WILLIAMS COMPANIES, INC. (WMB) stock intrinsic value fair value estimate & owner earnings analysis

What the business is. Williams owns and runs one of the largest natural gas pipeline networks in the United States. The core is Transco, a federally regulated interstate pipeline running from Texas and the Gulf Coast through the Southeast to New Jersey and New York, plus Northwest Pipeline and MountainWest in the Rockies and Pacific Northwest. Pipeline customers (utilities, power generators, LNG exporters) pay fixed reservation charges for capacity whether or not they use it, and rates are set by the federal regulator on a cost-of-service basis. Around this sits a gathering and processing business in Appalachia, the Haynesville and the Rockies that is paid by volume, gas storage on the Gulf Coast, a marketing arm, and small upstream interests. These are more exposed to drilling activity and gas prices. A newer line of business builds gas-fired power plants that sit right next to data centers. The first, Socrates in Ohio, finished its first phase in 2026. How we measured earnings. Operating cash flow has risen from $3.7 billion in 2019 to $5.9 billion in 2025, and it was $3.0 billion in the first half of 2026 against $2.9 billion a year earlier. Capital spending is the hard part. The company does not split spending between upkeep and growth, and its reported revenue swings with gas and NGL prices, so a revenue-based estimate of upkeep spending gives the wrong answer here: it would count most of 2025's $4.9 billion build-out as upkeep. We used the company's own filing instead. Its 2023 annual report planned $1.45 to $1.75 billion of growth spending for 2024, and total 2024 spending was $2.69 billion, which leaves about $1.1 billion for upkeep. We scale that figure with the size of the asset base, giving about $1.16 billion for 2025. We remove working-capital swings, count stock pay as a cost, take out the cash paid to minority partners, and exclude the one-time $534 million Energy Transfer litigation recovery in 2023. On that basis the cash the business produced before paying its lenders and before any growth spending was about $5.1 billion in 2023, $4.8 billion in 2024 (a year of low gas prices) and $5.8 billion in 2025. The jump in 2025 came from the Transco rate increase filed in August 2024 that took effect in March 2025 and expansions placed in service in 2024 and 2025, and the first half of 2026 held that level. Some of 2025 also came from firmer gas prices. We therefore set the base level at $5.5 billion a year, below 2025's actual figure. That means year one starts below last year's 20% increase. One accounting point matters: depreciation of $2.3 billion is well above the upkeep estimate, because pipelines last for decades and part of the charge is amortization of acquired contracts. Those contracts are long-dated acreage dedications, and their slow decay is carried in the bear case. Growth we credited, and what we left out. We credited only growth already paid for or under contract. (1) The build-out under construction: Transco expansions such as Southeast Supply Enhancement (about 1.6 Bcf/d, due late 2027) and gathering projects. All Transco expansions are backed by firm transportation contracts. We assume about $7.8 billion of Williams-funded non-power investment returns 11% a year after upkeep, ramping in over three years. (2) Five behind-the-meter power projects (Socrates, Socrates the Younger, Apollo, Aquila and Neo). In July 2026 a Blackstone-led group agreed to fund 49% of their roughly $9 billion cost and pay Williams about $0.9 billion more for a 49% stake. Williams keeps 51% of the cash flow. We credit Williams' share for a ten-year contract life and only part of it afterwards, because nothing we can verify says those plants will be re-contracted. (3) In the base case only, a continuing Transco expansion program of $1 billion a year for ten years, earning 11%. Williams has expanded Transco under firm contracts almost every year for decades, through the 2015-2016 and 2020 downturns, mostly with its own cash. We left out management's earnings targets, any growth from LNG or data-center demand beyond signed projects, and inflation escalators. The pending $5.5 billion Momentum Midstream acquisition ($3.5 billion in cash and debt plus about $2 billion in new shares, awaiting antitrust clearance) is treated as paying fair value. We give it no credit as value creation. Federal tax loss carryforwards that kept cash taxes very low ($162 million paid in 2025 against $857 million of tax expense) are running out, so every case includes rising cash taxes. Base case. The $5.5 billion level holds for roughly thirty years, then fades out over the next twenty. Regulated cost-of-service pipelines with take-or-pay capacity contracts serving Southeast power demand and Gulf Coast LNG are the evidence for a long life. The contracted build-out adds about $1.5 billion a year once complete, and cash taxes rise by $250 million, then $400 million. The business is worth about $92.7 billion. Debt is $30.6 billion (long-term debt $28.1 billion, current maturities $2.2 billion, commercial paper $0.5 billion, a small preferred issue, less $0.2 billion of cash). We reduce that by about $1.2 billion because existing fixed-rate bonds carry an average coupon near 5.35%, well below what new long debt costs, which brings it to $29.4 billion. That leaves about $63.3 billion, or $51.62 a share. Bear case. The level stays at the 2023-2025 median of $5.1 billion. A downturn like the 2015-2016 gas and oil price collapse, which brought customer contract renegotiations (Chesapeake then, and again in its 2020 bankruptcy), cuts gathering, marketing and upstream cash by about $660 million a year for two years and $330 million in the third. About $110 million is lost for good. That is deeper than Williams' actual experience: operating cash flow rose in 2016 and dipped only about 5% in 2020. New projects earn 8.5% (power 11%, with no value after the contracts end), the remaining build costs overrun by 15%, cash taxes rise to $450 million and then $600 million, the Momentum price proves $1.5 billion too high, and the pipeline business starts fading after fifteen years. The business is worth about $61.1 billion against $30.6 billion of debt, leaving $30.5 billion, or $24.88 a share. Even at the trough, cash flow covers interest of about $1.5 billion more than twice. Leverage near 4 times cash earnings would likely force a slower dividend or more partner capital rather than a restructuring. Bull case. The level is the 2025 actual of $5.8 billion. Projects earn 13% (power 15%, with half the cash flow continuing for fifteen years after the contracts). The Transco expansion program runs at $1.5 billion a year for fifteen years. Cash taxes rise more slowly, and the network lasts forty years before fading. The business is worth about $114.5 billion against $29.4 billion of debt, or $69.39 a share. What could make this wrong. The two largest risks are executing a capital program now running at more than $7 billion a year, and how much gathering cash flow depends on producers continuing to drill. Pipeline permitting and regulatory outcomes, including future Transco rate cases, can move results, as can a major pipeline failure. Debt due within a year was $2.2 billion at mid-2026, small relative to annual cash flow, so no single maturity drives the outcome. Our previous figures were prepared on a different basis and are not comparable. Margin-of-safety price. We are reasonably confident in the earnings level. More than half comes from regulated pipelines paid by reservation charges, operating cash held up through 2016 and 2020, and contracted future revenue stood at $30.7 billion in mid-2026. We are less sure about cash taxes, the returns on the power plants, and the gathering business through a gas price collapse. The worst plausible outcome is a deep commodity downturn while the build-out is still under way, which would push leverage toward 4.5 times and likely bring a dividend cut like the one in 2016. The hard assets, investment-grade balance sheet and long-dated debt should survive that. If we are wrong on the level, the project returns and taxes together, the shares are worth about $25. The dividend is $2.10 a year and has risen every year since 2017, so owners receive cash over the holding period. The margin-of-safety price is $30. At that price the dividend yields about 7%. If the base case plays out over four years, the dividends plus a value of about $56 a share at that point imply roughly 20% a year. If the bear case plays out instead, four years of dividends roughly offset the shortfall, so from $30 the bear case implies about breaking even rather than a large loss.