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BRIAN K. LANGENBERG, CFA is a strategic thinker, team builder and expert in global manufacturing, machinery, logistics and distribution. He is a trusted advisor to CEOs and other executives of public and private companies, institutional investors and high net worth individuals because of his... More
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  • WHY WILLIAMS COMPANIES CAPEX WILL PAY OFF IN RICH DIVIDENDS 0 comments
    May 16, 2014 6:05 PM | about stocks: WMB, WPZ, ACMP, AME, EMR, HON, ABB

    Analysis prepared by Nathan Yates, Research Associate

    Key take-aways from Williams Companies investor day:

    U.S. natural gas market - see 3% supply growth, 2% demand growth to 2030. Goal to be #1 or #2 North American gas infrastructure developer.

    Northeastern shale plays (Marcellus, Utica) - volumes up 64% in 2013; expect to double by '16 to 4 Bcf/d.

    Geismar update - #2 cash-generating facility offline since 2013.06.13 due to explosion but repairs 93% complete.

    NGL Supply Growing - requires movement from source of production to demand centers on the Gulf Coast and in the industrial Midwest/Northeast. This has driven a capital spending ramp….

    Capital spending - which is peaking in 2014.

    Entity (Ticker)

    2014

    2015

    2016

    Williams Companies (NYSE:WMB)

    $455-565

    $405-505

    $470-630

    Williams MLP (NYSE:WPZ)

    3,305-3,875

    2,195-2,705

    2,050-2,510

    Access Midstream JV (NYSE:ACMP)

    1,100-1,200

    900-1,000

    600-800

    Totals

    $4,860-5,640

    $3,500-4,210

    $3,120-3,940

    Change - midpoint

     

    (27%)

    (8%)

    Industrial company impact: These companies may face (manageable) headwinds in their midstream businesses beginning in 2015 - AME, ABB, HON, EMR.

    As capacity additions ramp and capital spending falls shareholders and unit holders benefit….

    Dividends - parent company distributions will grow faster than MLP through '16.

    - Williams Companies (WMB) - expect 20% per annum through 2016. High coverage.

    - Williams MLP (WPZ) - distributions up 6% in 2014-15 with 4.5% growth in 2016.

    - Access Midstream (ACMP) - paid $1.94 in '13; see 178% growth to '16 implies $5.39.

    We think investors who care about growing dividends should give ACMP a look. The units closed at $59.04 today and assuming even a 5% dividend yield in '16 could trade to $105+ over the next 2-3 years.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: WMB, WPZ, ACMP, AME, EMR, HON, ABB
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