• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Tulsa-Based Williams Net Income Drops Sharply for Third Quarter

Posted on: Friday, 4 November 2005, 21:00 CST

By David Page

Williams reported a sharp drop in net income Thursday for the third quarter, as losses in the Tulsa-based company's power segment offset higher natural gas production and prices.

Net income totaled $4.4 million, or 1 cent per diluted share, down from $98.6 million, or 19 cents per diluted share, for the third quarter of 2004.

Higher natural gas prices benefited Williams' exploration and production business but resulted in a loss for the company's power business, said Steve Malcolm, chairman, president and CEO.

The benefit of having diversity in our businesses and our revenue streams was evident during the third quarter, Malcolm said. We were able to create value and produce positive results, despite dealing with the hurricanes and a variety of factors that strained results in our power business.

Net income for the first nine months of 2005 totaled $246.8 million, or 42 cents per diluted share, up from $90.3 million, or 17 cents per diluted share, for the same period of 2004.

The power segment reported a third quarter loss of $226.4 million, compared with a profit of $109.3 million for the same period of 2004. The loss included $141.1 million in forward unrealized mark-to-market losses in the latest quarter, compared with $187.9 million in forward unrealized mark-to-market gains the prior year.

Williams' power segment manages a 7,000-megawatt power portfolio and provides services supporting the company's natural gas business.

The mark-to-market losses for the latest quarter were from gas price increases on net short gas contracts that do not qualify for hedge accounting. With mark-to-market accounting, the price reflects current market value rather than book value.

For the first nine months of 2005, the power business reported a segment loss of $187.3 million, down from a $121.1 million profit last year.

In New York Stock Exchange trading on Thursday, Williams closed up 97 cents, or 4.5 percent, at $22.49. Market capitalization totaled $12.87 billion.

Cash flows remain strong and Williams has increased guidance and capital spending plans, Malcolm said.

We're making these investments to produce the natural gas that America needs, to provide reliable services to our customers, and to seize opportunities to help bring even more energy online by building new pipeline and processing systems, he said.

Williams now expects $1.55 billion to $1.7 billion in consolidated segment profit for 2005 adjusted for the impact of mark- to-market accounting. Estimated consolidated segment profit totals $1.5 billion to $1.8 billion for 2006 and $1.8 billion to $2.2 billion for 2007.

The primary factor for the increase in expected earnings was higher natural gas prices.

Williams also increased its capital budget and plans to spend $1.2 billion to $1.35 billion for 2005; $1.8 billion to $2 billion for 2006; and $1.4 billion to $1.6 billion for 2007.

While the power business reported a loss for the third quarter, Williams' other businesses reported increased profits.

The exploration and production business reported net income of $158.8 million, up from $70.1 million a year earlier. The segment includes natural gas production and development in the Rocky Mountains, San Juan Basin and Mid-continent, and oil and gas development in South America.

Williams has 15 rigs operating in the Piceance Basin of western Colorado and is preparing to deploy a new rig from Tulsa-based Helmerich & Payne in the area Piceance later this month or in early December. Helmerich & Payne is scheduled to deliver 10 new rigs to Williams for use in the Piceance Basis during the remainder of 2005 and 2006. Williams has each of the new rigs under contract for three years.

Williams' midstream business, which provides natural gas gathering and processing services, along with natural gas liquids fractionation and storage services and olefins production, reported a profit for the third quarter of $121.1 million, up from $105.4 million a year earlier.

Williams announced plans Thursday to add a fifth cryogenic processing train at its Opal, Wyo., facility. The project is designed to boost the overall processing capacity of the Opal facility from more than 1.1 billion cubic feet per day to 1.45 billion cubic feet per day, with the ability to recover 68,000 barrels per day of natural gas liquids products. Work on the project is scheduled to be completed in the second quarter of 2007.

The gas pipeline business - which primarily delivers natural gas to markets along the Eastern Seaboard, in Florida and in the Northwest - reported a third quarter profit of $161.1 million, up from $148.8 million a year earlier.

Williams' Transco unit completed construction of a $16 million project to add 105,000 dekatherms per day of new firm service in central New Jersey. The expansion was placed into service Tuesday.

Within the past week, Transco and Northwest Pipeline announced new open seasons to provide additional capacity in the Northeast and Colorado.

Source: Journal Record - Oklahoma City

More News in this Category