Good day everyone and welcome to the The Williams Companies First Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. John Porter, Head of Investor Relations. Please go ahead.

Thanks David. Good morning and thank you for your interest in the The Williams Companies. Yesterday afternoon we released our earnings press release and the presentation, that our President and CEO, Alan Armstrong will speak to momentarily. Joining us today is our Chief Operating Officer, Micheal Dunn; our CFO, John Chandler; and our Senior Vice President of Corporate Strategic Development, Chad Zamarin. I've also mentioned that we've refined our quarterly earnings materials and our format for this call. We've adopted a clear earnings press release format and we've integrated the previous stand-alone analyst package into the earnings release documents. So we now basically have one document there rather than two. In our presentation materials you will find an important disclaimer related to forward-looking statements. This disclaimer is important and integral to all of our remarks and you should review it. Also included in our presentation materials are non-GAAP measures that we've reconciled to generally expected accounting principles. These reconciliations schedules appear at the back of today's presentation materials. And so with that, I'll turn it over to Alan Armstrong.

Great. Thanks John, and good morning and thank you for joining us this morning, as we discuss our first quarter financial performance and the key investor focus areas today. As John said we took a fresh look at the format and we're going to stay pretty brief and focused in our prepared remarks, to allow time for Q&A. So let's move right into the prep -- to the presentation and take a look at our first quarter 2019 results. On Slide 2, we provided a clear view of our year-over-year financial performance and the results you see reflect continued steady and predictable operational performance and strong project execution from our E&C team. And the results reflect very little direct commodity exposure, in fact our first quarter 2019 gross margin reflects 98% fee-based versus only 2% in direct commodity margins. And these contracted fee-based revenues are not dependent on basis differentials or commodity buy-sell transactions, allowing for continued predictability and durability in our cash flow streams. So taking from the top here, cash flow from operations increased 12% demonstrating significant free cash flow in the quarter when compared with the 46% reduction in the capital expenditures you see at the bottom of the slide. A much more to say about the adjusted EBITDA performance on the next couple of slides, where you can see here that it increased 7% year-over-year without adjusting for asset sales. And also you see really nice improvement of 16% for our adjusted EPS and on DCF we were up about 8% and we've also introduced DCF per share on this summary, which grew about 7% versus last year, and then lastly our very strong 1.7 times dividend coverage also increased versus the prior year. So really nice improvement on our various earning and cash flow metrics…

Thank you. [Operator Instructions] We will now take our first question from Jeremy Tonet of J.P. Morgan. Please go ahead.

Wanted to start-off with the Northeast G&P and I was wondering if maybe you can provide a little bit more detail with the volume growth that you're talking about. Maybe some thoughts on the cadence there how you see that kind of progressing over the next several years, based on producer conversations and also kind of CapEx specific to this area? Has that lightened up at all?

Yes, in terms of cadence I would just say right now we've got a lot of activity, a lot of wells being and pad being turned in the line right now as we speak actually here in the last month. So a lot happening out there right now, it's all over the place both in the Northeast and the Southwest. And so what's going on that, I would say in the Utica area the Encino team there has just now taking over operations of that area, and transition from Chesapeake and that we are really working closely with them to have kind of the same kind of integrated approach to development and growth development that we have with both Cabot and Southwestern, so really excited about the team they've pulled together there at Encino and our ability to work with them. In terms of kind of the cadence there, I would just say certainly, Cabot intending to lead the way with development with 20% kind of growth. And so I would the Northeast PA continues, they have continued to invest with or support our expansions of further expansion on our gathering systems out there. And of course we're very interested in additional takeaway capacity out of the area, given the big reserves and the low cost reserves they have in the area. But I would say in the Northeast there really hasn't been anything other than just continued steady performance by Cabot, and we're starting to see that kind of spread in to some of the other areas as well like in the Bradford area. So Northeast, so I think is very predictable and steady. The areas that have more I would say volatility in terms of ups and downs and perhaps things are little more reactive -- the prices…

That's helpful. Thanks for that. And turning to UEO-OMV the combination there, just wondering if you might be able to provide a little bit more detail as far as some of the synergies you see, bringing those two assets together as far as capital efficiency improvements.

Yes. Great question. It's reeling on two fronts. First of all, the very simple front there, is on the liquids front, so we have the Moundsville fractionator sitting there, that has been running right up against its maximum capacity and we had some investments, that was going to be required there to continue to operate that facility, and to expand it. And now we're going to enjoy being able to put those liquids through our new pipeline that we're building over to the Harrison fractionator. And so, we'll be taking those liquids over to the excess capacity, big excess capacity that exists at the Kensington fractionator. And so they were sitting there a lot of the latent capacity on the fractionation side, and better markets there at the Kensington area. So effectively allows us to shift our focus of growth for fractionation and reduce any investment required at Moundsville, and quickly take that capital out of our capital plan, so that's the simple side, on the more complex side we also are looking at ways to take advantage with the excess processing capacity that UEOM enjoys. And we're starting to run up on the capacity constraints there at OVM. And if growth continues there we'll be looking for ways to move volumes over to UEO as well. So those are kind of some of the obvious issues, obviously there is management consolidation and overhead consolidation, that's beneficial to us. But a lot of it really just has relates to being able to take capital out of our plan that would have otherwise been in there.

That's really helpful. Thanks. And last one if I could, it seems like NESE could really lower CO2 emissions by displacing dirtier fuels. Just wondering how that messaging is resonating in the communities that you're looking to operate in there? When do you see kind of the path forward at this point as far as permits been -- when construction could start there?

We absolutely think that NESE is a key piece of the puzzle in the New York city and New Jersey metropolitan to reduce emissions especially CO2 emissions, it's very dramatic in regard to the emissions profile of the fuel oil. It's currently being used and converted to natural gas up there. And we're going to be a key part of that, continuing opportunity to convert. If NESE gets approved and we think it will and gets built. The permitting process is currently in the late stages here. We expect to receive a FERC certificate for that project any day now. And the 401 Certification deadline in New York was mid-May. And then the 401 Certification deadline in New Jersey is mid-June. So we would expect several of those permits to come to the forefront here in rapid fashion.

We will now take our next question from Shneur Gershuni of UBS. Please go ahead.

Just sort to follow up on the Northeast questions a little bit. Your first and foremost just the consolidation of UEO into Williams or the UEO transaction rather. Is that sort of change your weighted average growth rate kind of beyond 2019? And when you talked about being able to take down CapEx what you've done materially for this year, does this CapEx efficiency benefit roll into 2020 and beyond?

And first of all on the gathering volume fees it really doesn't change that, because remember we're already operating the gathering systems that feed into UEOs, so those gathering volumes would have already been in there, so their drilling not any change on that UEO, is primarily just the fractionation of processing facilities downstream to that. So that's really no change from that. So that's really no change from that. On the question about capital savings going forward, I would say a big chunk of the capital savings and the synergies are actually now forward-looking as we take advantage of being able to balance between the two processing complexes and the liquid. So actually a lot of the capital is even more -- lot of the gathering capital really won't change that much. If you think about, that it's really on the processing and fractionation capital, that will be able to shift volumes into areas that would not have put expansions into, I think it would --.

Great color. Just another follow-up kind of a bigger picture question. You sort of talked about in your prepared remarks about a longer-term growth rate of 5% to 7% for EBITDA. Can you talk about what kind of capital program would be needed to support that type of long-term growth rate? And could we assume it would be funded at least 50% from internally generated cash flows?

Yes. And I'll maybe have John Chandler take that in terms of where we would go with that. As we said the $2.5 billion to $3 billion, assuming a little more moderated returns than we've been enjoying, generates that 5% to 7% growth rate. And so obviously as we can high-grade our investments that improves, and bring in synergies like we're doing on these JVs. But generally that $2.5 billion to $3 billion is what we think it takes to grow that 5% and 7%. And I'll let John talk about the funding.

I think that's fair. As we look forward in our projections today, using -- this $2.5 billion, you use that as the number, a tight expansion capital. And as we look to our forecast, we're able to fund that completely and entirely through excess cash flow. And obviously some new leverage in the future but with the growth of our EBITDA we're able to maintain and continue to lower our leverage ratio going forward. And fund that capital exports, that kind of EBITDA growth.

So with your -- effectively once you hit your leverage target, will there then be room to consider share repurchase business while also?

We had to talk about that once we get there. There is still work to do obviously between 4 -- under 4.6 to 4.2, there is still quite a bit of work for us to do. So I think we've got time to talk about that, but certainly when we get to the point where our leverage targets or where they need to be, we will be generating a significant amount of excess cash flow.

Yes, so I would just say on that front, we'll see what the markets look like when we get to that point. But -- and so is kind of hard to answer that, because we're speculating on what the returns would be on that investment versus our other investment. But I can't tell you we're constantly allocating out capital return project, that a lot of the industry would accept. And so I think, there will be a balance there between increased capital investment opportunity, is another thing we can do with that capital. And like I said, we're constantly allocating away projects today as we continue to press on deleveraging the business.

Okay. And one last question if I may. Your excitement level about the Gulf of Mexico seems to be increasing. You sort of touched on your prepared remarks, but I was wondering if you can sort of expand on the opportunities that you see there and how we can -- should be thinking about it on a go-forward basis?

Yes. I would just say, the opportunities are getting to be so clinical -- that kind of get hard to keep track honestly -- but some of very certain opportunities exist around the Gulf, West, our operations around the Perdido area. Obviously, the well prospect out there is going to be a big mover for us. And Shell just announced a little bit earlier this month or sorry in April the Blacktip discovery which is also another very large discovery in that Perdido belt area. And then to the south of that of course, the Mexico Perdido is even a much larger kind of where a magnitude opportunity, that we're extremely well-positioned for. So on the Western Gulf it's going to be a matter of maximizing our return on the investments. There is plenty of production to fill up our existing capacity and then to more. And so really important opportunities for us out there, and we're just extremely well-positioned both contractually and with the infrastructure that we have in place out here today. If you move over to Gulf East of course, really excited about the Ballymore prospect that will likely get produced across the Blind Faith -- Chevron Blind Faith platform. And that's also a very large find there. And again just big free incremental cash flows coming our way with very little to no capital on our part, so we're excited about that. And then the Northwest prospect while we kind of thought that was almost singular as an investment. Originally, we like the returns just singularly across that one field. We've seen a lot of new development out there around the North -- not just by Shell but also by Chevron, now in that area. And so, what's going on in the central Gulf, lots of…

Yes, I'd like to add to that -- on the opportunity, so that was a great negotiation for us to have with Shell there where we acquired the pipeline that they build, it was pretty negotiated with the return. And we're obligated obviously to move their gas to shore through our Mobile Bay facilities, where we have percent of liquids contract with them to process that gas. But the strategic value there additionally to us is the fact that pipeline won't be full. And from day one we can go out and acquire other business to bring through that with subsea tie-backs into that Northwest pipeline, that will purchase upon first gas movement there. So a great opportunity for us to take advantage of that facility, that it's already been build, so the construction risk is taken away, as well as the timing risk has been taken away, because we don't pay for it until the gas flows.

We will now take our next question from Christine Cho of Barclays. Please go ahead.

Good morning, everyone. You guys have talked about wanting to consolidate Northeast for some time. And obviously the UEOM tend to actually test you in that direction. How should we think about the potential for Blue Racer to be included under that umbrella?

Great question, Christine as always. And I would just say the -- a lot of value in that combination, we're working through some various transactions to try to extract some of that other than through direct control of the asset. But certainly a lot of opportunity there. But I would just say we haven't been able to get there from a price standpoint, we haven't been able to get to what we thought it make sense for us on that. And so I would say lots of opportunity, but we remain patient and will remain patient with making those combinations. So, but I do see some opportunity just contractually to continue to find ways to utilize common facilities out there and I think that's a -- step in the middle if we can't reach agreement on a broader transaction.

Okay. And then you guys are tracking to get to your targeted leverage faster than planned. Should we think that there are any other non-core aspects that you're contemplating selling? Or is this sort of it?

Well, I would just say we're always -- look we continue to see this big spread between what our stock is trading for, versus what these assets are selling for. So if we can do those kind of transactions in a way that don't dilute our future and our -- and stand in a way of accomplishing our strategies then we'll continue to look through those. But we don't have anything specific on the drawing boards. And I think as we said forth, I think looking to our strategy and looking to how things link in our asset base, is not because we have some written rules, that says we have to have the downstream business for it to be a core asset. But when it comes to placing capital and new capital it's competing in this capital allocation process, that we're constantly running. If it doesn't enjoy the downstream benefits and the coupon that both from a downstream benefit, the incremental returns just don't stand out. And so, Niobrara is actually a perfect example of that. The returns just on the stand-alone G&P basis there, just didn't stand up well within our capital allocation program. So we had both partners and customers -- frustrated with our lack of interest in investing at those return levels. And wasn't for any reason other than a distant stack up within our capital allocation process. And so that's why we are fixated on that and just because those areas that are in growth tend to drive those higher returns, and therefore make it through our capital allocation process. So I think that's about as much as I can tell you. Do we have site and then check where at this time, the answer is no.

I would also say though there is possibly cheap money looking for opportunity out in the marketplace and very similar to our Four Corners asset. We get approached by the market all the time on asset. So again to Alan's point, well we don't have anything specific thing targeted and we're constantly being approached.

We will now take our next question from Gabriel Moreen of Mizuho.

I just had a quick question on the Transco rate case and some of the associated details around that. It seems like you timeline there has been extended, around settlement discussions. Can you just talk a little the decisions to kind of keep going with some discussions and having extended timeline here fairly considerably, I assume you're pretty confident in terms of your position there, so why not a move -- to maybe litigate a little bit earlier than end of 2020? And related to that, the -- emissions reductions expanded at Transco. Is there, is that going to be part of the rate cast or separated out and is that something you would spend before the rate case was concluded?

I wouldn't say it's necessarily extended out per se, it's just a process we have to go through in front of a administrative law judge there and regards to trying to reach resettlement. So we think it's prudent to continue that process, until we reach impasse with our customers, but we certainly not there yet. So we're rapidly working with them to try to come to a settlement that both sides appreciate and like. But it certainly doesn't mean we won't be willing to litigate that, we would impasse and certainly the administrative law judge will assist us in getting there. Hopefully, quickly, so that we can don't move on to litigation path, that settlement is not, where we ultimately end up, but we would love to have a settlement with our customers there, we think it's a proper way to -- hopefully to achieve a good outcome for both sides. But, we're not afraid of litigation path as well. Specifically on the emissions reduction, so the way we've contemplated that it would be a separate tracker as we spend the capital, we would basically change the rate upwards to accommodate the compression that's been replaced there. And it's really just allows us to do that, as if we were going through a rate case, so to speak. Without having to go for a rate case we'd be able to increase those rate, as we deploy that capital to reduce those emissions along the Transco pipeline system. And so it's ultimately we don't get the emissions tracker, that would make it more likely that we would have more rate cases coming, to be able to accommodate those emissions reductions projects within our rates.

And then maybe if I can just get more of an update sort of on Bluestem and how discussions are going on that? It looks there, recent oil prices has been motivating customers a little bit more. And to what extent you're looking at partners there? Where it may stack up sort of on the returns profile or within your capital backlog?

I would just say, we continued to work on projects in the Permian to Transco markets. But we've seen recent dislocation in basis from the basin obviously to the coast. But if you look at the forward curves, I think the market has been a little slow to recognize, that might be long-term sustainable. So we're going to be really, I think cautious in ensuring that any project that we would proceed with this -- is one and that has really solid fundamentals and economics. I think if we were to move forward it would be with partners. We are not looking to make an investment of that scale, out of the basin on our own. And ultimately I think, what's important to us is to continue to build Transco's market connectivity both on the supply and on the demand side. And so we believe those volumes ultimately wants to get to the best market and so we think Transco offers those very best market. So again, we continue to explore participating in a project from the Permian to the Gulf coast. We have volumes, with our partnership with Brazos Midstream that we can leverage for the purpose of benefiting and improving a project. But again I think the economics that we've looked at, at least the date on the project that have gone forward and that have been contemplated haven't yet met our expectations, alongside the inventory of opportunities that we have. And so we'll continue to work it. And again, I think the most important thing for us to be -- we make sure that Permian gas has a good home to come to along our Transco market.

We will now take our next question from Colton Bean of Tudor Pickering Holt & Company. Please go ahead.

Good morning. Actually, just a follow-up on the Bluebonnet discussions there. Have you seen any shift in producer willingness to flare given kind of the extreme focus on ESG for the upstream community over the last couple of months?

Yes, I think we continue to see quite a bit of flare, but I do think the producers are interested in getting gas to market. I think they're looking forward to release coming later in the year, when the first long-haul project comes online. We've seen significant volumes shut-in, in the alpine high area. And so we have seen, I think restrictions associated with gas prices in Waha. So I think we get a lot of questions around with this large, the basis is why we haven't seen a stronger move toward the additional project. I think what we're seeing is, it takes, as Alan mentioned in his comments, it takes a lot of time and effort to create infrastructure that can move all the way from West Texas to the market. And so, I think we'll continue to see a desire to reduce flare, but the options today are either shutting in or waiting for infrastructure to be built and it take some time. We think another project needs to get built, but again if you look at the curve, the forward curves from basis from Waha to Henry Hub, right now, those prices don't support an investment in a long-haul pipeline. So until we see producers and end market users willing to step-up for a longer terms and better economics. And I think we'll continue to see challenges in the basin.

Got it. And just circling back to the Q1 results here. So on the downtick in the Atlantic-Gulf operating expense, is that a function of timing on the maintenance spend? Or is there something more structural or nature to point too?

Yes, this is Michael. It's not really, it's more of -- we had some one-off issues last year, that specifically in our unregulated business with turbine overhauls and things of that nature, that contributed to that higher expense in the comparable quarter in 2018. So it's not really a structural issue, it's just a timing issue of activity.

Got it. And so 2018 was probably an elevated level and this maybe a better look at the go-forward rate?

Well, I'm not going to be predictor of go-forward rates with the exception of saying that, it is lumpy, because of timing and specific terminal overhauls. They're pretty expensive, a couple of million dollars to terminal overhauls and it have to be done at certain intervals of run time hours. And so we have to accomplish those and we had the run time hours, and so it's highly dependent upon the run time of the equipment. For example, when we have to do those, and we have emerging problems, we have to go take care of. And I would also say in 2018 quarter we also did a lot of work on our reciprocating compression on the Transco system, that had to be accomplished as well. So it's just a timing of overhauls aspect and it's highly dependent upon run time.

And just a quick final clarification here. For the $400 million reduction of the capital program, I think you all noted previously that around $90 million was associated with Jackalope. So is the balance of the entirety there solely attributable to the Northeast? And as we think about the Northeast, Alan I think you mentioned a just-in-time element for some of the reductions. Does that imply that any of this has shifted to 2020? Or should we think about it more in terms of the processing discussion you outlined?

First of all, it's combination on the last part of your question. It is a combination of stuff getting pushed out, as well as ability to not have to for instance, continue to expand at Oak Grove and Moundsville. So yes it's getting pushed into '20 but you'll see some of the benefit of synergy show up in '20 would offset that. And then finally on your question of the $90 million, the Jackalope $400 million elsewhere. Well, I just say a lot of moving parts, of course we had a little bit of cost in there for getting on with the fractionation at Bellevue, as well as Bluestem, who is going in there. Some capital coming out of the Northeast and some lower capital for the year, just as these projects, we always have a lot of contingency built into these projects, and those push out and get closer, you saw we advanced one of our Transco projects in the 2020. And so we're actually seeing really good performance on that front. But for the most part, it is coming out of the Northeast, but not all.

We will now take our next question from T.J. Schultz of RBC Capital Markets. Please go ahead.

On the executive order, you guys highlighted what's your expectation from the DOE, is it worse to submit report just on timing to get more clarity around that? And any input you all are having on that process?

Well, obviously on the Presidential Executive Order, first of all we were really impressed with the work that was done by the various attorneys -- staff attorneys around EPA. I think everybody recognize that the -- some of the so called guidelines and I'll use quotes around that, term guidelines had been put in place during the Obama administration, that has become treated almost like rules by the state and in fact, there never really been a regulatory process to establish that. And I think the appropriately the EPA administration is regardless of which part of the affiliation you're interested in. I think they thought, that was not proper administration and regulation and so they're trying to bring clarity to that. And I think exactly what we've been asking for, we haven't been asking for easier regulations, we've been asking for clear and consistent regulations. And that's exactly what we thought the order tried to address without overreaching toward any one particular project. So it's something that need to be cleaned up. And if you really dig into that, it's actually a very astute and a detailed approach to it, that we really applaud. I think it's exactly big step in the right direction and it's obvious to us, and there was great experts involved in that. So well, I don't see it being a miracle tier for anyone of our particular projects that we have out there right now. I do see it as a big step in the right direction for bringing clarity and consistency between how the states and the Fed still with Clean Water Act regs within the EPA. So pretty impressed frankly with sophistication of that work.

Okay. It makes sense. Just one more, you mentioned on Bellevue a couple of times, may be ignoring timing on end service, they've built a lot of that project. Assuming they get to Station 165, you talked about synergy, has that moved into commercializing anything at this point, if they have to wait on firmer in-service, just any color on the benefits there see you all. Thanks.

Sorry, just to clarify you were talking about Moundsville pipeline is that correct?

Yes, sorry about that. Moundsville pipeline.

Okay. Yes, thank you. This is Michael. Just seeing what the Moundsville pipeline backers have said about their project, obviously they feel certainty in regard to completing their project. And we're obviously watching that very closely along with them. And ultimately we'll get Station 165 area and they're very likely should we take way opportunities for us, from that point on the Transco system, once that project gets closer to some certainty there. So we're certainly looking at that and willing to take on any customer-related projects, that would like to move that gas away from the Station 165, we certainly think there is opportunity to do that.

We will now take our next question from Jean Ann Salisbury from Bernstein. Please go ahead.

Hey, good morning. It looks like latest growth into Transco from the Northeast Marcellus, around 4.5 Bcf/d including Atlantic Sunrise. Is that effectively the max capacity for Transco there? Is there anyway that you could take more gas than you paid for -- just a compression anything like that?

Obviously say, there is -- just to remind everybody on that. Transco's capacity is fully sold, so it's consistently sold out of the [Technical Difficulty]. And so really what we're talking about is just the interrupt, just lows and how much we can physically flow during the period and that's very dependent on local loads where the gas need to be delivered to. And so there is a lot of variables that go into play there. But I would say generally, we are constantly maximizing capacity out of that basin right now, because the margin support that. But a lot of that is managed by the shippers, in other words they're the one who is dictating where they want to move the gas to and from. So a lot of that has been calculated by them. But I think that's where I would say every day we're optimizing as much as we can move that, that area.

Okay. That's helpful.

[Indiscernible] are staying full like Atlantic Sunrise has virtually been full almost since day one. So that does bode well for the future opportunities to move additional expansion volumes out of there with new projects. So Regional Energy Access, Jean Ann, Regional Energy Access though takes advantage of a lot of existing infrastructure as does the Leidy South project, that we're working on for National Fuel Gas and for Cabot. And in so there is obviously some pretty easy expansions out of the area, relatively the project seems better working on that [Indiscernible] we got a lot of compression, we can do and a little bit of looping to do -- to add capacity out of that area.

That's really helpful. Thank you. I mean, do you still have any spare capacity in gathering in the Haynesville, I mean perhaps in the Eagle Ford or is your system pretty much maxed out there?

I'll say in the Haynesville we bumped up against the top-end, there quite often as well pads come on. We get maximum capacity there last year and continue to find new volumes coming in there, that would try to max capacity. So we're pretty maxed out of Haynesville from time-to-time and it's highly dependent upon, from the [Indiscernible] on those wells. And then the Eagle Ford we continue to have new well connect opportunity there as well. And we continue to expand our systems there as needed for the producer customers out there. Most of that requires additional compression when we bring that online and some new well connect capital equivalent and possible looping. So it's just highly dependent upon where the producers are drilling their pad. Yes, -- system like the Haynesville, that system actually has South and North, component to it. And so what you might see one part of the system get loaded up, the southern part, maybe more than the north sometimes or vice versa, that really dictates. So it's not like, it's a processing plant, we just have a fixed amount of capacity through the plans, the system, the capacity is very dependent on where the gas goes up. But our team has done a really nice job out there, working with other midstream operators in the area, they use up capacity to be able to cross haul between systems and they continue to do that. On the Eagle Ford we would remind you that, that is a cost of service agreement. And so that as we add capital there that gets covered in our rates where the Haynesville is not, it's not that setup.

We will now take our next question from Michael Lapides of Goldman Sachs. Please go ahead.

I'll be quick. I know there has been a bunch on both MVP and ACP. Hypothetically is ACP and let's say even if MVP didn't go through, meaning got stuck in the court system, bogged down for a lot longer or cost creep inflated to a point making it untenable. How do you think about the solutions that Williams could offer into Virginia North and maybe in the South Carolina? And the ability the timeline to realize some of those solutions?

Yes, Michael, obviously it's topic that's been getting a lot of discussion. We have a lot to offer, in terms of distributing the product with gas to market whether it's healthy, what would be the ACP, Eastern system or moving supplies to them. We have -- we do have a tremendous amount to offer with our existing lighter weight. MDP is more just kind of a downstream issue so to speak, because obviously they're getting across the trial with those supplies. And so that's really struggled there. But, I would say, we have a lot more to offer ACP in terms of meeting their market distribution goals. And as the MDP, they need, they're going to need some market distribution as they do get across the trial and we're well-positioned to help them out with that. So that's how I describe that. Obviously in this environment I think it's important for all of the industry participant to try to utilize as much as existing facilities as possible, keep the cost down and that's what we're very focused on in both those cases.

But if ACP for some reason or another didn't get completed, how much new infrastructure, or new steel in the ground, how much significant new pipe would you have to build especially to get it? To get the gas into North Carolina? I'm just trying to think about the infrastructure requirements and the timeline to deliver them.

I would say we have a lot of -- lots of [indiscernible] already into some of those markets, but it is significant in terms of the investment, it's not, it's obviously quite a bit lower cost by using the existing facilities. But it would be pretty significant investment required and it's very dependent on where the supply comes from. So a lot of variables here depending on where the supply comes from. But if you just showed up with the supplies along that 155 to 194 corridor, we have a lot of ability to help distribute that gas into the market.

We will now take our next question from Justin Jenkins of Raymond James. Please go ahead.

Great. Thanks. Just one follow up for me. Just if you take the 1Q run rate per CapEx for a bit below the full year guide, so is it more balanced throughout the rest of the year here? Or is it back end driven? Maybe just to hop on the cadence of the CapEx if you could?

Yes. This is Michael. Say in Q1 you can't say $10 million is the run rate because our construction projects really ramp-up in the second and third quarter of the year, that our growth projects that we're working on. So we're still within the ballpark of our guidance suggestion that we put out there, with the information that came out this week, and it will ramp-up as the summer construction season heats up.

We will now take our next question from Chris Sighinolfi of Jefferies. Please go ahead sir.

Hi everyone. Thanks for the call this morning. Alan you guys have been very active since analyst day a year ago with asset sales, JV rationalizations and clearly a focus on deleverging. I guess, I have two questions stemming from all of that. The first is to follow up on Shneur's earlier question about your longer-term 5% to 7% annual EBITDA growth guidance. Just curious how to interpret your longer-term place in for periods beyond 2019, just wondering maybe how you or John will think about the outlook versus the forecast contained in the WTZ S-4 last summer?

Well the WTZ S-4 for last summer, I wouldn't pay much attention to the financial information. We had to do a fair amount of talking through that, that wasn't obviously meant for marketing purposes. So as we look at our forecast today, again back to our earlier point, as we look at our forecast today, over the next two to three years and we look at a capital spend of around $2.5 billion on expansion capital. Again we continue to see our deleveraging and at the same time we see this level of EBITDA growth of 5% to 7% range. So I really wouldn't put too much put much weight on the WTZ document.

Yes, I would just say Chris on that, we are focused on delivering on both of those ends both on the 5% to 7% growth, as well as deleveraging. And we're constantly balancing that, and obviously being able to sell assets that -- well at high multiples is pretty attractive way to get there. But we also are very focused on making sure we have plenty of reinvestment opportunity to drive that growth of 5% to 7% growth. And so far I would say, we're very comfortable about our ability to continue to face that capital. Project just continue to develop that, moving on pretty nicely. And within this period I would tell you that the one sizable project that's developed is Regional Energy Access project that's come along very nicely and with a lot of strong support all of a sudden. So I think we're really doing pretty good about the opportunity -- the high return investment opportunity continue to come. And as we get into the 2022 timeframe the deepwater -- this isn't speculative on our part, the deepwater cash flows there are going to be pretty big, because the FIDs for those projects are moving ahead and a lot of that business will be coming through this. And so lot of that's part of the [Indiscernible] exactly the size of that and exactly how much those projects are out there and are coming on our way. So we've doing very good about the ability to see that kind of growth rate and continue deleveraging, but we are managing both of those as we think about the transaction. I mean obviously we continue to take -- even though we saw in somewhat maybe a long-term view of growth in the Northeast volumes from 15% CAGR to 10% to 15%. Again we still see robust EBITDA growth coming out of the Northeast. We've got a number of projects, if you look in our slide deck in our index, number of Transco projects coming on into this year and next year that will be adding the EBITDA. And of course those are the same as DJ Basin assets that we have had acquired last -- late last year, there is a significant ramp up in growth coming from that as well.

Okay, and one clarification on that John, just my own purposes, it's very clear that you omitted any Transco rate case related impact on the formal 2019 guidance. But as we think about 5% to 7% over the next couple of years is it safe to assume that if you get a positive outcome there in that period of time, that's additive to that range or maybe puts you higher up in the range?

It would put us higher up in the range.

Okay. And then I guess that's very helpful. And my second question very much appreciate the reading or the presentation materials and something that we always acknowledged but illustrates clearly, I think it's Slide 13 it's just the significant non-cash items that 2% of drag to EPS. And I guess I'm just curious, are there additional transactions or impairments for restructuring, that you could do maybe trim some of those items for the benefit of EPS? Just we got a lot more questions from investors about the EPS, I'm assuming, you do to, and I'm just wondering what more could be done on that front? Thanks.

That's a weird commentary for a CFO to look for impairments, but it is something obviously that to the extent we could have that, it would benefit our depreciation -- by lowering our depreciation which is way out of line with our maintenance capital. There is really not a lot we can do on that front, absent to the extent we partner on assets that we consolidate today. That and to the extent we move the assets from a consolidation to a non-consolidation type approach to maybe partnering through JVs. That potentially could allow us to revalue assets and impair, and bring that depreciation level down. Anything short of that though, any of the test or impairment is based on gross cash flows, and well a lot of these assets got marked up to really high-value, back in the Access, Midstream merger, which was not a cash deal which is stock-for-stock trade but it forced us to revalue a lot of the Access assets at a very high valuation level. While those are at a high level, the gross cash flow still exceeds those book value. So anything short of actually some system kind of partnership for JV that would force some level of deconsolidation, that's the only thing that allows really to help bring that depreciation down.

Okay. That's helpful. I appreciate it. I know, it's a line of questions for you. The focus seems to fully changed. And it seems like that the reason [indiscernible] in Northeast maybe our structure [indiscernible] as well. So, just, that was where I was --. Appreciate it.

We will now take our next question from Craig Shere of Tuohy Brothers. Please go ahead.

Good morning. Most of my questions have been answered. I did have a quick one. Alan you commented on the weak wet gas, in Marcellus and Utica in terms of recent trends, and NGL pricing looks like Blue Racer had a pretty tough quarter. How do you see all those impacting the pace at which your new West Virginia panhandle processing might fell off over the next couple of years?

Yes. I think Craig, the investment we have there feel pretty good about that filling up. And it is as I mentioned earlier we got a lot of pads being turned online, and so really starting to see that come off. It doesn't -- it didn't a lot, big as those patents are, to make progress on that front. And we had some contracts coming our way that are shifting volumes our way. So feel pretty good about the TXP-2, the existing base capacity plus TXP-2 and we were able as a result of this synergy and knowing we have excess processing capacity, the UEO, that takes -- puts us in a position to not have to prebuild any capacity out in front and don't grow any further. So this energy or the -- as I mentioned earlier one of the nice things about that synergy is that, it prevents us from having to put capital in place to build out in front of those increasing volumes, because we do have alternatives that where we can ship those volumes to, but preserve the cash flows from it. And so I would just say, that gives us a lot more breathing room and allows for better capital efficiency as it relates to the OVM processing capacity. And so we intend to take full advantage of that.

Sounds good. So your TXP-2 is basically contracted up -- that slowdown is not really going to impacted but your derisk, the fact that you don't need new capital because you have the ability to work between basins?

Right. Correct.

We will now take our next question from Tim Schneider of Citi. Please go ahead.

Some -- just real quick. From my seat, I would say the biggest debate points among investors is capital allocation for companies in the midstream space. So I'm just kind of wondering how you guys look at the strategically, when you get together kind of bouncing growth, delevering and returning cash to shareholders over the longer-term and I think you said kind of the -- to leverage target, but what you think the right leverage is for a company with the asset mix of Williams? is that something that should go below 4x, are you happy kind of being in the low 4s, just interested in your thoughts here.

Yes. I would just say our asset mix, just we don't have a lot of -- very little business that's marketing based, is not basis differential based, it's not the term optimization that gets you to often around the assets, which is trading around the assets. We don't have that kind of variability per cash flow. And I bet you can see that with the remarkable predictability to our cash flow streams, that continues to flow. So no, I don't think they ought to get -- mark all the same, but I would say that the rating agencies have told us that, on their basis, it's a 4.5x kind of number to be BBB flat, and we want to be there be confidently there, at BBB flat level. And so that for 4.2x mark on kind of a steady run-rate basis is what we are seeking that because that happens to be coincidental with that BBB flat side from the rating agencies.

I mean, I guess if you guys are getting feedback from the investment community, do you really want to see something more of 4x, is that something that you would aim for in that case? Or do you think, well let's just kind of go with what the rating agencies are saying?

I would just say from my own personal perspective on that. I think they're tend to be fads that move through the investment community. And I think from our vantage point keeping our debt costs down and capacity to flex when we need to, is what we're targeting from the business trajectory. And I think we think that's really the smart place for us. And I think the market has to figure out, and it should figure out, who has volatility in their cash flows and who doesn't, and that ought to be driving the number, that each company should aspire to not just because somebody magically came up with a 4x number.

There are no further questions at this time. I would now like to hand the call over to Mr. Alan Armstrong for any additional or closing remarks.

Okay. Well, great, thanks everybody. Great questions as always and we appreciate the opportunity to visit with you on this. Really excited about the continued very predictable way our business is running, and the way our teams are executing on projects. So look forward to speaking with you in the future and at the next quarterly call. Thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.