10-QPeriod: Q2 FY2012

WILLIAMS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2012

Filed August 2, 2012For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported its second-quarter 2012 results, indicating a decline in net income attributable to the company compared to the same period in the prior year. This decrease was primarily driven by lower NGL production revenues and margins, influenced by falling NGL prices. The company also experienced an increase in selling, general, and administrative expenses, partly due to acquisition-related costs. Despite the year-over-year earnings decline, WMB highlighted significant strategic acquisitions in the Marcellus Shale region, including the Caiman Eastern Midstream and Laser Gathering System, bolstering its midstream footprint. The company also provided an optimistic outlook for dividend growth and announced substantial capital investment plans for the remainder of 2012, emphasizing a strategic shift towards a more fee-based business mix to mitigate commodity price volatility. Management reiterated confidence in sufficient liquidity and financial resources to fund operations and growth initiatives.

Financial Highlights

49 data points
Beta

Revenue

$1.85B

51.2% Gross Margin

Net Income

$132.00M

7.2% Net Margin

EPS (Diluted)

$0.21

Total Assets

$20.27B

Cash & Equivalents

$679.00M

Free Cash Flow

$424.00M

Financial Statements
Beta
Revenue$1.85B
Cost of Revenue$900.00M
Gross Profit$946.00M
SG&A Expenses$149.00M
Operating Expenses$1.51B
Operating Income$332.00M
Net Income$132.00M
EPS (Basic)$0.21
EPS (Diluted)$0.21
Shares Outstanding (Basic)621.48M
Shares Outstanding (Diluted)626.62M

Key Highlights

  • 1Net income attributable to The Williams Companies, Inc. decreased to $132 million ($0.21 per share) for Q2 2012, down from $227 million ($0.39 per share) in Q2 2011.
  • 2Revenues for Q2 2012 were $1.85 billion, a decrease from $1.98 billion in Q2 2011, primarily due to lower natural gas liquid (NGL) prices.
  • 3The company completed significant acquisitions in the Marcellus Shale: the Caiman Eastern Midstream acquisition for approximately $2.3 billion and the Laser Acquisition for $325 million plus WPZ units, enhancing its midstream presence.
  • 4Williams Partners' segment profit decreased by $132 million year-over-year, largely due to a $64 million decrease in NGL margins caused by lower NGL prices.
  • 5The company announced plans for significant dividend growth, with expected total 2012 dividends of $1.20 per share, a 55% increase from 2011.
  • 6Planned capital expenditures for 2012 are substantial, totaling $6.66 billion, including WPZ equity for acquisitions, indicating a strong focus on growth and expansion.
  • 7Despite current NGL margin pressures, management expects the business mix to transition towards more fee-based revenues over the long term, reducing commodity price sensitivity.

Frequently Asked Questions

The decrease in net income was primarily driven by lower natural gas liquid (NGL) production revenues and margins, which were significantly impacted by a sharp decline in NGL prices during the second quarter of 2012. Additionally, an unfavorable change in operating income at Williams Partners and increased selling, general, and administrative expenses, partly due to acquisition and transition-related costs, contributed to the decline.

Williams Companies has focused on strategic acquisitions, notably the Caiman Eastern Midstream and Laser Gathering System in the Marcellus Shale, to enhance its midstream footprint. The company is also advancing major expansion projects like the Constitution Pipeline and investing in Utica Shale infrastructure. A key long-term strategy is to transition towards a more fee-based business mix to mitigate commodity price volatility and to increase dividend payouts to shareholders.

Williams Companies expects NGL margins to remain depressed in the near term but anticipates some recovery by year-end. They are managing commodity price risks through hedging strategies, entering into NGL swap agreements to fix prices for a portion of their anticipated NGL sales volumes. The company also highlighted that a significant portion of its revenues are derived from long-term, fee-based contracts and firm transportation revenues, which are less sensitive to short-term commodity price fluctuations.

The company has approved a regular quarterly dividend and expects total 2012 dividends to be $1.20 per share, a 55% increase from 2011, with further increases anticipated for 2013 and 2014. Planned capital investments for the remainder of 2012 are substantial, totaling approximately $6.66 billion, aimed at funding growth projects and acquisitions.