaler counterparties, underwritten at roughly a 5x build multiple—or about a five-year payback—on take-or-pay style contracts. These projects generate cash flow in 18–24 months, versus three to four years for a typical pipeline. The first facility—Socrates, in New Albany, Ohio—is expected to come online in the second half of 2026, and management believes Power Innovation could ultimately represent 20–25% of Williams overall.
WHY WILLIAMS CAN WIN THIS BUSINESS. Reliability is the selling point: Each facility pairs gas turbines with Tesla Megapack batteries and redundant generating capacity. Williams also has advantages few can match—decades of turbine operating expertise, a nationwide pipeline footprint, and the Sequent marketing arm, which already supplies gas for roughly 25 gigawatts of power across the country. Management believes Williams is currently the only major midstream company pursuing this model at scale.
Growth without stretching the balance sheet. What could limit growth? Mr. Porter pointed to equipment procurement, project management bandwidth, and construction labor. Notably, financing was not on the list. The bank-led process to select a joint venture partner for the power business culminated in the Blackstone-led investment (Williams announces $5.34 billion investment in power innovation joint venture from Blackstone) announced on July 13 (more on that below).
While leverage had drifted modestly above the 3.5x–4.0x target range, management expects to de-lever organically by 2028 as projects come online. Guidance calls for 2026 EBITDA of $8.05–$8.35 billion, with a target of 10%+ annual EBITDA growth in the second half of the decade—following 9% annual EBITDA growth in the first half of the decade. (We noted that Williams significantly outperformed its prior guidance of 5–7% growth in the first half of this decade.)
Visibility to a 20%+ return on invested capital. This point came from Williams' Q1 earnings call rather than our conversation: management stated that its current slate of projects gives it confidence in achieving an industry-leading return on invested capital of more than 20%.
POSTSCRIPT: WILLIAMS DID NOT KEEP US WAITING. On July 13—just six days after our conversation with Mr. Porter—Williams announced a joint venture with funds managed by Blackstone Credit & Insurance, in partnership with Apollo and KKR. The highlights:
$5.34 billion for a 49% stake—including a ~$900 million promote. Blackstone and its partners will invest $5.34 billion for a 49% noncontrolling interest in the company’s first five behind-the-meter Power Innovation projects. Of that total, $4.4 billion represents the partners’ 49% share of expected growth capital spending; the remaining ~$900 million is additional consideration paid to Williams—a promote, and precisely the premium Mr. Porter suggested prospective partners were willing to pay. Williams retains a 51% interest and full commercial and operational control.
Williams keeps the right to buy it all back. Between years 7 and 14, Williams can buy in its partners’ 49% stake at a price equal to the partners’ outstanding investment balance—not fair market value. This structure is materially better than a typical fair-value buyout: Williams captures all the appreciation above the partners’ return hurdle, rather than paying market price for that value later. And because distributions above the partners’ targeted return reduce their investment balance over time, the better the projects perform, the cheaper the buy-in becomes. Williams has in effect rented the capital while preserving its long-term upside.
Balance sheet intact. The structure reduces Williams’ capital exposure, keeps leverage within the 3.5x–4.0x target range (the 2026 midpoint is now approximately 3.6x), and frees up capital to redeploy into the company’s 6+ GW backlog of new projects.
Guidance affirmed at the upper half. Management continues to expect 2026 Adjusted EBITDA in the upper half of its $8.05–$8.35 billion range.
NEXT UP: Fireside Chat with EQT Corporation’s CFO, Jeremy T. Knop, on Thursday August 6 at 4:00 PM ET. Consistent with our natural gas investment theme, we will be hosting a fireside chat with EQT, the low-cost and only domestic, large-scale vertically integrated natural gas producer. Please join us via this link.
JUNE: ENERGY AND COMMODITIES PULL BACK WITH IRAN CEASEFIRE
The rundown:
In June, SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 1.5% compared to -1.0% for the S&P 500 and -0.8% for its customized benchmark. The performance relative to benchmark reflects our overweight in midstream and lower weights in the utilities and clean energy sectors.
In June, SAM’s Energy Transition Portfolio generated a return (net of fees) of 1.0% vs -5.2% for its customized benchmark.
SAM’s portfolios are more heavily weighted in Midstream, which outperformed relative to the clean energy sector and was slightly worse than utilities in June.
Midstream outperformed the overall market and was up in June with a total return of 2.1% as measured by the AMNAX.
In June, the clean energy sector underperformed the overall market, generating a total return of -12.6% as measured by the S&P Global Clean Energy Index (SPGTCLTR). For the month, utilities outperformed the market with a total return of 2.2% as measured by the Philadelphia Stock Exchange Utility Index (XUTY).
Majority of sectors (i.e., 7 out of 11) in the S&P 500 delivered positive performance in June. Communications sector was the worst performer and Industrials was the best. Energy delivered a -5.1% monthly total return. June month-end WTI crude oil and Henry Hub natural gas prices were $70.56 per Bbl and $3.34 per MMBtu, down ~23% and flat ~0%, respectively, from last month.
YTD 2026 Total Return
RESULTS: SINCE INCEPTION & ONE YEAR
SAM’s Infrastructure Income Portfolio produced a return (net of fees) of 193.3% and 20.6% for the periods since 11/10/20 inception and 1-year, respectively. This compares to a total return of 186.4% and 28.8%, respectively, for its customized benchmark and 129.6% and 22.3%, respectively, for the S&P 500 as of 6/30/26.
SAM’s Energy Transition Portfolio generated a return (net of fees) of 54.6% and 22.4% for the periods since 4/29/21 inception and 1-year, respectively. This compares to a total return of 67.9% and 40.2%, respectively, for its customized benchmark and 91.9% and 22.3%, respectively, for the S&P 500 as of 6/30/26.
Sam Partners’ Infrastructure Income and Energy Transition Strategies seek to provide sustainable income and growth with capital preservation. This is accomplished by investing in a concentrated portfolio of high-quality midstream energy companies, utilities and clean energy companies that are well positioned to participate in the energy transition to a net zero carbon future. A diversified approach to investments across these sectors should optimize risk-adjusted returns, in our view. Our Infrastructure Income Strategy offers investors a current yield of ~4% and growth potential of ~5-7%; while the Energy Transition Strategy that is more heavily weighted with clean energy stocks and aligns with favorable ESG ratings, offers investors a current yield of ~3.0%. In a world searching for yield, we believe these Strategies offer a compelling value proposition.
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MPORTANT DISCLOSURES
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