10-QPeriod: Q2 FY2017

WILLIAMS COMPANIES, INC. Quarterly Report for Q2 Ended Jun 30, 2017

Filed August 3, 2017For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported a net income attributable to the company of $81 million for the three months ended June 30, 2017, a significant improvement from a net loss of $405 million in the same period of the prior year. For the six months ended June 30, 2017, the company reported a net income of $454 million, compared to a net loss of $470 million in the prior year period. This turnaround was largely driven by a substantial decrease in "Impairment of certain assets" and a rebound in service and product revenues. The company also benefited from strategic repositioning efforts, including transactions with Williams Partners L.P. (WPZ), which are strengthening its financial position and cash flow generation. While operating income improved, it's important to note that the increase in net income was partially offset by a higher provision for income taxes and increased net income attributable to noncontrolling interests. Investors should note the significant growth in total revenues and operating income, indicating a recovering operational performance. The company's strategy to focus on fee-based businesses and expansion projects, particularly along the Transco system, is expected to reduce commodity price volatility and drive future growth. Management's outlook suggests continued investment in infrastructure while maintaining a strong financial position and liquidity.

Financial Highlights

48 data points
Beta

Revenue

$1.92B

Net Income

$81.00M

4.2% Net Margin

EPS (Diluted)

$0.10

Total Assets

$48.77B

Cash & Equivalents

$1.92B

Free Cash Flow

$254.00M

Financial Statements
Beta
Revenue$1.92B
SG&A Expenses$153.00M
Operating Expenses$1.55B
Operating Income$378.00M
Interest Expense$271.00M
Net Income$81.00M
EPS (Basic)$0.10
EPS (Diluted)$0.10
Shares Outstanding (Basic)826.43M
Shares Outstanding (Diluted)828.58M

Key Highlights

  • 1Net income attributable to The Williams Companies, Inc. improved significantly, turning from a loss of $405 million in Q2 2016 to a gain of $81 million in Q2 2017.
  • 2For the first six months of 2017, net income was $454 million, a substantial turnaround from a net loss of $470 million in the same period of 2016.
  • 3Total revenues increased by $188 million (6%) to $3,912 million for the six months ended June 30, 2017, compared to the prior year.
  • 4Operating income showed a strong positive swing, moving from a loss of $226 million in the first six months of 2016 to an income of $814 million in the comparable 2017 period, largely due to a significant reduction in asset impairments.
  • 5The company completed the sale of its Geismar olefins plant in July 2017 for $2.084 billion, which is expected to generate a gain of approximately $1.1 billion in Q3 2017.
  • 6Williams Companies' financial repositioning initiatives, including transactions with Williams Partners L.P. (WPZ), are aimed at improving its cost of capital, enhancing growth, and providing debt reduction.
  • 7The company reported strong liquidity with $6.373 billion in available liquidity as of June 30, 2017.

Frequently Asked Questions

The primary driver of the improved financial performance is a substantial reduction in 'Impairment of certain assets,' which negatively impacted the prior year. Additionally, the company saw increased service and product revenues, along with positive outcomes from its financial repositioning and asset monetization efforts, such as the sale of the Geismar olefins plant.

In January 2017, Williams Companies underwent a financial repositioning with WPZ, which included permanently waiving general partner incentive distribution rights (IDRs) and converting its GP interest to a noneconomic one in exchange for WPZ common units. This, along with other unit purchases, resulted in Williams Companies owning a 74% limited partner interest in WPZ as of June 30, 2017. This strategy aims to improve WPZ's cost of capital, enhance its growth prospects, and facilitate debt reduction for both entities.

The company is focused on expanding its energy infrastructure, particularly through projects like the Atlantic Sunrise and other Transco expansions, which are largely contracted and fee-based. These initiatives, along with the monetization of assets like the Geismar plant, are intended to reduce the impact of commodity price volatility on its cash flows. The outlook suggests continued investment in growth projects while maintaining financial discipline and liquidity.

The company is involved in several legal and environmental matters, including class-action lawsuits related to natural gas price index manipulation, the Geismar incident, and sulfolane contamination litigation in Alaska. While the company believes most of these are substantially resolved or will not be material, it notes that some cases, like the natural gas price index manipulation litigation, have potential for material loss. Environmental remediation obligations are also ongoing, with accrued liabilities for these matters.