10-KPeriod: FY2008

WILLIAMS COMPANIES, INC. Annual Report, Year Ended Dec 31, 2008

Filed February 25, 2009For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported strong financial performance for the year ended December 31, 2008, with significant increases in revenues and income from continuing operations compared to the previous year. This growth was driven by robust performance across its segments, particularly Exploration & Production and Gas Pipeline, which benefited from increased production volumes, higher natural gas prices (through the first three quarters), and favorable rate adjustments. Despite a sharp decline in energy commodity prices in the fourth quarter of 2008, which impacted Midstream segment results, the company's overall financial position remained solid. Williams Companies highlighted its disciplined growth strategy, substantial capital expenditures in key areas like Exploration & Production and Midstream expansion, and a commitment to improving Economic Value Added (EVA®). The company also emphasized its liquidity position and the proactive steps taken to manage financial risks in a challenging economic environment, including completing a $1 billion stock repurchase program and maintaining significant credit capacity.

Financial Highlights

46 data points
Beta

Revenue

$11.89B

Net Income

$1.42B

11.9% Net Margin

EPS (Diluted)

$2.40

Total Assets

$26.01B

Cash & Equivalents

$1.44B

Free Cash Flow

$3.35B

Financial Statements
Beta
Revenue$11.89B
SG&A Expenses$504.00M
Operating Income$2.53B
Interest Expense$592.00M
Net Income$1.42B
EPS (Basic)$2.44
EPS (Diluted)$2.40
Shares Outstanding (Basic)581.34M
Shares Outstanding (Diluted)592.72M

Key Highlights

  • 1Williams Companies reported a substantial increase in revenues to $12.35 billion and income from continuing operations to $1.33 billion in 2008, up from $10.49 billion and $847 million, respectively, in 2007.
  • 2Exploration & Production segment revenues increased significantly due to higher production volumes (up 20%) and increased net realized average prices (up 28%), despite a sharp decline in Q4 commodity prices.
  • 3Gas Pipeline segment revenues saw a modest increase, driven by new rates and expansion projects, and benefited from the stable, fee-based nature of its contracts.
  • 4Midstream segment results were strong through the first three quarters but negatively impacted by a sharp decline in NGL and olefin prices in Q4, leading to a year-over-year decrease in segment profit.
  • 5The company invested approximately $2.5 billion in Exploration & Production capital expenditures, $608 million in Midstream expansion projects, and $306 million in Gas Pipeline expansion projects in 2008.
  • 6Williams Companies completed its $1 billion stock repurchase program during 2008.
  • 7Despite the challenging economic conditions and lower energy commodity prices at year-end 2008, the company maintained significant liquidity, with approximately $1.4 billion in cash and cash equivalents and $2.5 billion in available credit capacity.
  • 8The company is actively managing commodity price risk through hedging strategies, particularly for its Exploration & Production segment.

Frequently Asked Questions

Williams Companies demonstrated strong financial performance in 2008, with revenues increasing to $12.35 billion and income from continuing operations rising to $1.33 billion. This improvement was driven by higher production volumes and prices in its Exploration & Production segment, along with favorable rate adjustments in its Gas Pipeline segment. While the Midstream segment experienced a decline in the fourth quarter due to falling commodity prices, the overall results were positive compared to 2007.

Williams Companies employs hedging strategies, primarily through derivative contracts such as futures, swaps, and options, to manage commodity price risk. For its Exploration & Production segment, a significant portion of future production was hedged, which helped to mitigate the impact of the sharp decline in natural gas prices in the fourth quarter of 2008. The Gas Pipeline segment's revenues are largely insulated from commodity price volatility due to its fee-based, long-term contract structure.

In 2008, Williams Companies made significant capital investments focused on growth and expansion across its core businesses. This included approximately $2.5 billion in Exploration & Production for development drilling and acquisitions, $608 million in Midstream for expansion projects (particularly in the Deepwater Gulf and western U.S. gas processing), and $306 million in Gas Pipeline for expansion projects on its interstate natural gas pipelines.

As of December 31, 2008, Williams Companies maintained a strong liquidity position with approximately $1.4 billion in cash and cash equivalents and $2.5 billion in available credit capacity. The company anticipates that lower energy commodity prices and the general economic recession will lead to sharply reduced operating results and cash flow in 2009. However, it expects to maintain at least $1 billion in liquidity and fund its operations and capital expenditures primarily through cash flow from operations and available credit facilities, with a strategic focus on completing ongoing projects and managing costs.