Williams Reports Second-Quarter 2009 Financial Results

- Net Income is $142 Million, $0.24 Per Share for 2Q - Recurring Adjusted Income is $116 Million, $0.20 Per Share for 2Q - Recession, Lower Energy Commodity Prices Impact 2009 Results - 2009 Recurring Adjusted EPS Guidance Range Updated to $0.70 - $0.90 - Company Executing on 2009 Expansions, Growth Opportunities

TULSA, Okla., Aug. 6 /PRNewswire-FirstCall/ -- Williams (NYSE: WMB) announced unaudited net income attributable to Williams, for second-quarter 2009 of $142 million, or $0.24 per share on a diluted basis, compared with net income of $437 million, or $0.73 per share on a diluted basis for second-quarter 2008.

Sharply lower energy commodity prices in second-quarter 2009, compared to the record-high prices in second-quarter 2008, impacted results in Exploration & Production and Midstream, as both businesses' results were significantly lower than second-quarter 2008.

Gas Pipeline's results, as expected, were relatively steady despite the much lower commodity prices. Other factors that served to mitigate the effect of lower commodity prices include higher natural gas production; Exploration & Production's hedge positions, which cover a significant portion of its production; and fee-based revenues from certain of Midstream's gathering and processing services.

Year-to-date through June 30, Williams reported a net loss attributable to Williams of $30 million, or $0.05 per share on a diluted basis, compared with net income of $937 million, or $1.57 per share, for the first two quarters of 2008.

As a result of the Venezuelan government's expropriation of the El Furrial and PIGAP II compression facilities in May, Williams is now reporting the results of those operations in discontinued operations. All year-to-date and prior-period comparisons in this news release reflect this change.

The year-to-date loss from discontinued operations is primarily due to the charges associated with these facilities that were recorded in first-quarter 2009. The company's investment in Accroven, which was fully impaired during first-quarter 2009, continues to be reported in the Midstream segment, as the assets have not been expropriated. Accroven owns gas processing facilities and an NGL fractionation plant in Venezuela.

In addition to the losses associated with the Venezuelan operations and investments, the previously noted lower energy commodity prices compared with the record-high prices in 2008 also negatively affected the year-to-date 2009 results. The first half of 2008 also benefited from $148 million in pre-tax gains on the sale of certain international interests.

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 $116 million, or $0.20 per share for second-quarter 2009. On the same adjusted basis, recurring income from continuing operations was $399 million, or $0.67 per share, for second-quarter 2008.

For the first half of 2009, recurring income from continuing operations after mark-to-market adjustments was $244 million, or $0.42 per share; compared with $735 million, or $1.23 per share, for the first half of 2008.

The lower recurring adjusted results for both the second-quarter and year-to-date periods were also due to the large disparity between the relatively low 2009 commodity prices compared with the record-high 2008 prices.

The relatively steady results in Gas Pipeline, as well as higher natural gas production, Exploration & Production's hedge positions and fee-based revenues in Midstream, partially offset some of the negative effect of lower commodity prices.

A reconciliation of the company's income from continuing operations to recurring income from continuing operations and mark-to-market adjustments is available at www.williams.com and as an attachment to this news release.

2009 Guidance Ranges Updated

Williams is updating its outlook for full-year 2009 commodity price assumptions and its earnings and capital expenditures. The following chart shows the actual year-to-date results for commodity prices, earnings and capital expenditures, as well as the company's expectation for these ranges in the second-half and full-year of 2009. For comparison, it also shows actual full-year 2008 results for the same categories.

The company's updated outlook for 2009 recurring consolidated segment profit and earnings per share reflects higher expected net realized natural gas prices and NGL margins. The company has raised the lower-end of its guidance range for Exploration & Production by $75 million and refined Midstream's outlook by $50 million on both the lower- and upper-end of its guidance range. As a result, the company has also updated its recurring adjusted earnings per share guidance to a range of $0.70 to $0.90 for 2009.

The company has slightly reduced its expected capital expenditures for 2009, reflecting the company's efforts to reduce operating and capital project costs.

CEO Perspective

"This was a quarter in which our natural gas businesses performed as expected, as we were successful in reducing our operating and capital project costs and managing our liquidity," said Steve Malcolm, chairman, president and chief executive officer. "As a result, we remain on-target to meet our goals in a challenging year.

"We also continue to take advantage of ideal growth opportunities, such as our entry into the Marcellus Shale earlier this year, and to execute on important expansion projects, such as our new Willow Creek processing facility in the Piceance Basin.

"All of these efforts make Williams well-positioned for the coming market recovery that will drive substantial value across all of our businesses," Malcolm said.

Exploration & Production

Exploration & Production includes natural gas production and development in the U.S. Rocky Mountains, San Juan Basin, Barnett Shale, and Marcellus Shale, and oil and gas development in South America.

The business reported segment profit of $119 million for second-quarter 2009, compared with segment profit of $496 million in second-quarter 2008.

The significant decline in segment profit during the second quarter was due to much lower net realized average prices for natural gas, partially offset by higher production volumes.

These higher production volumes, coupled with higher capital costs in prior years, resulted in higher depletion, depreciation and amortization expense during the second-quarter. Also, the 2008 period benefited from a $30 million pre-tax gain on the sale of certain international interests.

Although natural gas production grew from second-quarter 2008 to second-quarter 2009, production is expected to continue to decline somewhat throughout the remainder of 2009 because of the company's reduced drilling activity. Average daily natural gas production on U.S. interests fell 4 percent from first-quarter 2009 to second-quarter 2009.

During second-quarter 2009, Williams' net realized average price for U.S. production was $3.95 per thousand cubic feet of natural gas equivalent (Mcfe), which was 51 percent lower than the $8.06 per Mcfe realized in second-quarter 2008.

For the first half of 2009, the exploration and production business reported a segment profit of $197 million, compared with $926 million for the first half of 2008.

Significantly lower net realized average price for natural gas was the primary driver of the lower segment profit in the first half of 2009. The first half of 2008 also benefited from $148 million in pre-tax gains on the sale of certain international interests. Also, the company recorded $34 million in expenses associated with the early termination of rig contracts in the first quarter 2009. These termination expenses were a result of reductions in 2009 drilling activities in the Piceance Basin.

Midstream Gas & Liquids

Midstream provides natural gas gathering and processing, deepwater production handling and oil transportation, natural gas liquids (NGL) fractionation and storage services and olefins production.

The business reported a segment profit of $137 million for second-quarter 2009, compared with segment profit of $270 million for second-quarter 2008.

The decline in segment profit for the quarter is primarily because of lower NGL and olefin prices and lower NGL equity sales volumes in the second quarter, partially offset by decreased production costs reflecting lower natural gas prices. While NGL margins in the second quarter of 2009 are still significantly lower than the 2008 margins, they have improved compared to first-quarter 2009 as natural gas prices declined and NGL prices, especially ethane, increased.

The lower NGL equity sales volumes for the quarter were primarily due to lower volumes in the West region because certain gas processing agreements with producers converted from keep-whole to fee-based processing at the beginning of 2009. Declines in production sources and hurricane-related impacts in the Gulf region, primarily in the Western Gulf of Mexico, also contributed to lower volumes.

For the first half of the year, Midstream's segment profit was $149 million, compared with $508 million for the first half of 2008.

The significant decline, compared with the same period in 2008, is due primarily to the same factors that drove the reduction in segment profit for the second quarter. In addition, the year-to-date results were unfavorably impacted by a $75 million loss related to the impairment of Midstream's equity investment in the Accroven assets in Venezuela.

In addition to the previously discussed factors that drove the reduction in NGL equity sales volumes in the second quarter, year-to-date 2009 volumes were also unfavorably impacted by periods of reduced NGL recoveries in the first quarter, primarily in the Gulf Coast region. The reduced NGL recoveries were due to unfavorable NGL economics. Offsetting these reductions, NGL equity volumes reflect a favorable impact related to an increase in inventory in the first-quarter 2008. The increase in inventory was the result of the company transitioning from selling volumes for certain plants in the West at the tailgate of the plant to shipping volumes through a third-party pipeline for sale downstream.

Gas Pipeline

Gas Pipeline, which primarily delivers natural gas to markets along the Eastern Seaboard, in Florida and in the Pacific Northwest, reported second-quarter 2009 segment profit of $162 million, compared with $179 million for second-quarter 2008.

During second-quarter 2009, Gas Pipeline experienced higher operating costs, partly offset by increased revenues from the Sentinel expansion, which was placed in service in December 2008.

The higher costs resulted primarily from higher depreciation, operational and maintenance, and pension expenses partially offset by lower project development costs. Also, the second-quarter 2008 results included the benefit of a $9 million gain on sale of excess natural gas inventory.

Year-to-date through June 30, Gas Pipeline reported segment profit of $341 million, compared with $359 million for the same period in 2008.

The lower segment profit was due primarily to the higher operating costs partially offset by the higher revenues explained above and increased year-to-date earnings from the company's 50-percent interest in Gulfstream Natural Gas Systems. The year-to-date 2008 results also included the previously noted benefit of the second-quarter gain on the sale of excess gas inventory.

Gas Marketing Services

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 NGLs for Midstream.

In addition, Gas Marketing manages various natural gas related contracts, such as transportation, storage, and related hedges. It also provides marketing services to third-parties, such as producers and processing companies. 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.

The improvement in Gas Marketing's second-quarter recurring segment loss after mark-to-market adjustments primarily resulted from the absence of a 2008 $8 million inventory valuation adjustment related to natural gas owned in storage and a $7 million improvement in margins from buying and selling gas around transportation contracts, as well as margins realized on physical gas purchases.

The improvement in Gas Marketing's year-to-date recurring adjusted results was primarily the result of a $13 million decrease in realized losses associated with certain legacy positions and $15 million improvement in realized natural gas margins around daily and monthly asset optimization.

Although not significant for the second-quarter 2009 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 hedging.

Williams' Liquidity, Financial Strength Remain Strong

As of July 31, 2009, Williams had approximately $1.87 billion of cash and cash equivalents, which included approximately $607 million held by certain domestic and international subsidiaries or margin deposits held on behalf of counterparties. The company also had approximately $1.87 billion of available credit capacity under the company's credit facilities. Williams' total liquidity as of July 31 was approximately $3.74 billion.

Williams has no significant debt maturities until 2011 and the company's $1.43 billion primary credit facility does not expire until May 2012. Williams is rated investment grade by three of the major rating agencies.

Today's Analyst Call

Management will discuss the second-quarter 2009 results and outlook for 2009 during a live webcast beginning at 9:30 a.m. EDT today. Participants are encouraged to access the webcast and corresponding slides for viewing, downloading and printing at www.williams.com.

A limited number of phone lines also will be available at (877) 874-1565. International callers should dial (719) 325-4836. Replays of the second-quarter webcast, in both streaming and downloadable podcast formats, will be available for two weeks at www.williams.com following the event.

Form 10-Q

The company plans to 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 (NYSE: WMB)

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

Our reports, filings, and other public announcements may 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 "anticipates," believes," "could," "may," "should," "continues," "estimates," "expects," "forecasts," "intends," "might," "objectives," "planned," "potential," "projects," "scheduled," "will," or other similar words. These statements are based on our present intentions and our assumptions about future events and are subject to risks, uncertainties, and other factors. In addition to any assumptions, risks, uncertainties or other factors referred to specifically in connection with such statements, other factors not specifically referenced could cause our actual results to differ materially from the results expressed or implied in any forward-looking statements. Those factors include, among others:

--  availability of supplies (including the uncertainties inherent in
assessing, estimating, acquiring and developing future natural gas
reserves), market demand, volatility of prices, and the availability and
cost of capital;
--  inflation, interest rates, fluctuation in foreign exchange, and general
economic conditions (including the current economic slowdown and the
disruption of global credit markets and the impact of these events on
our customers and suppliers);
--  the strength and financial resources of our competitors;
--  development of alternative energy sources;
--  the impact of operational and development hazards;
--  costs of, changes in, or the results of laws, government regulations
(including proposed climate change legislation), environmental
liabilities, litigation, and rate proceedings;
--  our costs and funding obligations for defined benefit pension plans and
other postretirement benefit plans;
--  changes in maintenance and construction costs;
--  changes in the current geopolitical situation;
--  our exposure to the credit risk of our customers;
--  risks related to strategy and financing, including restrictions stemming
from our debt agreements, future changes in our credit ratings and the
availability and cost of credit;
--  risks associated with future weather conditions;
--  acts of terrorism, and
--  additional risks described in our filings with the Securities and
Exchange Commission.

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change. Such changes in our intentions may also cause our results to differ. We disclaim any obligation to and do not intend to publicly update or revise any forward-looking statements or changes to our intentions, whether as a result of new information, future events or otherwise.

Adjustment to remove MTM effect
Dollars in millions except for per
share amounts
2nd Quarter           YTD
-----------           ---
2009     2008*    2009*    2008*
----     ----     ----     ----
Recurring income from cont. ops
available to common shareholders         $120     $390     $226     $728
Recurring diluted earnings per common
share                                   $0.20    $0.66    $0.39    $1.22
Mark-to-Market (MTM) adjustments for
Gas Marketing                              (7)      15       29       12
Tax effect of total MTM adjustments          3       (6)     (11)      (5)
---      ---      ---      ---
After tax MTM adjustments                   (4)       9       18        7
Recurring income from cont. ops available
to common shareholders after MTM
adjust.                                  $116     $399     $244     $735
Recurring diluted earnings per share
after MTM adj.                          $0.20    $0.67    $0.42    $1.23
weighted average shares - diluted
(thousands)                           588,780  596,187  587,999  597,404
Note:  all amounts attributable to Williams
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.
* Amounts have been recast to reflect certain Venezuela operations as
discontinued operations.
Reconciliation of Income from Continuing Operations Attributable to The
Williams Companies, Inc. to Recurring Earnings
(UNAUDITED)
2008
----
(Dollars in
millions, except
per-share amounts) 1st Qtr *  2nd Qtr *  3rd Qtr *  4th Qtr *   Year *
------------------- ---------  ---------  ---------  ---------   ------
----------------
Income from
continuing
operations
attributable to
The Williams
Companies, Inc.
available to
common stockholders      $411       $412       $360       $123   $1,306
====       ====       ====       ====   ======
Income from
continuing
operations -
diluted earnings
per common share       $0.69      $0.69      $0.61      $0.21    $2.21
=====      =====      =====      =====    =====
Nonrecurring
items:
Exploration &
Production (E&P)
-----------------
Gain on sale
of Peru
interests            $(118)      $(30)        $-         $-    $(148)
Reserve for
receivables
from bankrupt
counterparty             -          5          4          -        9
Impairments of
property in the
Arkoma basin             -          -         14        129      143
Accrual for
Wyoming
severance
taxes                    -          -          -         34       34
Penalties from
early release of
drilling rigs            -          -          -          -        -
----        ---        ---        ---       --
Total
Exploration &
Production
nonrecurring
items                 (118)       (25)        18        163       38
Gas Pipeline
-------------
Gain on sale of
excess
inventory gas -
TGPL                    -         (9)         -          -       (9)
Gain on sale of
certain south
Texas assets -
TGPL                     -          -        (10)         -      (10)
---        ---        ---        ---      ---
Total Gas
Pipeline
nonrecurring
items                     -         (9)       (10)         -      (19)
Midstream Gas &
Liquids (MGL)
---------------
Impairment of
Carbonate Trend
pipeline                 -          -          -          6        6
Involuntary
conversion
gain related
to Ignacio gas
processing
plant                    -         (3)        (6)        (3)     (12)
Reserve for
receivables
from bankrupt
counterparty             -          1          -          -        1
Final earnout
payment from
2005 Gulf
Liquids asset
sale                     -          -         (8)         -       (8)
Charges from
Hurricanes
Gustav & Ike             -          -          8          5       13
Involuntary
conversion
gain from
hurricane
damage at
Cameron                  -          -          -         (5)      (5)
Gulf Liquids
litigation
partial
settlement               -          -          -        (32)     (32)
Loss from
Venezuela
investment               -          -          -          -        -
---        ---        ---        ---      ---
Total Midstream
Gas & Liquids
nonrecurring
items                    -         (2)        (6)       (29)     (37)
----        ---        ---        ---      ---
Nonrecurring
items
included in
segment
profit (loss)           (118)       (36)         2        134      (18)
Nonrecurring
items below
segment profit
(loss)
---------------
Interest related
to Gulf Liquids
litigation
partial
settlement -MGL          -          -          -        (11)     (11)
Interest
related to
Wyoming
severance
taxes - E&P              -          -          -          4        4
Loss associated
with Venezuela
investment -E&P          -          -          -          -        -
Reversal of
litigation
contingency -
Corporate                -          -          -          -        -
---        ---        ---        ---      ---
-          -          -         (7)      (7)
Total
nonrecurring
items                   (118)       (36)         2        127      (25)
Tax effect for
above items              (45)       (14)         1         49       (9)
---        ---        ---        ---      ---
Recurring
income from
continuing
operations
available to
common
stockholders            $338       $390       $361       $201   $1,290
====       ====       ====       ====   ======
Recurring
diluted
earnings per
common share           $0.57      $0.66      $0.61      $0.34    $2.18
=====      =====      =====      =====    =====
Weighted-average
shares -diluted
(thousands)          598,627    596,187    589,138    587,057  592,719
2009
----
(Dollars in millions, except per-
share amounts)                         1st Qtr *  2nd Qtr    Year
---------------------------------      ---------   -------    ----
---------------------------------
Income from continuing operations
attributable to The Williams
Companies, Inc.
available to common
stockholders                              $2      $123     $125
===      ====     ====
Income from continuing operations -
diluted earnings per common share           $-     $0.21    $0.21
===     =====    =====
Nonrecurring items:
Exploration & Production  (E&P)
-------------------------------
Gain on sale of Peru interests              $-        $-       $-
Reserve for receivables from
bankrupt counterparty                       -         -        -
Impairments of property in the
Arkoma basin                                5         -        5
Accrual for Wyoming severance
taxes                                       -         3        3
Penalties from early release of
drilling rigs                              34        (2)      32
---       ---      ---
Total Exploration & Production
nonrecurring items                         39         1       40
Gas Pipeline
-------------
Gain on sale of excess inventory
gas - TGPL                                  -         -        -
Gain on sale of certain south
Texas assets - TGPL                         -         -        -
---       ---      ---
Total Gas Pipeline nonrecurring
items                                        -         -        -
Midstream Gas & Liquids  (MGL)
------------------------------
Impairment of Carbonate Trend
pipeline                                    -         -        -
Involuntary conversion gain
related to Ignacio gas
processing plant                            1         -        1
Reserve for receivables from
bankrupt counterparty                       -         -        -
Final earnout payment from 2005
Gulf Liquids asset sale                     -         -        -
Charges from Hurricanes Gustav &
Ike                                         -         -        -
Involuntary conversion gain from
hurricane damage at Cameron                 -         -        -
Gulf Liquids litigation partial
settlement                                  -         -        -
Loss from Venezuela investment              68         -       68
---       ---      ---
Total Midstream Gas & Liquids
nonrecurring items                         69         -       69
---       ---      ---
Nonrecurring items included in
segment profit (loss)                       108         1      109
Nonrecurring items below segment
profit (loss)
--------------------------------
Interest related to Gulf Liquids
litigation partial settlement -
MGL                                         -         -        -
Interest related to Wyoming
severance taxes - E&P                       -         -        -
Loss associated with Venezuela
investment - E&P                           11         -       11
Reversal of litigation
contingency -Corporate                      -        (5)      (5)
---       ---      ---
11        (5)       6
Total nonrecurring items                     119        (4)     115
Tax effect for above items                    15        (1)      14
---       ---      ---
Recurring income from continuing
operations available to common
stockholders                               $106      $120     $226
====      ====     ====
Recurring diluted earnings per
common share                              $0.18     $0.20    $0.39
=====     =====    =====
Weighted-average shares - diluted
(thousands)                             582,361   588,780  587,999
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.
* Amounts have been recast to reflect certain Venezuela operations as
discontinued operations.

SOURCE Williams