Alan Armstrong survived a failed merger and a board revolt in July to remain the chief executive of the pipeline giant, the Williams Cos. Now, he’s back on top, working to keep the Williams name and company alive after a tumultuous courtship, falling out, and bitter breakup with the Dallas pipeline company, Energy Transfer Partners.
Energy Transfer aggressively pursued and planned to acquire Tulsa-based Williams in a $33 billion deal, but then developed a major case of buyer’s remorse in the depressed energy market. Energy Transfer backed out of the loveless engagement through a legal loophole.
“There were a lot of twists and turns obviously in that deal,” Armstrong said in an interview last week. “Now everybody is really focused on the future and not wondering about what happened.”
Williams will remain independent and maintain its large uptown Houston hub in the landmark Williams Tower. Armstrong emphasized Houston, with one of the world’s largest concentration of energy companies, is a critically important base for Williams now and in the future.
Armstrong is a company man who joined Williams 30 years ago as an engineer and worked his way to the top — taking over a CEO in 2011. He was never a big fan of the Energy Transfer deal; he only agreed to go along when it was approved by his board, which had grown to 13 members after activist hedge fund investors were added in recent years.
Six of those board directors resigned last month after the board narrowly voted to keep Armstrong as chief executive. Armstrong’s most vocal critics accused him of “abysmal” leadership after their resignations.
“It’s a board’s job to have difficult debates,” Armstrong said. “While a lot of people see it as something negative, I see it as a positive.”
Armstrong kept quiet during the merger process except to “campaign for his job,” said Brandon Blossman, an analyst at the Houston energy investment banking firm Tudor, Pickering, Holt & Co. The “ironic artifact,” Blossman added, is the company performed well throughout the whole merger dance with solid cash flow. The company even turned a small profit for the first six months of the year, no easy task given the ongoing struggles of the oil and gas sector.
Now, Armstrong said, he and the rest of his team are focused on moving forward. Step one is to bring costs under control by selling assets and reduce payouts to investors to conserve cash. Williams is planning to sell its Canadian pipelines and processing plants and last week sliced its dividend to 20 cents from 64 cents. The dividend cut will save $1.7 billion through 2017.
That money will help finance pipeline expansions, including the company’s crown jewel Transco natural gas pipeline system, which runs 10,200 miles from South Texas to New York City. The goal is meet the increased demand of a larger customer base.
“It’s a top-tier asset and natural gas demand growth is one of the easiest growth stories to hang your hat on,” Blossman said.
Armstrong emphasized that Williams is less affected by oil and gas prices because it profits from the volumes of gas it transports and the fees it charges, not the spot pricing of natural gas on any given day. “We’re not really focused on price [of gas]” he said. “We’re focused on growth.”
The other focus is on Williams’ more unified board, which now has 7 members. The plan is to add more directors, but Armstrong is hesitant to increase it by much. He’s quick to point out that similar companies average about 9 directors.
“Before we had 13 and that was a really big number,” he said.