Williams Updates Earnings, Capital Expenditure Guidance for 2010-12

News provided by

Williams

Sep 16, 2010, 07:30 ET

TULSA, Okla., Sept. 16 /PRNewswire-FirstCall/ -- Williams (NYSE: WMB) today announced updates to its earnings and capital expenditure guidance for 2010-12.  

Steve Malcolm, Williams' chairman, president and chief executive officer, will discuss the updated guidance in his presentation today at the Barclays Capital CEO Energy-Power Conference.  His presentation is available for download at www.williams.com/investors.  

"We are adjusting our outlook and earnings guidance to reflect the current state of the economy and commodity markets," Malcolm said. "Despite the lower expected natural gas and NGL margins, we are still projecting steady earnings growth in 2010-12.

"We have demonstrated over the years that we are capable of seizing growth opportunities in a variety of commodity environments," Malcolm said.  "There are opportunities for growth across all of our businesses, and we will continue to pursue them with the same discipline that we always have."

The new earnings guidance for 2010-12 reflects lower expected natural gas prices and lower expected natural gas liquid (NGL) margins.  Additionally, the company is lowering its capital expenditure guidance for 2011-12, which will result in a slower rate of natural gas production growth during that time frame.

The company's updated assumptions for certain energy commodity prices for 2010-12 and the corresponding guidance for the company's earnings and capital expenditures are displayed in the following table.

Commodity Price Assumptions and
Financial Outlook








As of Sept. 16, 2010

2010

2011

2012











Low

Mid

High

Low

Mid

High

Low

Mid

High

Natural Gas ($/MMBtu):








   NYMEX

$4.35

$4.65

$4.95

$4.00

$5.00

$6.00

$4.30

$5.40

$6.50

   Rockies

$3.80

$4.05

$4.30

$3.50

$4.40

$5.30

$3.90

$4.85

$5.80

   Avg. San Juan/Mid-Continent

$4.05

$4.28

$4.50

$3.65

$4.58

$5.50

$4.00

$5.00

$6.00










Oil / NGL:








   Crude Oil - WTI ($ per barrel)

$73

$78

$83

$65

$80

$95

$67

$82

$97

   Crude to Gas Ratio

16.8x

16.8x

16.8x

15.8x

16.0x

16.3x

14.9x

15.3x

15.6x

   NGL to Crude Oil Relationship

52%

51%

49%

52%

53%

53%

52%

54%

55%










Average NGL Margins ($ per gallon)

$0.49

$0.51

$0.53

$0.46

$0.58

$0.70

$0.42

$0.56

$0.69










Capital Expenditures (millions)








   Williams Partners

$1,385

$1,520

$1,655

$830

$1,005

$1,180

$805

$980

$1,155

   Exploration & Production

1,900

2,000

2,100

870

1,210

1,550

830

1,330

1,830

   Other

150

175

200

370

420

470

500

550

600

Total Capital Expenditures (1)

$3,450

$3,700

$3,950

$2,075

$2,638

$3,200

$2,125

$2,850

$3,575










Cash Flow from Continuing Operations

$2,350

$2,525

$2,700

$2,200

$2,700

$3,200

$2,300

$3,000

$3,700










Adjusted Segment Profit (millions)  (2)








   Williams Partners

$1,360

$1,423

$1,485

$1,400

$1,583

$1,765

$1,500

$1,745

$1,990

   Exploration & Production after MTM adj.

325

375

425

155

385

615

100

450

800

   Other

175

183

190

160

190

220

185

223

260

Total Adjusted Segment Profit (3)

$1,875

$1,988

$2,100

$1,725

$2,163

$2,600

$1,800

$2,425

$3,050










Adjusted Diluted Earnings Per Share  (4)

$1.00

$1.10

$1.20

$0.85

$1.25

$1.65

$0.95

$1.48

$2.00










(1) Sum of the ranges for each business line may not match total range.

(2) Adjusted Segment Profit is adjusted to remove items considered unrepresentative of ongoing operations and the effect of mark-to-market accounting and is a non-GAAP measure.   Reconciliations to the most relevant GAAP measures are attached to this news release.

(3) Sum of the ranges for the business units does not match the consolidated total due to rounding and other adjustments.

(4) Adjusted Diluted Earnings Per Share is adjusted to remove items considered unrepresentative of ongoing operations and the effect of mark-to-market accounting and is a non-GAAP measure.   Reconciliations to the most relevant GAAP measures are attached to this news release.  

Non-GAAP Measures

This press release includes certain financial measures, adjusted diluted earnings per share and adjusted segment profit that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission. Adjusted diluted earnings per share and adjusted segment profit exclude items of income or loss that the company characterizes as unrepresentative of its ongoing operations.  Both measures provide investors meaningful insight into the company's results from ongoing operations.  This press release is accompanied by a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures. Management uses these financial measures because they are widely accepted financial indicators used by investors to compare a company's performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the company.  Neither adjusted diluted earnings per share nor adjusted segment profit are intended to represent an alternative to diluted earnings per share or segment profit. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles.

Certain financial information in this press release is also shown including mark-to-market adjustments for certain hedges and other derivatives in Exploration & Production, such as adjusted diluted earnings per share and adjusted segment profit.  This press release is accompanied by a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures.  Management uses the mark-to-market adjustments to better reflect results on a basis that is more consistent with derivative portfolio cash flows and to aid investor understanding.  The adjustments reverse forward unrealized mark-to-market gains or losses from derivatives and add realized gains or losses from derivatives for which mark-to-market income has been previously recognized, with the effect that the resulting adjusted segment profit is presented as if mark-to-market accounting had never been applied to these derivatives.  The measure is limited by the fact that it does not reflect potential unrealized future losses or gains on derivative contracts.  However, management compensates for this limitation since derivative assets and liabilities do reflect unrealized gains and losses of derivative contracts.  Overall, management believes the mark-to-market adjustments provide an alternative measure that more closely matches realized cash flows for these derivatives but does not substitute for actual cash flows.    

About Williams (NYSE: WMB)

Williams is an integrated natural gas company focused on exploration and production, midstream gathering and processing, and interstate natural gas transportation primarily in the Rocky Mountains, Gulf Coast, Pacific Northwest, Eastern Seaboard and the Marcellus Shale in Pennsylvania. Most of the company's interstate gas pipeline and midstream assets are held through its 80-percent ownership interest (including the general-partner interest) in Williams Partners L.P. (NYSE: WPZ), a leading diversified master limited partnership.  More information is available at www.williams.com. Go to http://www.b2i.us/irpass.asp?BzID=630&to=ea&s=0 to join our e-mail list.

Portions of this document may constitute "forward-looking statements" as defined by federal law. Although the company believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different. Any such statements are made in reliance on the "safe harbor" protections provided under the Private Securities Reform Act of 1995. Additional information about issues that could lead to material changes in performance is contained in the company's annual reports filed with the Securities and Exchange Commission.

MEDIA CONTACT:

Jeff Pounds
(918) 573-3332

INVESTOR CONTACT:

Sharna Reingold
(918) 573-2078



Reconciliation of Income (Loss) from Continuing Operations Attributable to The Williams Companies, Inc. to Adjusted Earnings



(UNAUDITED)











2010

(Dollars in millions, except per-share amounts)

1st Qtr

2nd Qtr

Year






Income (loss) from continuing operations attributable to The Williams Companies, Inc.




  available to common stockholders  

$            (195)

$             187

$                (8)

Income (loss) from continuing operations - diluted earnings per common share      

$           (0.33)

$            0.31

$           (0.01)






Adjustments:










Williams Partners (WP)




 Gain on sale of base gas from Hester storage field

$                (5)

$                (3)

$                (8)

 Involuntary conversion gain related to Ignacio

-

(4)

(4)

 Involuntary conversion gain related Hurricane Ike

-

(7)

(7)

 Gain on sale of Cameron Meadows

-

-

-

 Restructuring transaction costs

-

-

-

 Unclaimed property assessment accrual - TGPL

-

(1)

(1)

 Unclaimed property assessment accrual - NWP

-

(1)

(1)






 Total Williams Partners nonrecurring items

(5)

(16)

(21)






Exploration & Production  (E&P)




 Penalties from early release of drilling rigs

-

-

-

 Impairments of certain natural gas properties

-

-

-

 Depletion expense adjustment related to new guidance

-

-

-

 Unclaimed property assessment accrual

-

2

2

 Reserve for/(recovery of) receivables from bankrupt counterparty

-

-

-

 Accrual for Wyoming severance taxes

-

-

-






 Total Exploration & Production nonrecurring items

-

2

2






Other




 (Gain)/Loss from Venezuela investment

-

(13)

(13)

 Customer settlement gain

-

(6)

(6)






 Total Other nonrecurring items

-

(19)

(19)






Adjustment included in segment profit (loss)

(5)

(33)

(38)






Adjustments below segment profit (loss)




 Loss associated with Venezuela investment - E&P

-

-

-

 Impairment of cost-based investment - Corporate

-

-

-

 Reversal of litigation contingency - Corporate

-

-

-

 Early debt retirement costs - Corporate

606

-

606

 Acceleration of unamortized debt costs related to credit facility amendment - Corporate

3

-

3

 Acceleration of unamortized debt costs related to credit facility amendment - Williams Partners

1

-

1

 Restructuring transaction costs - Corporate

33

-

33

 Restructuring transaction costs - Williams Partners

6

2

8

 Allocation of Williams Partners' nonrecurring items to noncontrolling interests

(4)

1

(3)







645

3

648






Total adjustments

640

(30)

610

Less tax effect for above items

(242)

7

(235)

Adjustment reduction of tax benefits on the Medicare Part D federal subsidy






due to enacted healthcare legislation

11

-

11






Adjusted income from continuing operations available to common stockholders    

$             214

$             164

$             378






Adjusted diluted earnings per common share  

$            0.37

$            0.28

$            0.65






Weighted-average shares - diluted (thousands)

583,929

592,498

584,173






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.

Non-GAAP Reconciliation



















Segment Profit Guidance – Reported to Adjusted

















Dollars in millions

2010 Guidance

2011 Guidance

2012 Guidance


Low

Midpoint

High

Low

Midpoint

High

Low

Midpoint

High

Reported Segment Profit:



















Williams Partners (WPZ)

1,381

1,444

1,506

1,400

1,583

1,765

1,500

1,745

1,990

Exploration & Production (incl. Gas Mkt)

348

398

448

150

380

610

100

450

800

Other

194

202

209

160

190

220

185

223

260

Total Reported Segment Profit

1,938

2,051

2,163

1,720

2,158

2,595

1,800

2,425

3,050





















Adjustments:



















Gain on sale of base gas from Hester storage field

(8)

(8)

(8)

-

-

-

-

-

-

Involuntary conversion gain related to Hurricane Ike

(7)

(7)

(7)

-

-

-

-

-

-

Involuntary conversion gain related to Ignacio


(4)

(4)

(4)

-

-

-

-

-

-

Unclaimed property assessment accrual


(2)

(2)

(2)

-

-

-

-

-

-

Total Adjustments - Williams Partners (WPZ)

(21)

(21)

(21)

-

-

-

-

-

-





















Unclaimed property assessment accrual

2

2

2

-

-

-

-

-

-

Total Adjustments - Exploration & Production

2

2

2

-

-

-

-

-

-





















Gain from Venezuela investment

(13)

(13)

(13)

-

-

-

-

-

-

Aux Sable breach of contract settlement gain

(6)

(6)

(6)

-

-

-

-

-

-

Total Adjustments - Other

(19)

(19)

(19)

-

-

-

-

-

-





















Total Adjustments

(38)

(38)

(38)

-

-

-

-

-

-





















Mark-to-Market Adjustment

(25)

(25)

(25)

5

5

5

-

-

-





















Adjusted Segment Profit:



















Williams Partners (WPZ)

1,360

1,423

1,485

1,400

1,583

1,765

1,500

1,745

1,990

Exploration & Production after MTM adj.

325

375

425

155

385

615

100

450

800

Other

175

183

190

160

190

220

185

223

260

Total Adjusted Segment Profit

1,875

1,988

2,100

1,725

2,163

2,600

1,800

2,425

3,050

Non-GAAP Reconciliation










Forecast Reported Income from Continuing Operations Adjustments









to Adjusted Diluted Earnings Per Share























 Dollars in millions, except per-share amounts

2010

2011

2012














Reported income from continuing operations

$229

-

349


$505

-

985


$575

-

1,210















Adjustments - pretax

610

-

-














Less taxes

224

-

-














Adjustments - after tax

386

-

-














Adjusted income from continuing ops

615

-

735


505

-

985


575

-

1,210















Adjusted EPS before MTM

$1.03

-

1.23

$0.84

-

1.64

$0.95

-

2.00














Mark-to-market adjustment (pretax)

(25)

5


-














Less taxes @ 39%

(10)

2


-














Mark-to-market adjustment after tax

(15)

3


-














Adjusted Inc. from cont ops after MTM adj.

600

-

720

508

-

988

575

-

1,210














Adjusted Diluted EPS

$1.00

-

1.20

$0.85

-

1.65

$0.95

-

2.00

SOURCE Williams

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