Williams (WMB) is acquiring six storage facilities on the Gulf Coast, an asset class East Daley Analytics expects to grow in value as LNG exports ramp over the next decade.
WMB announced the $1.95B deal with Hartree Partners LP on December 27. The six assets in Louisiana and Mississippi have a combined storage capacity of 115 Bcf. The portfolio includes Arcadia Gas Storage, Cadeville Gas Storage, Perryville Gas Storage, Monroe Gas Storage, Pine Prairie Energy Center, and Southern Pines Energy Center.
Together, the six storage facilities have a combined 5 Bcf/d of injection capacity and 7.9 Bcf/d of withdrawal capacity, ranking among the highest injection/withdrawal capacities of any storage platform in the US.
East Daley highlighted the future value of natural gas storage in our 2024 Dirty Little Secrets report, two weeks prior to the Williams announcement. In Dirty Little Secrets, we noted developers have not expanded gas storage capacity to keep pace with market growth. As more LNG projects come online, storage becomes more critical for balancing supply and demand.
Without any new expansion projects, we estimate the combination of total US gas demand and exports would eclipse US storage withdrawal capacity by 2027 (see chart). When constraints or market disruptions arise, it will become harder to use storage to meet demand.
As the LNG export ramp approaches, the market is starting to recognize the value of storage. In addition to WMB’s recent acquisition, Enbridge (ENB) acquired the Tres Palacios facility in Texas in March 2023.
Growing facility revenues show the increasing value of storage. EDA tracks the revenues reported to the Federal Energy Regulatory Commission (FERC) by operators with significant Gulf Coast storage assets. These revenues have increased by ~20% over the last five years. The total contracted volume on those assets is up 8% from both higher utilization and increased rates.
Williams is paying a higher price since these assets last changed hands, reflecting their greater value. Hartree originally purchased Arcadia, Cadeville, Monroe, and Perryville in a 2019 transaction with Martin Midstream for $212MM, while the company purchased Pine Prairie and Southern Pines from Plains All American Pipeline (PAA) for $850MM in 2021. Unadjusted for inflation, Hartree’s investment in the assets totals $1.06B.
WMB expects a 10x multiple on 2024 EBITDA, placing the estimated EBITDA at $195MM for the six storage assets. WMB could see this multiple decline if revenues continue to climb from the Gulf Coast facilities. – Zach Krause Tickers: ENB, PAA, WMB.
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