Williams Reports Second-Quarter 2008 Financial Results
TULSA, Okla., Aug. 7 /PRNewswire-FirstCall/ — Williams announced second-quarter 2008 unaudited net income of $437 million, or $0.73 per share on a diluted basis, compared with net income of $433 million, or $0.71 cents per share on a diluted basis, for second-quarter 2007.
Year-to-date through June 30, Williams reported net income of $937 million, or $1.57 per share on a diluted basis, compared with net income of $567 million, or $0.93 per share on a diluted basis for the first six months of 2007.
Quarterly Summary Financial Information 2Q 2008 2Q 2007 Per share amounts are reported on a fully diluted basis millions per share millions per share Income from continuing operations $419 $0.70 $243 $0.40 Income from discontinued operations 18 0.03 190 0.31 Net income $437 $0.73 $433 $0.71 Recurring income from continuing operations* $397 $0.67 $221 $0.36 After-tax mark-to-market adjustments 9 0.01 43 0.07 Recurring income from continuing operations – after mark-to-market adjustments* $406 $0.68 $264 $0.43 Year-To-Date Summary Financial Information YTD 2008 YTD 2007 Per share amounts are reported on a fully diluted basis millions per share millions per share Income from continuing operations $835 $1.40 $413 $0.68 Income from discontinued operations 102 0.17 154 0.25 Net income $937 $1.57 $567 $0.93 Recurring income from continuing operations* $740 $1.24 $387 $0.63 After-tax mark-to-market adjustments 7 0.01 67 0.11 Recurring income from continuing operations – after mark-to-market adjustments* $747 $1.25 $454 $0.74 * A schedule reconciling income from continuing operations to recurring income from continuing operations and mark-to-market adjustments (non-GAAP measures) is available at http://www.williams.com/ and as an attachment to this press release.
Strong performances in the company’s exploration & production and midstream businesses were the key drivers of the increase in the second-quarter and year-to-date results. Key factors were higher net realized average natural gas prices and strong natural gas production growth, as well as natural gas liquid (NGL) margins remaining at historically high levels. The results also benefited from a gain on the sale of certain international interests.
Lower income from discontinued operations partially offset these benefits to net income during the second-quarter and year-to-date periods. The lower results from discontinued operations in second-quarter 2008 primarily reflect the absence of income recognized in second-quarter 2007 related to the sale of the company’s former power business.
Recurring Results Adjusted for Effect of Mark-to-Market Accounting
Recurring income from continuing operations, after adjustments to remove the effect of mark-to-market accounting for certain hedges and other derivatives in Gas Marketing Services, was $406 million, or $0.68 per share for second-quarter 2008. On the same adjusted basis, recurring income from continuing operations was $264 million, or $0.43 per share, for second-quarter 2007.
For the first half of 2008, recurring income from continuing operations after mark-to-market adjustments was $747 million, or $1.25 per share; compared with $454 million, or $0.74 per share for the first half of 2007.
The significant increases in the recurring adjusted results reflect strong performances in the company’s natural gas businesses driven by higher net realized average prices on increased production as well as strong NGL margins. Higher operating costs partially offset these benefits.
A reconciliation of the company’s income from continuing operations to recurring income from continuing operations and mark-to-market adjustments is available at http://www.williams.com/ and as an attachment to this news release.
CEO Perspective
“Natural gas is playing an increasingly vital role in our nation’s energy picture, and Williams operates a portfolio of natural gas assets that are best-in-class,” said Steve Malcolm, chairman, president and chief executive officer.
“Our energy-producing businesses enjoy the competitive advantages of scale in established, growing production basins. Our pipelines connect those long-lived producing areas to fast-growing markets along the Eastern Seaboard, in Florida and in the Pacific Northwest.
“There are abundant growth opportunities across our businesses and we have a solid track record of crisp execution. Our focus continues to be delivering earnings growth and driving long-term value creation,” Malcolm said.
Business Segment Performance: Consolidated Segment Profit Up 60% in Second Quarter
Consolidated results include segment profit for Williams’ businesses – Exploration & Production, Midstream Gas & Liquids, Gas Pipeline and Gas Marketing Services as well as results reported in the Other segment.
Consolidated Segment Profit (Loss) 2Q YTD Amounts in millions 2008 2007 2008 2007 Exploration & Production $496 $209 $926 $397 Midstream Gas & Liquids 295 251 556 405 Gas Pipeline 179 180 359 330 $970 $640 $1,841 $1,132 Gas Marketing Services (46) (63) (25) (93) Other (1) – – – Consolidated Segment Profit $923 $577 $1,816 $1,039 Recurring Consolidated Segment Profit (Loss) After Mark-to-Market Adjustments* 2Q YTD Amounts in millions 2008 2007 2008 2007 Exploration & Production $471 $209 $783 $397 Midstream Gas & Liquids 293 251 554 397 Gas Pipeline 170 157 350 307 $934 $617 $1,687 $1,101 Gas Marketing after MTM Adjustments (31) 7 (13) 15 Other (1) – – – Recurring Consolidated Segment Profit After Mark-to-Market Adjustments $902 $624 $1,674 $1,116 * A schedule reconciling income from continuing operations to recurring income from continuing operations and mark-to-market adjustments (non-GAAP measures) is available at http://www.williams.com/ and as an attachment to this press release.
For second-quarter 2008, Williams’ businesses reported consolidated segment profit of $923 million, compared with $577 million for second-quarter 2007. Improved results in Exploration & Production and Midstream drove the 60-percent increase.
Year-to-date through June 30, Williams’ businesses reported consolidated segment profit of $1.82 billion, compared with $1.04 billion for the same period in 2007. Strong results in Exploration & Production, Midstream and Gas Pipeline drove the significant increase in year-to-date consolidated segment profit. The year-to-date period also benefited from the previously noted gain on the sale of certain international interests.
On a basis adjusted to remove the effect of nonrecurring items and mark-to-market accounting, Williams’ recurring consolidated segment profit was $902 million in second-quarter 2008, compared with $624 million for second-quarter 2007, an increase of 45 percent.
For the first half of 2008 on the same basis, Williams’ recurring consolidated segment profit was $1.67 billion, compared with $1.12 billion for the first half of 2007.
Exploration & Production: Higher Net Realized Prices, Robust Production Growth Drive Higher Segment Profit
Exploration & Production includes natural gas production and development in the U.S. Rocky Mountains, San Juan Basin and Mid-Continent, and oil and gas development in South America.
The business reported segment profit of $496 million for second-quarter 2008, compared with second-quarter 2007 segment profit of $209 million, an increase of 137 percent.
Year-to-date through June 30, Exploration & Production reported segment profit of $926 million, compared with $397 million for the first six months of 2007.
Higher net realized average prices and strong growth in domestic natural gas production volumes were the primary drivers of the significant increases in segment profit for both the second-quarter and year-to-date periods. Results for the second-quarter and year-to-date 2008 periods also benefited from pre-tax gains on the sale of certain international interests of $30 million and $148 million, respectively.
Increased development within the Piceance, Powder River and Fort Worth basins drove the growth in domestic production volumes, as the company surpassed 1.1 billion cubic feet equivalent (Bcfe) per day in domestic production during the second quarter. In the Piceance Basin of western Colorado — the company’s cornerstone for production and reserves growth — average daily production increased 26 percent for the second quarter. In the Powder River Basin in Wyoming, the company’s second-largest production area, average daily production increased 41 percent for the quarter.
Quarterly Average Daily Production 2Q Amounts in million cubic feet equivalent of natural gas (MMcfe) 2008 2007 Growth rate Piceance Basin 659 522 26% Powder River Basin 234 166 41% Other Basins 266 257 4% U.S. Interests only 1,110 898 24% U.S. & International Interests 1,159 945 23%
During second-quarter 2008, Williams’ net realized average price for U.S. production was $8.056 per thousand cubic feet of natural gas equivalent (Mcfe), which was 49 percent higher than the $5.39 per Mcfe realized in second-quarter 2007.
The benefits of higher net realized average prices and higher production volumes in the second-quarter and year-to-date periods were partially offset by increased depreciation, depletion and amortization, higher operating taxes, and higher lease operating expenses.
Williams is updating Exploration & Production’s segment profit guidance released on June 25 for 2008 and 2009. Increased expected production levels, including the effects of beginning the development of the company’s recent acquisitions in the Piceance Basin and the Barnett Shale, are driving the updated forecast.
In 2008, Williams now expects recurring segment profit to range from $1.4 billion to $1.7 billion, updated from the June 25 guidance range of $1.35 billion to $1.7 billion. For 2009, the company now expects a range of $1.275 billion to $1.775 billion, updated from June 25 guidance of $1.250 billion to $1.75 billion.
The company is also updating its capital expenditure guidance ranges for Exploration & Production for both 2008 and 2009. The increase in capital expenditure guidance for both 2008 and 2009 are due to the previously announced acquisition in the Barnett Shale.
In 2008, Williams is now forecasting a range of $1.975 billion to $2.175 billion in capital expenditures, up from June 25 guidance of $1.8 billion to $2 billion. For 2009, the company now expects capital expenditures of $1.725 billion to $1.925 billion, up from June 25 guidance of $1.625 billion to $1.825 billion.
Midstream Gas & Liquids: Continued Solid Earnings Growth
Midstream provides natural gas gathering and processing, NGL fractionation and storage services and olefins production. For second-quarter 2008, the business reported segment profit of $295 million, compared with segment profit of $251 million for second-quarter 2007.
For the first six months of 2008, Midstream’s segment profit was $556 million, compared with $405 million for the same time period in 2007.
Midstream’s growth in segment profit during the second quarter is primarily due to greater contribution from the olefins business, higher NGL unit margins and higher fee-based revenues across all regions. The acquisition of an additional interest in the Geismar plant in July 2007 helped drive the greater contribution from the olefins business. Higher operating costs partially offset these benefits.
Higher NGL margins, associated with favorable market commodity pricing on NGLs, were the primary driver of the segment profit growth in the year-to-date period.
Williams markets NGLs via equity volumes the company retains as payment-in-kind under certain processing contracts. Midstream’s 2008 NGL equity volumes for both the quarter and year-to-date periods are comparable to the same periods of 2007.
Gas Pipeline: New Transco Rates, Expansion Projects Drive Year-to-Date Segment Profit Growth
Gas Pipeline, which primarily delivers natural gas to markets along the Eastern Seaboard, in Florida and in the Pacific Northwest, reported second-quarter 2008 segment profit of $179 million, compared with $180 million for second-quarter 2007.
Year-to-date through June 30, Gas Pipeline reported segment profit of $359 million, compared with $330 million for the same period in 2008.
On a recurring basis, Gas Pipeline’s second-quarter 2008 segment profit was $170 million, compared with $157 million for second-quarter 2007, an increase of 8 percent.
Increased revenues from two expansion projects placed into service in fourth-quarter 2007, partially offset by higher costs, contributed to the higher recurring segment profit in the second quarter.
Also on a recurring basis, Gas Pipeline’s segment profit for the first half of 2008 was $350 million, compared with $307 million for the first half of 2007.
Increased revenues from new rates on the Transco system and the two expansion projects were the primary drivers of the higher recurring segment profit in the year-to-date period. Higher costs partially offset these benefits.
Gas Marketing Services: Supporting Natural Gas Businesses with Marketing, Risk Management
Gas Marketing Services is responsible for supporting Williams’ natural gas businesses by providing marketing and risk management services. These services primarily include marketing and hedging the gas produced by Exploration & Production, and procuring fuel and shrink gas and hedging natural gas liquids for Midstream.
In addition, Gas Marketing manages various natural-gas related contracts, such as transportation, storage, and related hedges, and proprietary trading positions, and provides marketing services to third-parties, such as producers. The segment also manages certain legacy natural gas contracts and positions that previously were reported in the former power business, which have been reduced to a minimal level.
Gas Marketing reported a second-quarter 2008 segment loss of $46 million, compared with a segment loss of $63 million in second-quarter 2007.
For the first six months of 2008, Gas Marketing reported a segment loss of $25 million, compared with a segment loss of $93 million for the same period in 2007.
The reduction in segment loss for both the second-quarter and year-to-date periods was primarily due to reduced mark-to-market losses associated with derivative contracts with a future delivery date that are not accounted for using hedge accounting. The favorable change was largely the result of reduced losses in 2008 from legacy contracts that are no longer outstanding. This benefit was partially offset in both periods by a decrease in accrual gross margin.
Although not significant for second-quarter or year-to-date 2008 results, the company expects in the future to have some level of mark-to-market volatility in Gas Marketing Services, primarily from natural gas storage and transportation hedging.
Gas Marketing Recurring Segment Profit (Loss) Adjusted for Mark-to-Market Effect* 2Q YTD Amounts in millions 2008 2007 2008 2007 Segment loss ($46) ($63) ($25) ($93) Nonrecurring adjustments – – – – Recurring segment loss ($46) $0 ($63) ($25) $0 ($93) Mark-to-market adjustments 15 70 12 108 Recurring segment profit (loss) after MTM adjustments ($31) $7 ($13) $15 * A schedule reconciling income from continuing operations to recurring income from continuing operations and mark-to-market adjustments (non-GAAP measures) is available at http://www.williams.com/ and as an attachment to this press release.
Williams is adjusting its guidance for Gas Marketing in 2008 and 2009. The company now expects Gas Marketing’s 2008 recurring segment results, adjusted for the effect of mark-to-market accounting, to range from a loss of $50 million to a loss of $30 million. Previous guidance was a loss of $30 million to breakeven.
For 2009, Williams’ new guidance for recurring segment results, adjusted for the effect of mark-to-market accounting, is a loss of $20 million to a profit of $20 million. Previous guidance was a loss of $40 million to breakeven.
Segment Profit, Capital Expenditure Guidance Updated
Guidance for consolidated segment profit includes results for Exploration & Production, Midstream and Gas Pipeline, as well as Gas Marketing and the Other segment. All consolidated segment profit and earnings per share ranges are presented on a recurring basis adjusted for the effect of mark-to-market accounting.
For 2008, Williams has updated its consolidated segment profit guidance to a range of $3.15 billion to $3.65 billion and earnings per share of $2.35 to $2.80. The previous ranges were $3.1 billion to $3.65 billion in consolidated segment profit and earnings per share of $2.30 to $2.80. The updated range for 2008 reflects the previously referenced update in Exploration & Production.
For 2009, Williams has updated its consolidated segment profit guidance to a range of $2.925 billion to $3.825 billion and earnings per share of $2.10 to $2.95. The previous ranges were $2.9 billion to $3.8 billion for consolidated segment profit and earnings per share of $2.05 to $2.90. The updated range for 2009 reflects the previously referenced update in Exploration & Production.
Williams is updating its capital expenditure guidance for 2008 and 2009, reflecting the previously referenced increases in Exploration & Production.
The new range for 2008 is $3.2 billion to $3.55 billion, up from the previous range of $3.025 billion to $3.375 billion.
For 2009, the new range is $2.725 billion to $3.125 billion, up from the previous range of $2.625 billion to $3.025 billion.
As noted in its June 25 guidance update, Williams is now providing capital expenditure expectations for potential future projects it is investigating that are not yet included in capital expenditure guidance. The inclusion of potential future project expectations is designed to provide investors with Williams’ current views on total potential capital in the given year.
The company has identified $100 million to $300 million in potential future projects for 2008 and $200 million to $500 million in potential future projects for 2009.
Commodity Price, NGL Margin Outlook
The following chart provides Williams’ outlook for natural gas and crude oil prices as well as expected average NGL margins in 2008 and 2009. The company’s outlook is unchanged from its June 25 guidance.
Un-hedged Commodity Price Assumptions 2008 2009 Natural Gas: Basin Prices Average Rockies $7.30 – $8.10 $6.60 – $8.10 Average San Juan/Mid-Continent $7.70 – $9.00 $7.00 – $9.00 NYMEX (reference only) $9.00 – $10.50 $8.00 – $10.50 Crude Oil: WTI (reference only) $100 – $120 $80 – $120 Average NGL Margins: ($/gallon) $0.57 – $0.68 $0.43 – $0.71 Williams Completes Stock Repurchase Program
In July 2007, Williams announced that its board of directors authorized the repurchase of up to $1 billion of the company’s common stock with no expiration date.
As of July 16, 2008, the company has completed the program, purchasing approximately 28.8 million shares for approximately $1 billion.
Today’s Analyst Call
Management will discuss second-quarter 2008 results during a live webcast beginning at 9:30 a.m. EDT today. Participants are encouraged to access the webcast and access slides for viewing, downloading and printing at http://www.williams.com/.
A limited number of phone lines also will be available at (877) 558-9190. International callers should dial (706) 902-3248. Replays of the second-quarter webcast, in both streaming and downloadable podcast formats, will be available for two weeks at http://www.williams.com/ following the event.
Form 10-Q
The company will file its Form 10-Q with the Securities and Exchange Commission today. The document will be available on both the SEC and Williams websites.
About Williams
Williams, through its subsidiaries, finds, produces, gathers, processes and transports natural gas. Williams’ operations are concentrated in the Pacific Northwest, Rocky Mountains, Gulf Coast, and Eastern Seaboard. More information is available at http://www.williams.com. Go to http://www.b2i.us/irpass.asp?BzID=630&to=ea&s=0 to join our e-mail list.
Contact: Jeff Pounds Williams (media relations) (918) 573-3332 Travis Campbell Williams (investor relations) (918) 573-2944 Richard George Williams (investor relations) (918) 573-3679 Sharna Reingold Williams (investor relations) (918) 573-2078
Williams’ reports, filings, and other public announcements might contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You typically can identify forward-looking statements by the use of forward-looking words, such as “anticipate,” believe,”"could,”"continue,”"estimate,”"expect,”"forecast,”"may,”"plan,”"potential,”"project,”"schedule,”"will,” and other similar words. These statements are based on our intentions, beliefs, and assumptions about future events and are subject to risks, uncertainties, and other factors. Actual results could differ materially from those contemplated by the forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such statements, other factors could cause our actual results to differ materially from the results expressed or implied in any forward-looking statements. Those factors include, among others: changes in general economic conditions and changes in the industries in which Williams conducts business; changes in federal or state laws and regulations to which Williams is subject, including tax, environmental and employment laws and regulations; the cost and outcomes of legal and administrative claims proceedings, investigations, or inquiries; the results of financing efforts, including our ability to obtain financing on favorable terms, which can be affected by various factors, including our credit ratings and general economic conditions; the level of creditworthiness of counterparties to our transactions; the amount of collateral required to be posted from time to time in our transactions; the effect of changes in accounting policies; the ability to control costs; the ability of each business unit to successfully implement key systems, such as order entry systems and service delivery systems; the impact of future federal and state regulations of business activities, including allowed rates of return, the pace of deregulation in retail natural gas market, and the resolution of other regulatory matters; changes in environmental and other laws and regulations to which Williams and its subsidiaries are subject or other external factors over which we have no control; changes in foreign economies, currencies, laws and regulations, and political climates, especially in Canada, Argentina, Brazil, and Venezuela, where Williams has direct investments; the timing and extent of changes in commodity prices, interest rates, and foreign currency exchange rates; the weather and other natural phenomena; the ability of Williams to develop or access expanded markets and product offerings as well as their ability to maintain existing markets; the ability of Williams and its subsidiaries to obtain governmental and regulatory approval of various expansion projects; future utilization of pipeline capacity, which can depend on energy prices, competition from other pipelines and alternative fuels, the general level of natural gas and petroleum product demand, decisions by customers not to renew expiring natural gas transportation contracts; the accuracy of estimated hydrocarbon reserves and seismic data; and global and domestic economic repercussions from terrorist activities and the government’s response to such terrorist activities. In light of these risks, uncertainties, and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
In regard to the company’s reserves in Exploration & Production, the SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves. We have used certain terms in this news release, such as “probable” reserves and “possible” reserves and “new opportunities potential” reserves that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. The SEC defines proved reserves as estimated quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known reservoirs under the assumed economic conditions. Probable and possible reserves are estimates of potential reserves that are made using accepted geological and engineering analytical techniques, but which are estimated with reduced levels of certainty than for proved reserves. Possible reserve estimates are less certain than those for probable reserves. New opportunities potential is an estimate of reserves for new areas for which we do not have sufficient information to date to raise the reserves to either the probable category or the possible category. New opportunities potential estimates are even less certain than those for possible reserves.
Reference to “total resource portfolio” includes proved, probable and possible reserves as well as new opportunities potential.
Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the Securities and Exchange Commission on Feb. 26, 2008, and our quarterly reports on Form 10-Q available from our offices or from our website at http://www.williams.com.
Reconciliation of Income from Continuing Operations to Recurring Earnings (UNAUDITED) 2007 (Dollars in millions, except per-share amounts) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Income from continuing operations available to common stockholders $170 $243 $228 $206 $847 Income from continuing operations – diluted earnings per common share $0.28 $0.40 $0.38 $0.34 $1.40 Nonrecurring items: Exploration & Production Accrual for royalty litigation contingency $- $- $- $4 $4 Gain on sale of Peru interests – – – – – Reserve for receivables from bankrupt counterparty – – – – – Total Exploration & Production nonrecurring items – – – 4 4 Gas Pipeline Change in estimate related to a regulatory liability – NWP – (17) – – (17) Payments received for terminated firm transportation agreement – NWP – (6) (12) – (18) Gain on sale of excess inventory gas – TGPL – – – – – Total Gas Pipeline nonrecurring items – (23) (12) – (35) Midstream Gas & Liquids Reversal of a maintenance accrual (8) – – – (8) Income from a favorable litigation outcome – – – (12) (12) Reserve for international receivables – – – 9 9 Impairment of Carbonate Trend pipeline – – – 10 10 Involuntary conversion gain related to Ignacio gas processing plant – – – – – Reserve for receivables from bankrupt counterparty – – – – – Total Midstream Gas & Liquids nonrecurring items (8) – – 7 (1) Gas Marketing Services Accrual for litigation contingencies – – – 20 20 Total Gas Marketing Services nonrecurring items – – – 20 20 Nonrecurring items included in segment profit (loss) (8) (23) (12) 31 (12) Nonrecurring items below segment profit (loss) Early debt retirement costs (Corporate) – – – 19 19 Interest related to Gulf Liquids litigation contingency ( Interest accrued – Midstream) 1 1 1 – 3 Interest income related to contract termination gain noted above (Investing income – Gas Pipeline – NWP) – – (2) – (2) Interest related to royalty litigation contingency noted above (Interest accrued – E&P) – – – 1 1 Rounding – 1 (1) – – 1 2 (2) 20 21 Total nonrecurring items (7) (21) (14) 51 9 Tax effect for above items (1)(2) (3) 1 (5) 13 6 Adjustment for nonrecurring tax-related items (3) – – – 23 23 Recurring income from continuing operations available to common stockholders $166 $221 $219 $267 $873 Recurring diluted earnings per common share $0.27 $0.36 $0.36 $0.44 $1.44 Weighted-average shares – diluted (thousands) 611,470 613,172 610,651 604,243 609,866 2008 (Dollars in millions, except per-share amounts) 1st Qtr 2nd Qtr Year Income from continuing operations available to common stockholders $416 $419 $835 Income from continuing operations – diluted earnings per common share $0.70 $0.70 $1.40 Nonrecurring items: Exploration & Production Accrual for royalty litigation contingency $- $- $- Gain on sale of Peru interests (118) (30) (148) Reserve for receivables from bankrupt counterparty – 5 5 Total Exploration & Production nonrecurring items (118) (25) (143) Gas Pipeline Change in estimate related to a regulatory liability – NWP – – – Payments received for terminated firm transportation agreement – NWP – – – Gain on sale of excess inventory gas – TGPL – (9) (9) Total Gas Pipeline nonrecurring items – (9) (9) Midstream Gas & Liquids Reversal of a maintenance accrual – – – Income from a favorable litigation outcome – – – Reserve for international receivables – – – Impairment of Carbonate Trend pipeline – – – Involuntary conversion gain related to Ignacio gas processing plant – (3) (3) Reserve for receivables from bankrupt counterparty – 1 1 Total Midstream Gas & Liquids nonrecurring items – (2) (2) Gas Marketing Services Accrual for litigation contingencies – – – Total Gas Marketing Services nonrecurring items – – – Nonrecurring items included in segment profit (loss) (118) (36) (154) Nonrecurring items below segment profit (loss) Early debt retirement costs (Corporate) – – – Interest related to Gulf Liquids litigation contingency ( Interest accrued – Midstream) – – – Interest income related to contract termination gain noted above (Investing income – Gas Pipeline – NWP) – – – Interest related to royalty litigation contingency noted above (Interest accrued – E&P) – – – Rounding – – – – – – Total nonrecurring items (118) (36) (154) Tax effect for above items (1)(2) (45) (14) (59) Adjustment for nonrecurring tax- related items (3) – – – Recurring income from continuing operations available to common stockholders $343 $397 $740 Recurring diluted earnings per common share $0.57 $0.67 $1.24 Weighted-average shares – diluted (thousands) 598,627 596,187 597,404 (1) The tax rate applied to nonrecurring items for 2nd quarter 2007 has been adjusted to reverse the effect of certain previous adjustments for nondeductible expenses associated with securities litigation and related costs, as these expenses are now considered deductible based on an IRS ruling. (2) The tax rate applied to nonrecurring items 4th quarter 2007 has been adjusted to reverse the effect of early debt retirement costs considered deductible in 2004 as these expenses are now considered nondeductible. (3) The 4th quarter of 2007 includes an adjustment for an income tax contingency. Note: The sum of earnings per share for the quarters may not equal the total earnings per share for the year due to changes in the weighted-average number of common shares outstanding. The sum of amounts for the quarters may not equal the totals for the year due to rounding. Adjustment to remove MTM effect Dollars in millions except for per share amounts 2nd Quarter YTD 2008 2007 2008 2007 Recurring income from cont. ops available to common shareholders $397 $221 $740 $387 Recurring diluted earnings per common share $0.67 $0.36 $1.24 $0.63 Mark-to-Market (MTM) adjustments for Gas Marketing 15 * 70 12 * 108 * Tax effect of total MTM adjustments (6) (27) (5) (41) After tax MTM adjustments $9 $43 $7 $67 Recurring income from cont. ops available to common shareholders after MTM adjust. $406 $264 $747 $454 Recurring diluted earnings per share after MTM adj. $0.68 $0.43 $1.25 $0.74 weighted average shares – diluted (thousands) 596,187 613,172 597,404 612,325 * Excludes $39MM termination payment related to legacy contract. Adjustments have been made to reverse estimated forward unrealized MTM gains/losses and add estimated realized gains/losses from MTM previously recognized, i.e. assumes MTM accounting had never been applied to designated hedges and other derivatives. Some annual figures may differ from sum of quarterly figures due to rounding.
Williams
CONTACT: media relations, Jeff Pounds, +1-918-573-3332, or investorrelations, Travis Campbell, +1-918-573-2944, or Richard George,+1-918-573-3679, or Sharna Reingold, +1-918-573-2078, all of Williams
Web site: http://www.williams.com/