The Williams Companies, Inc. (WMB) Earnings Call Transcript & Summary

All right. Good afternoon, everyone, and thanks for joining us today. I'm Justin Jenkins, and I head up coverage of U.S. Midstream here at Ray J. and the next fireside chat we've got here is with the Williams Companies. I'm joined by John Chandler, CFO of WMB, and Danilo Juvane, who heads up IR for the company. I want to thank you both for joining us here today. Williams has been one of our favorite midstream companies for a long chunk of time now. And we think that view was very much vindicated last year with the relative strength in financial results and stock performance. Company's diversified gas focused business really shined last year in our view. And just for the audience background here before we dive into questions. About half the business is regulated, largely the Transco asset base. And the other half is closer to the wellhead offering good overall integration of the business. So with that preamble, John, I'm going to jump right in here.

And if memory serves me right, and forgive me, it's been a long year, so my memory might not be that great. But I think it was exactly a year ago today that you and I were in Orlando doing this. Hard to believe, I think, that it's only been a year. But I guess maybe more important to my first question here is despite all of the craziness that followed Williams was actually able to keep its pre-pandemic EBITDA to make EBITDA guidance intact and 2020 overall EBITDA, actually landed even above the original midpoint. And with a good outlook, I think you guys gave in -- for '21 guidance, maybe just talk high level what the key drivers have been and why WMB's business has remained so resilient here?

Well, Justin, thanks for that question. You're right. It seems like forever, that we were in Orlando, and unimaginably, I was digging ice out of an open ice bin to sort of a glass for a soda pop, I can't imagine to do something like that today. But when I think back to our original guidance, we gave our guidance back at our Analyst Day in 2019 in December 2019. So just to kind of paint that picture we gave our guidance originally long before the pandemic was even a thought and long before and we saw the crude oil and commodity price disruptions that happened in February and March. And so I am really proud of how we performed. But it's a testament to our assets and obviously a testament to our team. But again, to the point that we made, it really shows the resiliency of our assets. And really, I think of 3 key things that helped us really execute during that time frame. You hit on the first one, roughly half of our business, 45%, 50% of our business are transmission assets. And there's lots of people that have transmission assets that where maybe they're discounting their rates or they don't have firm committed capacity for everything on their system, they didn't fare as well as we did. But our systems, that I think this is a unique thing that people need to really understand about our pipeline system strength. Our 3 biggest ones, obviously, are Transco, Northwest Pipeline and Gulfstream. Those systems are all 100% committed and firm capacity, and they all work max rate because they're highly in demand. And so for good or bad, we're not going to wake up tomorrow and see earnings be up substantially from those systems, but also we're not going to wake up tomorrow in the earnings are going to be down in those systems. They are where they are, and they're firm committed with great credits. It's backed by utility. So half of our business was completely 100% rock solid. And I think, generally, the investment community all understood that. I think a lot of questions come to us about the other side of our business, the gathering and a lot of people would have thought, man, and that's going to be disrupted, and we're going to have issues. We felt fairly confident about how we're going to perform. And I think it really showed itself through. I think one thing that really showed itself, and you really should think about it in this terms. Even though we're gathering, we are at the well head #1. #2, we do have a fair number of minimum volume commitments. So we have commitments from a producer to pay us whether or not they move volumes in a few of our more significant systems. But #3, we're in 15 different basins, and we're probably 1 of the largest natural gas gathering companies in the U.S. And so what that means is as long as gas demand is growing, and even though last year, it was down just a tad just because we had a really warm winter. It's still pretty stable last year, and other long run is expected to grow. But because we're in 15 different basins, if any 1 basin has an issue, that just means we're probably picking up something in some other basin. And I think you really showed the that showed itself last year. There are basins where we did have issues, but there are other basins where we outperformed what we thought. And that's what has led to our stability, not just last year, but over the last several years. So that's the second item that I would say that really helped us differentiate ourselves. The third item and I think this is important, too, was the fact that we are relentlessly focused on cost control. And I'm really proud of my planning team actually dating back to June or probably July 2019, we were looking forward at the new gas prices were weak. This is before the pandemic and the oil price flat, but we just realized gas prices are going to be a bit -- maybe the volumes were going to be a little bit down. And we focus on a percentage, you can call operating margin percentage, and that's basically how much of your revenue falls to the bottom line. And we saw that backing up a little bit. And we said we're not going to let that happen. And so we went about a cost reduction exercise in 2019. And we ultimately cut $75 million of payroll costs out of the business through voluntary severance programs and a small reduction in force towards the end of 2019. And so while cost reductions were a big theme in the industry in 2020, we were done. We took care of that in 2019. So we hit 2020 fully ready with a cost structure that was already reduced. And so anyway, those 3 things, transmission being a key part of our half of our business, yet this rock-solid, stable a very diversified gathering systems with significant producers backing our systems and dedicated to natural gas is the second reason, and then cost control. As we look forward into '21, we see a lot of positive things. And I think you kind of picked up that tone in our earnings call. If you happened to have heard that. Obviously, we -- the producers in the Northeast, we have some of the largest most stable natural gas producers in the Northeast. They all have been suggesting in 2021 that they're going to be focused on kind of free cash flow generation, balance sheet improvement, that tells us they were positioning themselves to be somewhat stable from a volume standpoint in the Northeast. My sense is, with what's happened in Texas, the inventory drawdown, the LNG pickup, I think that's probably going to start shifting over time. And you're probably going to see a more robust view towards growth, probably not substantial in '21, but maybe into '22. But certainly, there's a better backdrop now than there was even 2 or 3 weeks ago for those predictions, so anyway. So we see a lot of stability in the Northeast in '21 and in fact, we see about growth in the Northeast, not because of volumes, but there's a lot more web gas that's showing up on our systems. We've invested a lot over the years. in processing capacity and also our liquids handling capacity. And so we see an EBITDA thrust as the Northeast just from that really, not from volume growth, but just from that. Volume growth will just be a plus on top of that. So a good outlook from the Northeast. In the transmission and Gulf of Mexico assets, 2020 brought us an incredible hurricane season also. And we were able to weather that storm. It did to get us -- we had about $49 million of negative impacts from hurricanes. We don't obviously expect for anything like that to happen in that scale in 2021, so just a normal year is going to revert a lot of EBITDA back into our business there. We completed a pretty nice expansion project on Transco called Southeastern Trails brought into the service right at the end of 2020. So we'll get a full year service out of that. We've got another nice project we're bringing into service at the end of this year, called Leidy South, another significant expansion on Transco. We bought a little bit of that into service in December of last year. And that's in part of compression and expansion projects and we brought some compression on that and some of that Leidy South project showed up in December and throughout this year, but any way we'll see growth from Leidy South and Southeastern Trails and some other smaller projects. So and again, [ the answer ] of -- the hurricane season, we should see an uplift in there. And so that brings us to the West. Our West business, as we look at our volumes in the West in 2021, we think they're going to trend sideways. There's areas of growth like the Haynesville, we think volumes are going to grow in Haynesville. But we also think volumes are going to decline in the Eagle Ford and a few other places, only because we had a number of producers that were having financial difficulty, their weren't being active in the drilling front. And when you don't drill volumes fall in the subsequent year. So I think we see generally barring somewhat flat in the West, our EBITDA in the West will step down though a little bit due to Overland Pass Pipeline, we see some volumes moving up that system, [ 1 or 2 ] some volumes up. Also, we do -- we did agree with some rate concessions that Haynesville as part of the Chesapeake bankruptcy. They gave us acreage and return. We can talk about that more at a different time. That's going to be a fantastic outcome for us in the future. But when you put all that together in one picture, I think you take a positive coming up from this that we'll see some nice growth in 2021 and probably even better growth in 2022.

John, I think the takeaway for me is stability, consistency and visibility in terms of the operating and financial results and that leads to my next question here, I think, that aspect of thing, lets Williams, maybe be more disciplined or more strategic in its capital allocation priorities. Obviously, debt paydown has been top of mind for everybody in energy here. For the last chunk of time, but I'm curious how Williams today thinks about the priorities of capital allocation in terms of investing for growth, balance sheet strength versus maybe growing returns to shareholders?

Yes. No, that's a really interesting question. We, for the last several years, have been very clear about our first goal, the most focused goal, which was deleveraging getting our balance sheet to a 4.2 debt-to-EBITDA ratio and here we are, we find ourselves as we come to the end of this year, at the midpoint, we'll be really close, our guidance was 4.25x. The reality is we've come in above guidance, we'll probably be there, certainly at the end of this year. And if not, we'll be at the beginning in the first quarter of 2022. So we're there and so it's time -- we've had conversations with our Board the last couple of years about what we're going to do kind of when we hit that point where we've achieved our leverage target. What are we going to do with the incremental dollar post that? Are we going to -- and it really falls into 1 or 3 themes, are we going to de leverage further? Are we going to buy back shares? Or are we going to maybe [ slow ] our return threshold a bit. For example, on Transco, we can invest in our rate base on Transco today, we under earn on that pipeline. And again, I told you we're earning max rate there. We can invest on that pipeline, earn a rate base type of return, which is 10% -- let's say, 11% to 13%. Not a bad return, when it's backed by firm committed capacity and the utility credit and grow EBITDA. So the 3 opportunities; buy back shares, pay down debt or grow EBITDA maybe by investing a little bit more on some of our lower returning projects on Transco. And I can also tell you, I don't really know what the right answer is on that. And I can tell you, there's probably varying opinions by our Board. And I bet with people listening to this call, I could ask 3 different investors that question and I would get 3 different answers. And so we are going to be going through an effort to land on a point of view. Obviously, we have our big strategy discussions usually around here with our Board in July. And we'll be trying to hone in on what we think the biggest value contributor to our shareholder is. I would say, I'm a CFO, so I like deleveraging. That's kind of where I come at things. I can also tell you, though, I get it, we've got share -- our units, right, our shares right now that are yielding almost 7%. And we actually did that last week the refinancing debt is coming due at 2.6%. So if you are a solid investment graded, rated company, which we are, we're soon to be upgraded by Moody's, we're on a positive outlook there. So we'll be BBB flat BAA too, at why would I do less 2.6% financing and lease 7% yielding stock out there. So that's a good question. And is that the most shareholder friendly thing to do. And likewise, if I could go and invest at 10% to 13% and utility back from committed capacity, that's higher than my cost to capital by quite a bit. And so I'm just not sure. We want to bring new generous investors into our name. So I like deleveraging. I think that attracts me in generous investors, but how many, that's the question. And so I'm giving you a non answer to your question because I really don't know that. I would tell you, in the back end of all this, here's something very positive though. Our leverage is where it needs to be. We've got massive coverage of our dividend. We're generating $1.3 billion more in cash than we need for our dividend. Our leverage is right, and we're hitting a point in time where we can either deleverage further, invest more or buy back stock, what a great position to be in. And so stay tuned is all I can really say on that.

No, I appreciate that, John. And I couldn't agree more. I find it interesting that the investor base continues to demand lower leverage, but the point you made about the interest rate you guys got a week or 2 ago was, I think, cycle low. So it is a good spot for Williams to be in from an optionality standpoint. I think there's no doubt about that. But let's shift away from the financial stuff and maybe go to some of the operational things that are topical these days. You mentioned your views towards volumes being relatively stable, I think, throughout the course of 2021, kind of across the overall footprint. Maybe just give us your sense of leading-edge conversations with most producers and then also touch on any events or any issues with the extreme weather that we had here in Texas a couple of weeks ago? And if there's any impact [ specific ] to Williams overall from that.

Yes. Thanks for that question. As we talk to our producers, we're not hearing much different than what you would have heard from them on their earnings calls. But we're in our sense, and we're seeing that in real actions on their part, either focused on free cash flow generation, cost reduction, balance sheet repair, capital returns to shareholders. That's their focus. And a lot of the producers we deal with in the Northeast had sufficient liquidity and enough scale. They can cut things back and kind of do fine. And so when I think of the Cabots of the world or the EQTs of the world or even the southwestern of the world, I think generally, they're saying, "I want to see a longer-term, more sustained higher natural gas price and I've got time to wait that out. So I'm not going to drill into or overproduce just to kind of change that outcome from myself because it's way more valuable in the long run for us to see gas prices a little bit higher. And so we're seeing that discipline. We've seen that last year. We're seeing that in their discussions with us this year. I can tell you though, there has been a change in the last 2 or 3 weeks. Inventories have dropped significantly, natural gas inventories. You've seen LNG prices pick back up. I think we'll probably start seeing new LNG activities kind of make probably starting in the future discussions about adding capacity there. And so what does that all mean? I think it bodes well for 2022, for sure. I think we should see things that -- I'm not sure how long they -- I think a lot of the bigger producers are going to probably want to see this set in and see higher prices set in before they probably become much more active than just kind of operating in maintenance mode. So I'd like to say, we're hearing a lot of conversations about firing things up more so than what we've said in the public I don't think we're deep enough into that. I would say 1 other thing. We're adding a couple of big projects that by sheer share design will add incremental takeaway from capacity to the market. Our [ recent energy ] -- I'm sorry, our Southeast Trails project that we brought on the end of last year has -- it adds about 300 million dekatherms a day coming out of that market and also regional energy access. We're still scaling that pipe. That will add around 700 million dekatherms by 2024. And of course, Leidy South, it comes on at the end of this year, we'll add a total of 600 million dekatherms. So think about that new capacity in that market and the new demand has been those projects are off demand back. In some cases, the producer [indiscernible] but mostly demand back. So that's new capacity that's going to have to be served out of those markets. And just by fair nature, we'll bring new volumes out of that market. So we're real optimistic about 2022 and beyond. And I think 2020, the good news is even in 2021 while, again, we don't expect to see significant volume uptake in the Northeast, we do expect to see EBITDA growth. And again, if through more revenues for that same volumes, a [indiscernible] bridge volumes being handled on our system. So that's kind of what we're seeing here with producers. As we think about the weather events that just happened, a couple of weeks ago. First of all, I'll tell you, we did have gathering systems in Texas and Louisiana and Oklahoma. If you add together those systems, they represent about -- they represent less than 20% of our overall gas volume. So not significant, first and foremost. At its peak, which is February 16, was on Tuesday, we were down about 70% on our volumes in Texas, Louisiana and Oklahoma. By Saturday, we were down 40% by that Monday we were down 15%. So it was a fairly short duration of it for us on a fairly small amount of volumes in our system. So really not a meaningful financial impact. And frankly, we do have a small amount of marketing and trading that we do, very small. People look at our pie chart, we typically say on our gross margin, less than 2% of potential commodity activities. And that's our team that does that kind of marketing. They did have access to natural gas. They do sell natural gas. And frankly, you probably made a little bit more money than we lost. So it's probably a net plus to us. So anyway that's -- our transmission systems, by the way, work perfectly. There was nothing dithering in our transmission systems. Our gathering systems all worked well. Also, the issues we had more than anything was actually at the wellhead and it's a producer problem related to water takeaway and water lines coming up with the wells. Because of those water issues, they had to shut in production. And so I'm not sure if there's anything that can be done about that. I can't imagine weatherizing thousands of well sites for a black [indiscernible] it like that. I do -- I can imagine maybe a potential opportunity for gas storage, maybe more gas storage in the market. Maybe controlled by the state or the government. So we'll see what comes of that. But for us, we fared well and our staff kept things operating well. And again, from a financial -- a financial standpoint, I think it was probably a slight positive.

Okay. That's all good to hear, John. I've got 2 questions here on M&A. I'll give you the first one here. So what are your thoughts here on upstream M&A and what that means for Williams and maybe the broader midstream space obviously, that's been a bigger theme over the past 12 months than at any point in recent memory. So just curious your thoughts on that.

Well, obviously, in a lower commodity price environment, consolidation makes sense for all of us for upstream and midstream. And I think to the extent that producers can become more healthy and more rational in their thought about how much they produce, don't overproduce in the market, the better off everybody is going to be. So I think that's positive for us and positive as a midstream industry and certainly positive for the upstream industry. So we -- on the midstream side, have been trying to do our part in creating some consolidation synergy. In a world where commodity prices let's say, gas is going to be the $2.50 to $3 MCF range. And let's say, oil is going to be $50. The midstream operator needs to be very efficient and provide low-cost services so that both the upstream producer and the midstream can make enough money to make it viable for both of our investors. And so we, for quite some time, have been focused on cost reductions, trying to be lean operators, but also creating synergies and combinations where possible. Back in 2019, we did undertake the consolidation in the Northeast. We bought out one of our JV partners, Momentum, moved that JV into our OBM JV, brought in Canadian Pension Fund, CPPIB. And partnered on that, they brought in capital, we deleveraged. And as a result of doing all that, we were able to bring some cost efficiencies and reduce capital. More recently, at the end of last year, we bought additional interest in Blue Racer Midstream. We had us -- we had, in effect -- technically a 20-some-odd percent interest there. Now we own 50% interest in Blue Racer, along with First Reserve, that owns the other 50% those assets obviously have some synergy opportunities there as well, at a minimum, there's some capital synergy opportunities. Again, where Blue Racer has incremental processing capacity that we otherwise would have had to have built out our Northeast JV, and it just doesn't make sense. And so I think these are positive trends when you bring these assets together, creating rational investments, using excess capacity at various facilities and just becoming more lean operator. So I expect to see more of that, and I expect us to participate in that. How we'll likely participate in that? It's just like how we kind of did the Northeast JV to the extent there are other systems that become available in close proximity to our systems. And this is whether it's in the West or the Northeast. I think we'd seek out third-party capital to buy those that interest out, deliver that asset to us. We bring our asset from a joint venture to share the synergy value with that at a partner. And so that's basically the strategy that we did with CPPIB in the Northeast JV and I think that will bodes well for us going forward. So that's how I would expect us to pursue those kind of opportunities going forward.

Yes, that makes sense. You already touched on the second portion of the M&A question I had. So I'm going to skip ahead to maybe the ESG topics that are pretty relevant today. Williams has been a midstream leader in ESG, even you in so far ahead as to have the first dedicated to the ESG Analyst Day in the sector. And maybe give us a sense of the strategic priorities on the ESG front for the company.

Yes. Well, first and foremost, I feel fortunate for us in that our natural gas focused strategy gives us a heads up start versus just about most of the other companies in the industry because like we're not gas has been a big part of the emissions reductions in the U.S. And so I know that's not very politically accepted or popular, but the reality is gas has been part of the significant delivery of that. So we believe the people that really care to know that. And it's just a matter of us and figuring how to make it more politically popular going forward. Obviously, because of our gas-focused strategy and we have been focused on emissions reduction, we've got a great story to tell on that front. We have reduced emissions significantly. We were the first to set a target to being to be net 0 by 2050. And we were probably one of the first to actually put forward instead of 2030 goal for ourselves as well. And we have significant performance against that already. We've already reduced emissions 44% against kind of the date when the Paris Accord agreement started. So we got a great story to tell there. We already are starting to pursue some emissions reduction initiatives. We're one of the first kind of to [ fire ] out there and talk about solar development and our compressors and plants. And the good news is those are projects that are actually competitive with our other capital projects, heads up, and it's because they're serving our own power loads. So we're looking for opportunities to invest on solar that, again, a great story there. Back on the power front, the power industry in the U.S. has had a -- seen a 33% reduction in CO2 and 40% of that reduction has come from natural gas, 30% of that's come from us of renewables. So we have a big part of story that we can tell towards emissions reductions. There's still something like 75 gigawatts of coal-fired power generation along our markets on Transco. And so there's still a lot we can do to invest and reduce emissions in the U.S. And of course, along with that, if we could consume all of that, if we could take advantage of all of that coal conversion, that would be the equivalent of putting 12 Bcf a day of new pipeline capacity into services, tremendous investment opportunity for Transco, and it would serve to be the equivalent of reducing 380 million metric tons of CO2 like taking 84 million vehicles off the street. So it's just -- we have an incredibly strong story about using natural gas to reduce emissions in the U.S. So if people are serious about that. And I believe the Biden administration is about emissions reductions. And of course, I should say also, about a greater future, we think it's undeniable that we have a role to play in that. And I think it's -- we're hopeful that the politics can move out of the way, and people could get serious in the right here right now opportunities which is to take gas infrastructure, take out fuel in the Northeast, take out coal-fired generation in the West and build the LNG infrastructure to help places like China that are burning tremendous amount of coal-fired generation. So anyway, we think we've got a tremendous story on that front.

John, I couldn't agree more. I think even here in Texas, obviously, with the power market failures, it's been easier to point fingers instead of actually find solutions, but one of the frustrating things I have in talking with investors sometimes is as people seem to think it's natural gas or renewables as opposed to natural gas and renewables in terms of the mix of the power sector going forward. How does pairing the 2 together help the Williams story in some broader sense?

Yes. Well, first of all, 1 thing I would -- 1 of my favorite charts that we had in our investor slide decks is a slide that said, if you look at 2000 -- and I don't think a lot of people appreciate this. When you look at 2019 and total worldwide energy demand, and we always think about power and using solar and wind generation to offset coal or natural gas-fired power generation, a worldwide energy demand, power was only 20% of worldwide energy demand in 2019. Of that 20% gas and wind and solar was only 7% of that 20%. So of worldwide energy demand in 2019, only 1.4% was met by solar and wind turbines. We are huge believers that wind and solar are going to grow substantially. We believe that. We know that, and we will partner with that. The reality is, in the meantime, also the worldwide energy demand is growing. There's lots of people in this world that don't live the life we live and the kind of environment we live in, and they're going to demand more and more. And so the reality is gas is going to grow, renewals are going to grow substantially, and frankly, so is oil. Oil is going to grow, too. It's just -- that's an undeniable truth. So -- but we're going to be able to take advantage of that. And partner with that. Even today, as renewable energy is built. And I don't know if a lot of people appreciate this, but when a solar farm is built or when a utility builds a wind farm, we don't have enough reliable storage today to be able to support the market that those solar or wind farms are serving. And so variably, what happens is the utility that builds a natural gas kicking unit behind that. And to have a natural gas peaking unit and not have firm committed capacity in the pipeline is like having nothing. And so that also means they have to take new capacity out on Transco, which by the way is 100% sold out. And so any time renewables are added, and by the way, the utilities love to invest doubly. They like to invest both in the renewable resource and also the gas peaking units and earn a return on both that. So they're doing that investment, which requires that we have capacity on Transco, whether or not they ever ship an ounce of gas on the system, they have to have that capacity there. So we're partnering today on that side with the utilities, that's the near term. As we move through solar and wind power in the long term, as we build more and more solar and wind, invariably, we're building those resources in areas where there's more power being generated than is needed in those local areas. And so then you get into a question of transport and storage and how do we transport, store that excess power generation that's occurring in those markets. And I think that's where the exciting future is around hydrogen. And about electrolysis and about turning that excess resource into something and using our existing infrastructure to ship that. And so I don't want to tell you that hydrogen is here in the next 3 or 4 years. There's probably some pilot projects we'll probably try to pursue. But I have decided that someday in the future, #1, I think natural gas is going to continue to grow. So don't hear anything different there. But I also expect that hydrogen blends will become kind of a new next frontier for our infrastructure in the long run. And until you can burn straight hydrogen in your stove or in your furnace at your house, which involve probably massive scale infrastructure replacement in the U.S. at best, I think of it kind of like, I think of the refined products industry, you'll probably see blends kind of like ethanol blends and gasoline. I think you'll probably see hydrogen blends in the natural gas. And I think that will be the next wave that will probably take us many, many years down the road.

Yes, that makes sense to me. Hydrogen is definitely the sexy long-term theme of the day. There's no doubt about that. How about renewable natural gas and how that can fit into William's portfolio as another element of kind of a topical theme of the day?

Yes. And I kind of failed to talk more about solar too, but on renewable natural gas front, we already have 6 renewable natural gas facilities connected to our pipelines today. And this is gas that's coming off dairy farms. Or its coming out of landfills or wastewater management facilities. And so we have 6 of those today. We have a team of people that are out looking for additional opportunities. We think there's at least a $200 million additional investment opportunity there. As we think about it today, I think we're just going to have 12 or 13 other sites to connect to our system. And that's just as being responsive to actually developing -- I wouldn't view us to be a developer of these kinds of projects. We're just being responsive and saying, okay, we can connect that into our systems. I think there's obviously a future for us too to actually identify additional sites and be more proactive on that front of timing, green gas or renewable gas into our system. But we already have been active on that front, and we'll continue to be active on that front. Especially in the northwest to, we've got a lot of that opportunity in the northwest. So that's certainly an opportunity set for us. Solar, and again I haven't talked much about that. We identified several months ago that the total opportunity set available to us on solar power is around $400 million. That's over several years. On a more smaller subsection of that, we've got 13 active sites that we're looking at using solar power to offset the power consumption we used to fuel our pump stations in our processing plants. And those projects stand ahead of our other projects from a return standpoint. And they're based upon the cost of power and they're based upon renewable energy credits that are available to us, but those would be great projects to bring down emissions. And to kind of do our part on end and on the other end they're great returns. And so in the shorter term, at these 13 sites, that's about $250 million of that $400 million investment that we see as an opportunity over the next 2 to 3 years. So nice opportunity set renewable natural gas, a nice opportunity set on solar investments. And again, as you look further out on the horizon, we certainly feel like we ought to be 1 of the leaders in the hydrogen development, certainly, especially in some of the markets we serve in the Northeast, where maybe there's more sensitive -- more sensitivity to hydrocarbons, there seems like we should be able to help solve something in those markets. So we'll certainly be active on that front.

Got it. John, I think the last element for ESG, the G component tends to be the most overlooked, but I would argue maybe that the most important of all of them for a corporation in particular. Maybe just talk about how, in my opinion, Williams has one of the strongest Boards in all of energy. Maybe just talk about how having a strong diversified Board helps keep the company on a solid foundation here.

Well, I think that's a key point. I mean we have -- and I really encourage anybody who's thinking about Williams that's not invested in the Williams to look at our Board, we have some highly seasoned and highly talented executives that our Board members, Scott Sheffield, Chairman of Pioneer; Steve Chazen, Chairman at Oxy; Mike Creel, who was an ex Chairman of the Enterprise, Nancy Buese, CFO for Newmont Mining. Anyway, we've got some really -- and everybody else, I don't want to -- hopefully, if our Board members are listening to this. I think they're all fantastic, highly talented people. And I will tell you, obviously, I've been on Boards. I retired from Magellan for a period of time, and I was on 4 boards, I've been exposed to other Boards. This Board is incredible. And the dialogue we have is incredible. This is a one-way information exercised when we [ move forward ] with them, it's a highly engaged discussion with people who are very understanding the industry. 12 of our 13 directors are independent. We have a very strong Independent Chairman of our Board, who is very vocal and very involved in what we do. All of our -- all of our committees are independent -- our Board has been very active on the safety side and pushing us forward. We're -- obviously, we've even been safety very important, with their help push us forward. They're helping push us forward on the ESG front. And that committee is very engaged in our reporting exercises around ESG and what we're doing there. And they're very involved on the diversity completion front. We are being very advanced and moving forward on trying to to improve our diversity and inclusion metrics as well as a company. So -- and of course, it goes without saying, we eliminated our MLP in 2018. So we didn't have that -- we are governing going on that I know confuses and and creates issues for some people. So anyway, for what it's worth, I think we have the best Board in the space. I think it's an incredible Board. I think you can see the decisions coming out of the Board to the actions that we're affecting in the marketplace. We're being careful. We're being safe. We've got tremendous coverage. We're improving our financial flexibility, and that's all predicated on the governance that you're seeing coming out of our Board.

John, we've just got a few minutes left here. I'll skip to my last question here, and we're going to round-trip it back to where we started, where we talked to to initially the consistency, the stability of Williams. Maybe talk about the next handful of years that the most visible elements of growth that you think that the company has over the next, call it, 3 to 5 years?

Well, yes. No, I appreciate that question. And I think some really exciting areas for growth for us. First of all, Transco is going to have tremendous opportunities. And we produced a slide in our earnings deck that shows something like 26 projects on Transco, that's $12 billion of investment. And I will tell you, that's not a stale document, that changes all the time. There's new projects that come in and projects that go off. So those are real things. Those are tied to new LNG opportunities where we'll build new pipelines to [ targeting ] new LNG opportunities, power conversion opportunities and new industrial development. So those are all real and great opportunities that hopefully we'll be able to FID. And that doesn't include the emissions reductions opportunities on Transco, that we get a rate base return on. That doesn't include the solar investments on renewable natural gas investments. And it certainly doesn't involve hydrogen opportunities. And so when I think about Transco and our transmission systems and even beyond Transco and Northwest Pipe and Gulfstream and and we have another system called [ Cardinal ] . Great opportunities on those systems going forward. So I think a lot of great growth coming there. When I think about the Gulf of Mexico, I saw statistics from our team that operate those assets, I think there's a 94% utilization of drilling rigs in deepwater Gulf of Mexico right now, very active. And we are the largest natural gas gatherer in the deepwater the Gulf of Mexico. And there's not a lot of people that can build pipelines in 7,000 and 8,000 feet water, we can. And so we have a lot of [ collating ] capacity, by the way, on those systems as well. So as that production comes online. In some cases, that production is dedicated to us. Or in other cases, it's very close to our existing infrastructure. We expect to see a lot of growth coming out of the deepwater Gulf of Mexico. And the final thing I'd say, related to the next several years, we did out of this bankruptcy process, we turned -- in our view, we turned -- limited our M&A, we were able to exercise our rights and control in some of these bankruptcy process to end up with acreage at very, very cheap cost. We don't intend to be an upstream operator or acreage or a producer. But what we do intend to do is to utilize our ownership of that acreage to pick the right producing partners and produce that acreage and drive our midstream value. And I'm very confident that, that strategy is going to work very well for us. So anyway, we see a -- just a lot of growth opportunities for us over the next several years. And again, we've got the balance to go take care of that. We've got ourselves in a really good financial position. So that. And again, we're really excited about what our future growth looks like.

Very good. John, Danilo. We very much appreciate your participation in the Institutional Investors Conference. I hope to see you all in person again next year, if not much sooner than that, but wish you all a very safe day and look forward to catching up again here soon. So thanks again.

Thank you.

Thank you.