10-QPeriod: Q1 FY2001

WILLIAMS COMPANIES, INC. Quarterly Report for Q1 Ended Mar 31, 2001

Filed May 15, 2001For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported a significant increase in revenues for the first quarter of 2001 compared to the same period in 2000, driven primarily by its Energy Services segment. Total revenues surged by 63% to $3.09 billion, largely due to higher gas and electric power services, increased petroleum product prices, and the acquisition of Canadian operations. Operating income more than doubled to $779.9 million, with Energy Services showing a substantial $392.2 million increase. This strong performance was partly overshadowed by a significant loss from discontinued operations related to the planned spinoff of its communications business, Williams Communications Group (WCG). Despite the challenges related to WCG and ongoing litigation, the company is pursuing strategic growth initiatives, including a pending merger with Barrett Resources.

Key Highlights

  • 1Total revenues increased by 63% to $3.09 billion in Q1 2001, driven by the Energy Services segment's strong performance.
  • 2Operating income more than doubled, reaching $779.9 million, primarily due to significant gains in Energy Services.
  • 3The company is undertaking a tax-free spinoff of its communications business, Williams Communications Group (WCG), which resulted in a significant loss from discontinued operations in the quarter.
  • 4Williams announced a definitive merger agreement to acquire Barrett Resources for approximately $2.8 billion, expected to close in Q3 2001.
  • 5Cash and cash equivalents decreased significantly from $996.8 million at the end of 2000 to $237.8 million at the end of Q1 2001, largely due to financing activities and capital expenditures.
  • 6The company adopted SFAS No. 133 (Accounting for Derivative Instruments and Hedging Activities) in early 2001, impacting the reporting of its hedging activities.

Frequently Asked Questions

The primary driver for the substantial revenue increase was the Energy Services segment, which saw significant growth due to higher gas and electric power services, increased petroleum product prices, and contributions from recently acquired Canadian operations.

The planned tax-free spinoff of WCG is accounted for as discontinued operations. This resulted in a significant loss from discontinued operations of $179.1 million for the quarter, impacting the net income.

Williams faces risks related to regulatory matters, particularly in California's power markets, where the FERC has issued refund notices totaling approximately $30 million for sales in January-February-March 2001. Additionally, there are environmental remediation liabilities and ongoing litigation, though the company states it does not believe these will have a material adverse effect on its financial position.

Williams has sufficient availability under its commercial paper and revolving credit agreements for the cash portion of the acquisition. It is also considering establishing a bridge loan facility and evaluating other long-term funding options such as volumetric production payments, convertible debt, or equity.