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Williams Reports First-Quarter 2020 Financial Results

TULSA, Okla.–(BUSINESS WIRE)–Williams (NYSE: WMB) today announced its unaudited financial results for the three months ended Mar. 31, 2020.

Strong Fee-Revenue Drives 1Q 2020 Results

  • Net loss of $518 million, resulting in net loss of $0.43 per diluted share (EPS), which includes net non-cash impairment impact of $824 million, or $0.68 per diluted share, with improved business performance being offset by non-cash impairments
  • EPS of $0.26 per diluted share, excluding primarily non-cash impairment charges
  • 10% increase in DCF to $861 million
  • 4% increase in Adjusted EBITDA to $1.26 billion
  • 2% increase in cash flow from operations to $787 million
  • 1.78x dividend coverage ratio up from 1Q 19
  • Debt-to-Adjusted EBITDA reduced by 0.41x to 4.36x since 1Q 19
  • 45% reduction in capital investments; down $233 million vs. 1Q 19

Intentionally built natural gas strategy remains durable for the long haul, despite current market volatility

  • Natural gas market fundamentals and demand remain strong
  • Stable and reliable customer base of utilities, power plants, LNG facilities and industrials plants supports firm-committed capacity on demand-pull regulated pipelines
  • Diversified gas gathering business linked directly to wellheads in premier dry gas basins provides advantaged position over crude basins

Safe and uninterrupted operation of critical systems, including pipeline control, amid coronavirus threat

  • Implemented proactive measures that align with federal and state guidelines so operators, security experts and entire workforce continue to do their jobs in a safe and productive manner without interruption to service

CEO Perspective

Alan Armstrong, president and chief executive officer, made the following comments:

“First quarter results were in line with our expectations as strong fee-revenue and cost savings more than offset much lower commodity margins. We are pleased with the resilient cash flow our business produces, including continued growth from our Transmission & Gulf of Mexico segment as well as the Northeast G&P segment – even with the onset of the historic disruption in energy markets due to geopolitical factors and the wide-spread economic impacts of COVID-19. As a critical natural gas infrastructure provider, I am proud of the efforts of our frontline employees who have worked diligently behind the scenes to ensure we continue to safely and reliably meet the clean energy needs of communities across the country.

“Now more than ever, our focus on connecting the best natural gas supplies to the best markets is proving to be the right strategy. The scale of our natural gas-focused operations provides us the opportunity to identify efficiencies and reduce costs, something we actively addressed in 2019 and continue to explore this year. A healthy 42% of our EBITDA is driven by the firm reserved capacity payments on our fully contracted natural gas transmission pipelines that serve electric power generation, industrial and residential sectors. Our gas gathering and processing operations in advantaged gas-directed supply areas stand to benefit as associated gas basins are impacted by falling oil prices. Despite the fact that we could see some near-term shut-in risks in oil-directed areas, our business remains stable, and we continue to execute on our portfolio of transmission growth projects.”

Armstrong added, “Demand for natural gas remains firm, and we are extremely well-positioned to deliver this clean, affordable and reliable energy source to communities across the United States at a time when the dependability of the nation’s energy infrastructure is of critical importance. Natural gas is an economically and environmentally superior energy source with dramatically less exposure to geopolitical factors. Not surprisingly, Williams is standing tall amid the downward pressure in the oil market and demonstrating during these volatile times the stability of our natural gas-focused business strategy.”

Williams Summary Financial Information

1Q

Amounts in millions, except ratios and per-share amounts. Per share amounts are reported on a diluted basis. Net income (loss) amounts are attributable to The Williams Companies, Inc. available to common stockholders.

2020

2019

GAAP Measures
Net Income (loss)

($518

)

$194

Net Income (loss) Per Share

($0.43

)

$0.16

Cash Flow From Operations

$787

$775

Non-GAAP Measures (1)
Adjusted EBITDA

$1,262

$1,216

Adjusted Income

$313

$273

Adjusted Income Per Share

$0.26

$0.22

Distributable Cash Flow

$861

$780

Dividend Coverage Ratio

1.78

x

1.70

x

Other
Debt-to-Adjusted EBITDA at Quarter End (2)

4.36x

4.77x

Capital Investments (3)

$284

$517

(1)

Schedules reconciling adjusted income from continuing operations, Adjusted EBITDA, Distributable Cash Flow and Coverage Ratio (non-GAAP measures) to the most comparable GAAP measure are available at www.williams.com and as an attachment to this news release.

(2)

1Q 2019 Debt-to-Adjusted EBITDA and Capital Investments excludes $727 million (net of cash acquired) for the purchase of the remaining 38% of UEOM as this amount was provided for at the close of the new Northeast JV by our JV partner, CPPIB, in June 2019.

(3)

Capital Investments includes increases to property, plant, and equipment, purchases of businesses, net of cash acquired, and purchases of and contributions to equity-method investments.

GAAP Measures

  • First-quarter 2020 net loss included impairments of equity-method investments, goodwill and goodwill at an equity investee, resulting in a total $1.2 billion pre-tax charge, of which $65 million was attributable to noncontrolling interests, in connection with the recent macroeconomic and geopolitical conditions, including significant declines in crude oil prices driven by both surplus supply and a decrease in crude oil demand caused by the COVID-19 pandemic. In assessing the related fair value measurements that led to these impairments, Williams was required to consider recent publicly available indications of value (including the company's stock price), which included lower observed publicly traded EBITDA market multiples as compared with recent history, and a significantly higher industry weighted average discount rate. First-quarter 2019 included impairments of certain assets and equity-method investments totaling $86 million.
  • First quarter 2020 also reflects the benefits of $34 million of increased service revenues primarily due to expansion projects and the rate case settlement at Transco and higher gathering, processing and liquids handling volumes in Northeast G&P, $18 million lower operating and administrative costs primarily due to cost-savings initiatives implemented in late 2019, $20 million of higher equity earnings (excluding the effect of the previously mentioned impairment of goodwill at an equity investee), and $15 million of favorable changes in the amortization of regulatory assets and liabilities were partially offset by $19 million lower commodity margins primarily due to lower NGL prices.
  • The provision for income taxes changed favorably by $273 million primarily due to lower pre-tax income.

Non-GAAP Measures

  • The increase in Adjusted EBITDA reflects the previously mentioned increased service revenues, lower operating and administrative costs, and favorable changes in the amortization of regulatory assets and liabilities, partially offset by lower commodity margins.
  • Adjusted income for the quarter also improved, driven by the higher Adjusted EBITDA and higher equity earnings, partially offset by a higher provision for income taxes.
  • First-quarter 2020 DCF is higher, reflecting the increased Adjusted EBITDA and lower maintenance capital.

Business Segment Results & Form 10-Q

Williams' operations are comprised of the following reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West and Other. For more information, please see the company's first-quarter 2020 Form 10-Q.

Quarter-To-Date

Amounts in millions

Modified EBITDA

Adjusted EBITDA

1Q 2020

1Q 2019

Change

1Q 2020

1Q 2019

Change

Transmission & Gulf of Mexico

$662

$636

$26

$669

$636

$33

Northeast G&P

369

299

70

370

302

68

West

215

256

(41

)

216

270

(54

)

Other

7

(4

)

11

7

8

(1

)

Totals

$1,253

$1,187

$66

$1,262

$1,216

$46

Note: Williams uses Modified EBITDA for its segment reporting. Definitions of Modified EBITDA and Adjusted EBITDA and schedules reconciling to net income are included in this news release.

Transmission & Gulf of Mexico

  • First-quarter 2020 Modified and Adjusted EBITDA reflect increased service revenues from Transco expansion projects placed in service and the benefit of Transco’s settled general rate case, partially offset by lower deferred revenue amortization at Gulfstar.
  • The period also benefited from favorable changes in the amortization of regulatory assets and liabilities driven by the settlement terms of Transco’s general rate case and lower operating and administrative costs.
  • On March 24, 2020, the FERC issued an order approving Transco’s uncontested rate case settlement., which will become effective on June 1, 2020.

Northeast G&P

  • First-quarter 2020 Modified and Adjusted EBITDA reflect increased service revenues due to higher gathering, processing and liquids handling volumes primarily from the new Northeast JV, Susquehanna Supply Hub, and the Utica Shale region, as well as the additional ownership in Utica East Ohio Midstream following the March 2019 acquisition and contribution into the Northeast JV.
  • The period also reflects higher proportional Modified and Adjusted EBITDA driven by the Marcellus South system and Blue Racer Midstream.
  • Gross gathering volumes, including 100% of operated equity-method investments, increased by 4% over the same period in 2019.

West

  • Volumes were stable in first-quarter 2020, but Modified and Adjusted EBITDA were down primarily due to $34 million of lower revenue in the Barnett Shale driven by reduced recognition of non-cash deferred revenue and the end of a contractual MVC period as well as a $21 million impact on commodity margins and inventory driven by lower NGL prices.
  • Lower operating and administrative costs, partially off-set the unfavorable changes described above. The change in Modified EBITDA also benefited from the absence of a 2019 impairment charge of $12 million, which is excluded from Adjusted EBITDA.

2020 Financial Guidance

As stated during Williams' investor update call on March 25, the company continues to expect 2020 Adjusted EBITDA toward the lower end of its previously stated range of between $4.95 billion and $5.25 billion. The company also continues to expect 2020 growth and maintenance capex toward the lower end of its previously stated range of between $1.55 billion and $1.85 billion. Guidance does not assume prolonged shut-ins of oil or condensate production or increases of dry gas production.

Williams' First-Quarter 2020 Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow

Williams' first-quarter 2020 earnings presentation will be posted at www.williams.com. The company’s first-quarter 2020 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, May 5, at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). A limited number of phone lines will be available at (833) 968-1947. International callers should dial (778) 560-2563. The conference ID is 1267901. A webcast link to the conference call is available at www.williams.com. A replay of the webcast will be available on the website for at least 90 days following the event.

About Williams

Williams (NYSE: WMB) is committed to being the leader in providing infrastructure that safely delivers natural gas products to reliably fuel the clean energy economy. Headquartered in Tulsa, Oklahoma, Williams is an industry-leading, investment grade C-Corp with operations across the natural gas value chain including gathering, processing, interstate transportation and storage of natural gas and natural gas liquids. With major positions in top U.S. supply basins, Williams connects the best supplies with the growing demand for clean energy. Williams owns and operates more than 30,000 miles of pipelines system wide – including Transco, the nation’s largest volume and fastest growing pipeline – and handles approximately 30 percent of the natural gas in the United States that is used every day for clean-power generation, heating and industrial use. www.williams.com

The Williams Companies, Inc.

Consolidated Statement of Operations

(Unaudited)

Three Months Ended

March 31,

2020

2019

(Millions, except per-share amounts)

Revenues:

Service revenues

$

1,474

$

1,440

Service revenues – commodity consideration

28

64

Product sales

411

550

Total revenues

1,913

2,054

Costs and expenses:

Product costs

396

525

Processing commodity expenses

13

40

Operating and maintenance expenses

337

340

Depreciation and amortization expenses

429

416

Selling, general, and administrative expenses

113

128

Impairment of goodwill

187

Other (income) expense – net

7

44

Total costs and expenses

1,482

1,493

Operating income (loss)

431

561

Equity earnings (losses)

22

80

Impairment of equity-method investments

(938

)

(74

)

Other investing income (loss) – net

3

1

Interest incurred

(301

)

(306

)

Interest capitalized

5

10

Other income (expense) – net

4

11

Income (loss) before income taxes

(774

)

283

Provision (benefit) for income taxes

(204

)

69

Net income (loss)

(570

)

214

Less: Net income (loss) attributable to noncontrolling interests

(53

)

19

Net income (loss) attributable to The Williams Companies, Inc.

(517

)

195

Preferred stock dividends

1

1

Net income (loss) available to common stockholders

$

(518

)

$

194

Basic earnings (loss) per common share:

Net income (loss)

$

(.43

)

$

.16

Weighted-average shares (thousands)

1,213,019

1,211,489

Diluted earnings (loss) per common share:

Net income (loss)

$

(.43

)

$

.16

Weighted-average shares (thousands)

1,213,019

1,213,592

The Williams Companies, Inc.

Consolidated Balance Sheet

(Unaudited)

March 31,

2020

December 31,

2019

(Millions, except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents

$

400

$

289

Trade accounts and other receivables

940

1,002

Allowance for doubtful accounts

(10

)

(6

)

Trade accounts and other receivables – net

930

996

Inventories

105

125

Other current assets and deferred charges

130

170

Total current assets

1,565

1,580

Investments

5,179

6,235

Property, plant, and equipment

41,772

41,510

Accumulated depreciation and amortization

(12,631

)

(12,310

)

Property, plant, and equipment – net

29,141

29,200

Intangible assets – net of accumulated amortization

7,688

7,959

Regulatory assets, deferred charges, and other

1,056

1,066

Total assets

$

44,629

$

46,040

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable

$

359

$

552

Accrued liabilities

1,129

1,276

Long-term debt due within one year

628

2,140

Total current liabilities

2,116

3,968

Long-term debt

21,848

20,148

Deferred income tax liabilities

1,602

1,782

Regulatory liabilities, deferred income, and other

3,804

3,778

Contingent liabilities

Equity:

Stockholders’ equity:

Preferred stock

35

35

Common stock ($1 par value; 1,470 million shares authorized at March 31, 2020 and December 31, 2019; 1,248 million shares issued at March 31, 2020 and 1,247 million shares issued at December 31, 2019)

1,248

1,247

Capital in excess of par value

24,330

24,323

Retained deficit

(12,013

)

(11,002

)

Accumulated other comprehensive income (loss)

(205

)

(199

)

Treasury stock, at cost (35 million shares of common stock)

(1,041

)

(1,041

)

Total stockholders’ equity

12,354

13,363

Noncontrolling interests in consolidated subsidiaries

2,905

3,001

Total equity

15,259

16,364

Total liabilities and equity

$

44,629

$

46,040

The Williams Companies, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

Three Months Ended

March 31,

2020

2019

(Millions)

OPERATING ACTIVITIES:

Net income (loss)

$

(570

)

$

214

Adjustments to reconcile to net cash provided (used) by operating activities:

Depreciation and amortization

429

416

Provision (benefit) for deferred income taxes

(177

)

75

Equity (earnings) losses

(22

)

(80

)

Distributions from unconsolidated affiliates

169

172

Impairment of goodwill

187

Impairment of equity-method investments

938

74

Amortization of stock-based awards

9

14

Cash provided (used) by changes in current assets and liabilities:

Accounts receivable

67

97

Inventories

19

1

Other current assets and deferred charges

20

(6

)

Accounts payable

(155

)

(39

)

Accrued liabilities

(150

)

(142

)

Other, including changes in noncurrent assets and liabilities

23

(21

)

Net cash provided (used) by operating activities

787

775

FINANCING ACTIVITIES:

Proceeds from (payments of) commercial paper – net

1,014

Proceeds from long-term debt

1,702

708

Payments of long-term debt

(1,518

)

(864

)

Proceeds from issuance of common stock

6

6

Common dividends paid

(485

)

(460

)

Dividends and distributions paid to noncontrolling interests

(44

)

(41

)

Contributions from noncontrolling interests

2

4

Other – net

(10

)

(9

)

Net cash provided (used) by financing activities

(347

)

358

INVESTING ACTIVITIES:

Property, plant, and equipment:

Capital expenditures (1)

(306

)

(422

)

Dispositions – net

(3

)

(4

)

Contributions in aid of construction

14

10

Purchases of businesses, net of cash acquired

(727

)

Purchases of and contributions to equity-method investments

(30

)

(99

)

Other – net

(4

)

(16

)

Net cash provided (used) by investing activities

(329

)

(1,258

)

Increase (decrease) in cash and cash equivalents

111

(125

)

Cash and cash equivalents at beginning of year

289

168

Cash and cash equivalents at end of period

$

400

$

43

_____________

(1) Increases to property, plant, and equipment

$

(254

)

$

(418

)

Changes in related accounts payable and accrued liabilities

(52

)

(4

)

Capital expenditures

$

(306

)

$

(422

)

Transmission & Gulf of Mexico

(UNAUDITED)

2019(1)

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

Regulated interstate natural gas transportation, storage, and other revenues (2)

$

658

$

650

$

682

$

690

$

2,680

$

692

Gathering, processing, and transportation revenues

128

121

117

113

479

99

Other fee revenues (2)

3

5

3

4

15

4

Commodity margins

8

7

6

4

25

3

Operating and administrative costs (2)

(197

)

(230

)

(209

)

(242

)

(878

)

(184

)

Other segment income (expenses) – net

(6

)

(7

)

22

22

31

4

Impairment of certain assets (3)

(354

)

(354

)

Proportional Modified EBITDA of equity-method investments

42

44

44

47

177

44

Modified EBITDA

636

590

665

284

2,175

662

Adjustments

38

15

359

412

7

Adjusted EBITDA

$

636

$

628

$

680

$

643

$

2,587

$

669

Statistics for Operated Assets

Natural Gas Transmission

Transcontinental Gas Pipe Line

Avg. daily transportation volumes (Tbtu)

13.2

12.2

13.2

13.3

13.0

13.8

Avg. daily firm reserved capacity (Tbtu)

17.1

17.0

17.3

17.5

17.2

17.7

Northwest Pipeline LLC

Avg. daily transportation volumes (Tbtu)

2.7

2.0

1.9

2.7

2.3

2.6

Avg. daily firm reserved capacity (Tbtu)

3.1

3.0

3.0

3.0

3.0

3.0

Gulfstream – Non-consolidated

Avg. daily transportation volumes (Tbtu)

1.1

1.3

1.3

1.2

1.2

1.2

Avg. daily firm reserved capacity (Tbtu)

1.3

1.3

1.3

1.3

1.3

1.3

Gathering, Processing, and Crude Oil Transportation

Consolidated (4)

Gathering volumes (Bcf/d)

0.25

0.25

0.22

0.29

0.25

0.30

Plant inlet natural gas volumes (Bcf/d)

0.53

0.55

0.50

0.58

0.54

0.58

NGL production (Mbbls/d)

36

33

27

31

32

32

NGL equity sales (Mbbls/d)

7

9

5

6

7

5

Crude oil transportation volumes (Mbbls/d)

146

136

128

135

136

138

Non-consolidated (5)

Gathering volumes (Bcf/d)

0.35

0.38

0.36

0.35

0.36

0.35

Plant inlet natural gas volumes (Bcf/d)

0.35

0.39

0.36

0.35

0.36

0.35

NGL production (Mbbls/d)

24

27

24

26

25

24

NGL equity sales (Mbbls/d)

7

8

6

5

6

5

(1) Recast due to the change in segments in the first quarter of 2020.

(2) Excludes certain amounts associated with revenues and operating costs for tracked or reimbursable charges.

(3) Our partners' $209 million share of the fourth-quarter 2019 impairment of the Constitution pipeline project is reflected outside of Modified EBITDA within Net loss attributable to noncontrolling interests.

(4) Excludes volumes associated with equity-method investments that are not consolidated in our results.

(5) Includes 100% of the volumes associated with operated equity-method investments.

Northeast G&P

(UNAUDITED)

2019

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

Gathering, processing, transportation, and fractionation revenues

$

239

$

291

$

310

$

331

$

1,171

$

312

Other fee revenues (1)

23

21

23

24

91

25

Commodity margins

2

1

(1

)

2

1

Operating and administrative costs (1)

(83

)

(112

)

(100

)

(98

)

(393

)

(87

)

Other segment income (expenses) – net

(4

)

3

(1

)

(2

)

Impairment of certain assets

(10

)

(10

)

Proportional Modified EBITDA of equity-method investments

122

103

108

121

454

120

Modified EBITDA

299

303

345

367

1,314

369

Adjustments

3

16

(2

)

10

27

1

Adjusted EBITDA

$

302

$

319

$

343

$

377

$

1,341

$

370

Statistics for Operated Assets

Gathering and Processing

Consolidated (2)

Gathering volumes (Bcf/d)

4.05

4.16

4.33

4.41

4.24

4.27

Plant inlet natural gas volumes (Bcf/d)

0.63

1.04

1.16

1.33

1.04

1.24

NGL production (Mbbls/d)

44

58

92

106

76

92

NGL equity sales (Mbbls/d)

4

3

3

2

3

2

Non-consolidated (3)

Gathering volumes (Bcf/d)

4.27

4.08

4.35

4.47

4.29

4.40

(1) Excludes certain amounts associated with revenues and operating costs for reimbursable charges.

(2) Includes volumes associated with Susquehanna Supply Hub, the Northeast JV, and Utica Supply Hub, all of which are consolidated. The Northeast JV includes 100% of volumes handled by UEOM from the date of consolidation on March 18, 2019, but does not include volumes prior to that date as we did not operate UEOM.

(3) Includes 100% of the volumes associated with operated equity-method investments, including the Laurel Mountain Midstream partnership; and the Bradford Supply Hub and a portion of the Marcellus South Supply Hub within the Appalachia Midstream Services partnership. Volumes handled by Blue Racer Midstream (gathering and processing), which we do not operate, are not included.

West

(UNAUDITED)

2019 (1)

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

Gathering, processing, transportation, storage, and fractionation revenues

$

344

$

355

$

307

$

302

$

1,308

$

299

Other fee revenues (2)

7

6

6

4

23

6

Commodity margins

19

18

24

33

94

2

Operating and administrative costs (2)

(125

)

(135

)

(116

)

(114

)

(490

)

(115

)

Other segment income (expenses) – net

(3

)

4

(5

)

6

2

(5

)

Impairment of certain assets

(12

)

(64

)

(24

)

(100

)

Proportional Modified EBITDA of equity-method investments

26

28

29

32

115

28

Modified EBITDA

256

212

245

239

952

215

Adjustments

14

75

(1

)

24

112

1

Adjusted EBITDA

$

270

$

287

$

244

$

263

$

1,064

$

216

Statistics for Operated Assets

Gathering and Processing

Consolidated (3)

Gathering volumes (Bcf/d)

3.42

3.53

3.61

3.51

3.52

3.43

Plant inlet natural gas volumes (Bcf/d)

1.41

1.52

1.56

1.44

1.48

1.26

NGL production (Mbbls/d)

62

59

48

46

54

35

NGL equity sales (Mbbls/d)

27

28

17

17

22

12

Non-consolidated (4)

Gathering volumes (Bcf/d)

0.17

0.15

0.21

0.27

0.20

0.20

Plant inlet natural gas volumes (Bcf/d)

0.17

0.14

0.21

0.26

0.20

0.20

NGL production (Mbbls/d)

7

1

18

22

12

17

NGL and Crude Oil Transportation volumes (Mbbls/d) (5)

254

269

250

238

253

227

(1) Recast due to the change in segments in the first quarter of 2020.

(2) Excludes certain amounts associated with revenues and operating costs for reimbursable charges.

(3) Excludes volumes associated with equity-method investments that are not consolidated in our results.

(4) Includes 100% of the volumes associated with operated equity-method investments, including the Jackalope Gas Gathering System (sold in April 2019) and Rocky Mountain Midstream.

(5) Includes 100% of the volumes associated with operated equity-method investments, including the Overland Pass Pipeline Company and Rocky Mountain Midstream.

Contacts

MEDIA CONTACT:
[email protected]
(800) 945-8723

INVESTOR CONTACTS:
Brett Krieg

(918) 573-4614

Grace Scott

(918) 573-1092

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