10-QPeriod: Q3 FY2010

WILLIAMS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2010

Filed October 28, 2010For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported a significant net loss for the nine months ended September 30, 2010, largely driven by substantial impairment charges totaling $1.681 billion, including a $1 billion goodwill impairment in its Exploration & Production segment due to declining natural gas prices. The company also incurred $606 million in early debt retirement costs associated with its February 2010 strategic restructuring. This restructuring involved contributing key midstream and gas pipeline assets to its master limited partnership, Williams Partners L.P. (WPZ), aiming to lower capital costs and enhance access to capital markets. Despite the significant losses, the company highlighted positive trends such as improved energy commodity prices in the first nine months of 2010 compared to the prior year, and a $183 million increase in net cash provided by operating activities. The Williams Partners segment showed revenue growth, and recent strategic initiatives like the merger with WMZ and the acquisition of additional interest in OPPL position the company for future growth. Management expressed confidence in maintaining sufficient liquidity and meeting financial obligations.

Financial Highlights

44 data points
Beta

Revenue

$2.30B

Net Income

-$1.26B

-54.9% Net Margin

EPS (Diluted)

$-2.16

Total Assets

$23.85B

Cash & Equivalents

$1.01B

Free Cash Flow

$644.00M

Financial Statements
Beta
Revenue$2.30B
SG&A Expenses$122.00M
Operating Income-$1.29B
Net Income-$1.26B
EPS (Basic)$-2.16
EPS (Diluted)$-2.16
Shares Outstanding (Basic)584.74M
Shares Outstanding (Diluted)584.74M

Key Highlights

  • 1Significant Net Loss: WMB reported a net loss of $1.226 billion for the three months ended September 30, 2010, and $1.271 billion for the nine months ended September 30, 2010.
  • 2Substantial Impairments: The company recorded $1.681 billion in impairments, including a $1 billion goodwill impairment and $678 million in impairments of producing properties and acquired unproved reserves in the Exploration & Production segment due to declining natural gas prices.
  • 3Strategic Restructuring: Completed a significant restructuring in February 2010, contributing midstream and gas pipeline businesses to Williams Partners L.P. (WPZ) to improve capital structure and access.
  • 4Early Debt Retirement Costs: Incurred $606 million in costs related to early debt retirement as part of the restructuring.
  • 5Increased Operating Cash Flow: Net cash provided by operating activities increased by $183 million for the nine months ended September 30, 2010, compared to the same period in 2009.
  • 6Williams Partners Performance: The Williams Partners segment showed revenue growth and completed strategic transactions including a merger with WMZ and increased ownership in OPPL.
  • 7Future Growth Initiatives: The company is pursuing growth opportunities and has significant capital expenditure plans for pipeline expansions and asset acquisitions.

Frequently Asked Questions

The primary drivers were significant impairment charges totaling $1.681 billion, primarily within the Exploration & Production segment, due to falling natural gas prices. Additionally, $606 million in early debt retirement costs were incurred due to the company's February 2010 strategic restructuring. These negative factors were partially offset by improved energy commodity prices in the first nine months of 2010 compared to the prior year and an increase in net cash provided by operating activities.

The restructuring involved contributing significant midstream and gas pipeline assets to Williams Partners L.P. (WPZ). This move aimed to lower capital costs and enhance access to capital markets. While it resulted in substantial debt retirement costs, the company believes it has better positioned itself for future growth and value creation. WPZ is now expected to be more self-funding and operates with a separate capital structure.

Management expects to maintain consolidated liquidity of at least $1 billion through cash and unused credit facilities. The company anticipates funding its operations, capital expenditures, and debt obligations through a combination of operating cash flow, existing cash, credit facilities, and potential debt or equity issuances. While the company faces risks such as lower commodity prices or weaker economic conditions, it believes it has sufficient resources to meet its financial commitments.

The company is involved in various legal, regulatory, and environmental matters. While management believes that the ultimate resolution of these matters, taken as a whole, will not have a material adverse effect on its future liquidity or financial position, they acknowledge that unfavorable rulings could have a material adverse impact on results of operations in the period of resolution. Specific risks include compliance with environmental regulations, particularly those related to greenhouse gas emissions, and the potential impact of new regulations on derivative transactions.