10-QPeriod: Q3 FY2014

WILLIAMS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 30, 2014For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported strong financial performance for the nine months ended September 30, 2014, driven by a significant non-cash gain from remeasuring its equity-method investment in Access Midstream Partners, L.P. (ACMP) to fair value following the acquisition of controlling interest. This acquisition boosted revenues and expanded the company's midstream operations in key shale plays. While operating income saw a slight decrease due to lower NGL and olefin margins, the overall net income attributable to The Williams Companies, Inc. surged, reflecting the substantial gain and increased service revenues from its Williams Partners segment. The company also continued its focus on dividend growth and capital investments to support its strategy of connecting North American resource plays to growing markets.

Financial Highlights

51 data points
Beta

Revenue

$2.07B

Net Income

$1.68B

81.1% Net Margin

EPS (Diluted)

$2.22

Total Assets

$49.81B

Cash & Equivalents

$302.00M

Free Cash Flow

-$759.00M

Financial Statements
Beta
Revenue$2.07B
SG&A Expenses$171.00M
Operating Expenses$1.76B
Operating Income$307.00M
Interest Expense$210.00M
Net Income$1.68B
EPS (Basic)$2.24
EPS (Diluted)$2.22
Shares Outstanding (Basic)747.41M
Shares Outstanding (Diluted)752.06M

Key Highlights

  • 1Reported a significant non-cash gain of $2.5 billion in the third quarter of 2014 from remeasuring its equity-method investment in ACMP to fair value after acquiring control, which substantially boosted net income.
  • 2Total revenues increased to $5.5 billion for the nine months ended September 30, 2014, up from $5.2 billion in the prior year, primarily driven by higher service revenues.
  • 3The company completed the acquisition of a controlling interest in ACMP on July 1, 2014, enhancing its position in the Marcellus and Utica shale plays and diversifying its midstream business.
  • 4Declared cash dividends per common share increased to $0.56 for the third quarter of 2014, up from $0.36625 in the prior year, with expectations of continued quarterly increases.
  • 5Significant capital expenditures of approximately $10.9 billion are planned for 2014, including the ACMP acquisition and ongoing expansion projects.
  • 6Williams Partners reported strong service revenues and segment profit, driven by gathering, processing, and transportation services, while facing headwinds from lower olefin margins.
  • 7The Geismar incident resulted in $175 million of insurance recoveries in the first nine months of 2014, offsetting some of the financial impact, though total losses are expected to exceed insurance policy limits.

Frequently Asked Questions

The primary driver was a substantial non-cash gain of $2.5 billion recognized in the third quarter of 2014. This gain resulted from the remeasurement of Williams Companies' previously held equity-method investment in Access Midstream Partners, L.P. (ACMP) to its fair value upon acquiring controlling interest and consolidating the entity.

The ACMP acquisition, completed on July 1, 2014, significantly increased Williams Companies' midstream footprint in key shale plays. It led to the consolidation of ACMP's operations, boosting revenues and expanding the company's fee-based business model. However, it also resulted in increased debt and associated interest expenses, as well as higher depreciation and amortization.

Key risks include the dependence on earnings and distributions from its master limited partnerships (WPZ and ACMP), potential delays or failure to realize expected benefits from the ACMP acquisition, uncertainties surrounding the Geismar incident (timing of plant restart, costs, and insurance recoveries), potential operational disruptions, and volatility in commodity prices impacting margins.

Williams Companies is committed to dividend growth, with a 53% increase in its quarterly dividend in the third quarter of 2014 compared to the prior year. The company expects to increase its dividend by approximately 15% annually through 2017, funded primarily by distributions from WPZ and ACMP. Significant capital investments are planned for 2014 to support growth projects and strategic acquisitions.