10-QPeriod: Q3 FY2015

WILLIAMS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 29, 2015For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported a net loss attributable to the company of $40 million, or $0.05 per share, for the third quarter of 2015, a significant decrease from the $1.678 billion net income, or $2.24 per share, reported in the same period of the prior year. This decline was primarily driven by the absence of a substantial gain on the remeasurement of an equity-method investment recognized in the third quarter of 2014, coupled with impairment charges on certain equity-method investments and lower NGL (Natural Gas Liquids) margins due to falling commodity prices. The company also announced on September 28, 2015, a significant strategic development: an Agreement and Plan of Merger with Energy Transfer Equity, L.P. (Energy Transfer). This transaction, expected to close in the first half of 2016, involves WMB merging into a newly formed entity, Energy Transfer Corp LP (ETC). This merger represents a major shift for Williams Companies and is a key focus for investors in evaluating the company's future. Operationally, service revenues saw an increase, driven by new projects coming online and higher volumes in gathering operations. However, product sales declined due to lower commodity prices. Despite the net loss, the company continued its capital investment program, reflecting ongoing strategic initiatives and growth projects within its Williams Partners segment, which remains the primary driver of the company's revenue and operational activity.

Financial Highlights

51 data points
Beta

Revenue

$1.80B

Net Income

-$40.00M

-2.2% Net Margin

EPS (Diluted)

$-0.05

Total Assets

$50.82B

Cash & Equivalents

$125.00M

Free Cash Flow

-$168.00M

Financial Statements
Beta
Revenue$1.80B
SG&A Expenses$177.00M
Operating Expenses$1.44B
Operating Income$356.00M
Interest Expense$263.00M
Net Income-$40.00M
EPS (Basic)$-0.05
EPS (Diluted)$-0.05
Shares Outstanding (Basic)749.82M
Shares Outstanding (Diluted)749.82M

Key Highlights

  • 1Reported a net loss of $40 million for Q3 2015, a sharp decline from a net income of $1.678 billion in Q3 2014, largely due to the absence of a significant investment gain from the prior year and new impairment charges.
  • 2Announced a significant merger agreement with Energy Transfer Equity, L.P. on September 28, 2015, under which WMB will merge into Energy Transfer Corp LP (ETC).
  • 3Service revenues increased by 10% year-over-year for the quarter, driven by contributions from new projects and increased volumes in gathering operations.
  • 4Product sales decreased by 41% year-over-year for the quarter, primarily due to lower commodity prices and volumes.
  • 5Incurred impairment charges of $461 million related to equity-method investments, impacting profitability for the nine months ended September 30, 2015.
  • 6Continued substantial capital expenditures, with $2.425 billion for the nine months ended September 30, 2015, focused on expansion projects within its Williams Partners segment.
  • 7The company's balance sheet reflects a significant increase in long-term debt, totaling $21.8 billion as of September 30, 2015, up from $20.9 billion at the end of 2014.

Frequently Asked Questions

The primary reason for the decrease in net income from $1.678 billion in Q3 2014 to a net loss of $40 million in Q3 2015 is the absence of a $2.522 billion gain on the remeasurement of an equity-method investment that was recognized in the prior year. Additionally, the current quarter was impacted by impairment charges on certain equity-method investments.

The merger agreement with Energy Transfer Equity, L.P. (announced September 28, 2015) is a major strategic development. Williams Companies will merge with a newly formed entity, Energy Transfer Corp LP (ETC). This transaction is expected to close in the first half of 2016 and represents a transformative event for the company, impacting its structure, operations, and shareholder value. Investors should closely monitor the conditions and timeline for this merger.

Fluctuating commodity prices, particularly lower NGL (Natural Gas Liquids) and olefins prices, have negatively impacted the company's financial performance, leading to reduced margins and lower product sales revenue. While the company benefits from fee-based revenues that are less exposed to short-term price volatility, it remains indirectly exposed to longer-term depressed prices which can affect producer activity and gathering/processing volumes.

As of September 30, 2015, Williams Companies had a working capital deficit and a total available liquidity of approximately $3.72 billion, including cash, cash equivalents, and available credit facilities at both the parent and subsidiary levels. The company's long-term debt stood at $21.8 billion. While the company believes it has sufficient liquidity for its operations and capital expenditures, the significant debt level and the ongoing merger with Energy Transfer are key considerations for investors.