10-QPeriod: Q3 FY2018

WILLIAMS COMPANIES, INC. Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 1, 2018For Securities:WMB

Summary

Williams Companies, Inc. (WMB) reported its third-quarter 2018 results, showcasing a significant increase in revenues driven by expanded operations and the recent merger with Williams Partners L.P. (WPZ). While net income attributable to common stockholders saw a decrease compared to the prior year, largely due to the absence of a large gain from a prior asset sale and increased tax provisions, the underlying operational performance remains robust. The company successfully integrated the WPZ operations, which is expected to provide long-term strategic benefits, particularly in navigating regulatory changes related to income tax recovery for pipelines. Management highlighted strong performance in its gathering and processing segments, alongside continued growth in its interstate natural gas pipeline business, driven by significant expansion projects coming online. Investors should note the company's strategic focus on fee-based businesses, which helps mitigate commodity price volatility. The successful completion of the WPZ merger is a key event, simplifying the corporate structure and enhancing financial flexibility. The company is actively managing its debt and capital expenditures, with substantial investment in growth projects aimed at connecting North American energy resources to growing markets. While potential headwinds exist from regulatory changes and commodity price fluctuations, WMB appears strategically positioned to leverage its infrastructure and market access for continued growth.

Financial Highlights

49 data points
Beta

Revenue

$2.28B

Net Income

$129.00M

5.7% Net Margin

EPS (Diluted)

$0.13

Total Assets

$47.15B

Cash & Equivalents

$42.00M

Free Cash Flow

-$23.00M

Financial Statements
Beta
Revenue$2.28B
SG&A Expenses$174.00M
Operating Expenses$1.80B
Operating Income$501.00M
Interest Expense$270.00M
Net Income$129.00M
EPS (Basic)$0.13
EPS (Diluted)$0.13
Shares Outstanding (Basic)1.02B
Shares Outstanding (Diluted)1.03B

Key Highlights

  • 1Total revenues increased by 21% for the nine months ended September 30, 2018, compared to the same period in 2017, driven by higher service and product sales.
  • 2The company successfully completed the merger with Williams Partners L.P. (WPZ) on August 10, 2018, which is expected to provide significant strategic and financial benefits.
  • 3Operating income increased by 28% for the nine months ended September 30, 2018, compared to the prior year, largely due to the absence of significant asset impairments recorded in 2017 and increased service revenues from expansion projects.
  • 4Net income available to common stockholders decreased from $487 million in the first nine months of 2017 to $416 million in the same period of 2018, primarily impacted by higher income tax provisions and the absence of a large gain from asset sales in the prior year.
  • 5The company is undertaking significant capital expenditures for growth projects, with updated expectations for 2018 growth capital and investment expenditures to be at least $3.9 billion.
  • 6Cash provided by operating activities increased to $2.331 billion for the nine months ended September 30, 2018, up from $2.231 billion in the prior year, indicating strong operational cash generation.
  • 7The company's credit facilities remain robust, with a $4.5 billion revolving credit facility in place, and the company was in compliance with all financial covenants as of September 30, 2018.

Frequently Asked Questions

The merger with Williams Partners L.P. (WPZ), completed on August 10, 2018, was accounted for as a non-cash equity transaction. It resulted in significant increases to Common Stock and Capital in excess of par value, while also impacting noncontrolling interests and deferred income tax liabilities. Operationally, the merger simplifies the corporate structure and is expected to provide benefits in recovering income tax allowances for FERC-regulated pipelines, mitigating uncertainties related to FERC policy changes and the Tax Cuts and Jobs Act.

Total revenues saw a substantial increase, growing by 21% for the nine months ended September 30, 2018, compared to the prior year. This growth was driven by higher service revenues, largely from expansion projects placed in service at Transco and increased gathering volumes, and a significant increase in product sales, attributed to higher marketing revenues and NGL prices. The adoption of ASC 606 also led to the recognition of 'Service revenues – commodity consideration' which is a new presentation.

Williams Companies reports its operations across three main segments: Northeast G&P (gathering and processing), Atlantic-Gulf (interstate natural gas pipeline, gathering, and processing), and West (interstate natural gas pipeline, gathering, and processing). Northeast G&P and Atlantic-Gulf segments showed strong Modified EBITDA growth driven by higher service revenues and absence of impairments. The West segment's Modified EBITDA also increased significantly, primarily due to the absence of a large asset impairment in the prior year and improved commodity margins, despite some service revenue headwinds from deconsolidation and rate adjustments.

Key risks include potential adverse impacts from Colorado's Proposition 112 ballot measure, which could restrict oil and gas development. The company also faces risks related to regulatory changes impacting FERC-regulated pipelines, counterparty credit risks, commodity price volatility affecting producer customers and gathering/processing volumes, and the potential for unexpected increases in capital expenditures or delays in project execution. Legal proceedings and environmental matters, while generally not expected to be material individually, are also ongoing areas of attention.