Williams Reports First-Quarter 2010 Financial Results

TULSA, Okla., May 5 /PRNewswire-FirstCall/ -- Williams (NYSE: WMB) announced an unaudited net loss attributable to Williams, for first-quarter 2010 of $193 million, or $0.33 per share on a diluted basis, compared with a net loss of $172 million, or $0.29 per share on a diluted basis for first-quarter 2009.

The net losses in both first-quarter 2010 and first-quarter 2009 were due to significant non-recurring items in each period.

The first-quarter 2010 net loss was due to charges in conjunction with the strategic restructuring that transformed Williams Partners L.P. (NYSE: WPZ) into a leading diversified master limited partnership.  The charges, totaling approximately $401 million after taxes, are comprised primarily of costs associated with Williams' cash tender offer for debt, including the market-value premium.

An improved commodity price environment in first-quarter 2010, compared with the recession-driven unusually low prices in first-quarter 2009, partially offset the negative effect of the restructuring charges in the first quarter.  The 2009 period includes a significant loss from discontinued operations, primarily related to losses associated with the company's operations in Venezuela.

All prior-period comparisons in this news release are based on recast 2009 results.  The recast results reflect the company's structure following the strategic restructuring with Williams Partners L.P.

Recurring Results Adjusted for Effect of Mark-to-Market Accounting

Recurring income from continuing operations, after adjustments to remove the effect of mark-to-market accounting for certain hedges and other derivatives in Exploration & Production, is $208 million, or $0.36 per share for first-quarter 2010. On the same adjusted basis, recurring income from continuing operations was $128 million, or $0.22 per share, for first-quarter 2009.

The 64-percent improvement in recurring adjusted earnings per share during the first quarter is due to significant improvement in both Williams Partners and Exploration & Production results, which are detailed later in this press release.

A reconciliation of the company's income (loss) from continuing operations to recurring income from continuing operations and mark-to-market adjustments is available at www.williams.com and as an attachment to this news release.

CEO Comment

"Williams delivered very strong results in the first quarter, with an improvement in our recurring adjusted earnings of more than 60 percent," said Steve Malcolm, chairman, president and chief executive officer.  

"Williams Partners delivered substantial earnings and cash flow following the transformational restructuring in the first quarter," Malcolm said.

"Williams' exploration and production business, which continues to benefit from being among the industry leaders in low drilling costs, also performed well.   Our world-class resource in the Piceance Basin will enable us to substantially increase production when prices strengthen further.

"We also have continued to diversify our drilling portfolio by adding to our presence in the Marcellus Shale.   We have added to our position and now have approximately 45,000 net acres at an attractive average price of $2,800 per acre," Malcolm said.  "As always, we approach these opportunities for growth with financial discipline and a focus on long-term value creation."

Guidance Updated for 2010-11, Introduced for 2012

Williams is updating its commodity price assumptions and the related outlook for its consolidated financial results for 2010-11.  It is also providing its initial commodity price assumptions and financial outlook for 2012.  The assumptions and outlook are presented in the following chart.

Business Segment Results

Williams is now reporting its new business segment format following the strategic restructuring with Williams Partners L.P.   The company's business segments for financial reporting are Williams Partners, Exploration & Production, and Other.  

The Williams Partners segment includes the consolidated results of Williams Partners L.P.; Exploration & Production now includes the results of the former Gas Marketing segment; and the Other segment includes the company's Canadian midstream and domestic olefins businesses and a 25.5-percent interest in the Gulfstream interstate natural gas pipeline system.  The 2009 results have been recast to reflect the new reporting structure.

Williams Partners

Williams Partners is focused on natural gas transportation, gathering, treating, processing and storage; natural gas liquid (NGL) fractionation; and oil transportation.

For first-quarter 2010, Williams Partners reported segment profit of $414 million, compared with $252 million for first-quarter 2009.  The significant increase in segment profit reflects significantly higher NGL margins from Williams Partners' midstream business.   Much higher NGL prices, compared with the unusually low first-quarter 2009 prices drove the higher NGL margins for the quarter.  This benefit was partially offset by an increase in costs due to higher average natural gas prices.  First-quarter 2010 NGL margins in the midstream business were also improved compared with fourth-quarter 2009.  

The gas pipeline business results declined slightly in the first quarter but were steady as expected.

There is a more detailed description of Williams Partners' interstate gas pipeline and midstream business results in the partnership's first-quarter 2010 financial results news release, which is also being issued today.  

Exploration & Production

Exploration & Production includes natural gas production and development in the U.S. Rocky Mountains, San Juan Basin, Barnett Shale, Marcellus Shale, and oil and gas development in South America.    

The business reported segment profit of $162 million for first-quarter 2010, compared with segment profit of $76 million in first-quarter 2009.

The increase in segment profit is due to higher net realized average prices on production partially offset by lower production volumes, reflecting the company's decision to curtail drilling in 2009.   During first-quarter 2010, Williams' net realized average price for U.S. production was $5.01 per thousand cubic feet of natural gas equivalent (Mcfe), which was 19 percent higher than the $4.21 per Mcfe realized in first-quarter 2009.

Additionally, first-quarter 2009 included expense of $34 million associated with contractual penalties from the early termination of drilling rig contracts.  

The chart below details Williams' average daily natural gas production for first-quarter 2010. During 2009 the company reduced drilling activity in response to lower natural gas prices, resulting in lower production volumes in first-quarter 2010 compared to first-quarter 2009.

The company plans to increase average daily domestic production throughout this year, with fourth-quarter 2010 volumes expected to be approximately 7-10 percent higher than first-quarter 2010 volumes.  Overall average annual daily production for 2010 is expected to be consistent with 2009 volumes.

Other

The Other segment reported first-quarter 2010 segment profit of $27 million, compared with a segment loss of $60 million for first-quarter 2009.

The significant improvement in the segment results is due primarily to the absence of a nonrecurring $75 million impairment of the company's equity investment in Accroven during first-quarter 2009.  The improvement in recurring segment profit was driven by higher production margins from the Canadian midstream and domestic olefins businesses.

Analyst Meeting in New York City on May 11

Williams' management will host an analyst meeting in New York City on Tuesday, May 11. During the meeting, the company's senior management will present highlights and an overview of Williams' and Williams Partners L.P.'s natural gas businesses.

The meeting will begin at 8:30 a.m. EDT.  The morning session will focus on overviews of Williams and Williams Partners, plus in-depth presentations on Williams Partners' midstream and gas pipeline businesses; the afternoon session will feature an in-depth presentation on Williams' exploration and production business.

Both sessions will be broadcast live via webcast. Participants are encouraged to access the webcast at www.williams.com or www.williamslp.com.   Slides will be available the morning of May 11 on both web sites for viewing, downloading and printing.  A replay of the analyst meeting webcast will be available for two weeks following the event at the web sites listed above.

Today's Analyst Call

Management will discuss the first-quarter 2010 results and outlook during a live webcast beginning at 9:30 a.m. EDT today. Participants are encouraged to access the webcast and slides for viewing, downloading and printing at www.williams.com.

A limited number of phone lines also will be available at (888) 378-0344. International callers should dial (719) 785-1767. Replays of the first-quarter webcast, in both streaming and downloadable podcast formats, will be available for two weeks at www.williams.com following the event.

Form 10-Q

The company plans to file its first-quarter 2010 Form 10-Q with the SEC today.  The document will be available on both the SEC and Williams websites.

About Williams (NYSE: WMB)

Williams is an integrated natural gas company focused on exploration and production, midstream gathering and processing, and interstate natural gas transportation primarily in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania.  Most of the company's interstate gas pipeline and midstream assets are held through its 84-percent ownership interest (including the general-partner interest) in Williams Partners L.P. (NYSE: WPZ), a leading diversified master limited partnership.  More information is available at www.williams.com.   Go to http://www.b2i.us/irpass.asp?BzID=630&to=ea&s=0 to join our e-mail list.

Our reports, filings, and other public announcements may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You typically can identify forward-looking statements by various forms of words such as "anticipates," "believes," "seeks," "could," "may," "should," "continues," "estimates," "expects," "forecasts," "intends," "might," "goals," "objectives," "targets," "planned," "potential," "projects," "scheduled," "will" or other similar expressions. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

• Amounts and nature of future capital expenditures;
• Expansion and growth of our business and operations;
• Financial condition and liquidity;
• Business strategy;
• Estimates of proved gas and oil reserves;
• Reserve potential;
• Development drilling potential;
• Cash flow from operations or results of operations;
• Seasonality of certain business segments; and
• Natural gas and natural gas liquids prices and demand.

Forward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or results to be materially different from those stated or implied in this announcement. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:

• Availability of supplies (including the uncertainties inherent in assessing, estimating, acquiring and developing future natural gas reserves), market demand, volatility of prices, and the availability and cost of capital;
• Inflation, interest rates, fluctuation in foreign exchange, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers);
• The strength and financial resources of our competitors;
• Development of alternative energy sources;
• The impact of operational and development hazards;
• Costs of, changes in, or the results of laws, government regulations (including proposed climate change legislation), environmental liabilities, litigation, and rate proceedings;
• Our costs and funding obligations for defined benefit pension plans and other postretirement benefit plans;
• Changes in maintenance and construction costs;
• Changes in the current geopolitical situation;
• Our exposure to the credit risk of our customers;
• Risks related to strategy and financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the availability and cost of credit;
• Risks associated with future weather conditions;
• Acts of terrorism; and
• Additional risks described in our filings with the Securities and Exchange Commission ("SEC").

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.

Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the SEC on Feb. 26, 2010, and our quarterly reports on Form 10-Q available from our offices or from our website at www.williams.com.

SOURCE Williams

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