Williams Reports Fourth-Quarter and Full-Year 2020 Financial Results

: Business Wire; Posted On Feb 23, 2021

TULSA, Okla.--(BUSINESS WIRE)--Williams (NYSE: WMB) today announced its unaudited financial results for the three and 12 months ended December 31, 2020.

Full-year 2020 results validate strength of natural gas strategy in the face of significant headwinds; results exceed pre-COVID-19 guidance midpoints in key metrics

Net income of $208 million, or $0.17 per diluted share (EPS), which includes net non-cash impairment impact of ($1.107 billion), or ($0.91) per diluted share
Adjusted EPS of $1.10 per diluted share - up 11% from 2019
Cash flow from operations (CFFO) of $3.496 billion – down approximately $200 million from 2019 primarily due to the Transco rate case refund impact
Available funds from operations (AFFO) of $3.638 billion increased by 1% over 2019
Adjusted EBITDA of $5.105 billion - up $90 million or 2%
DCF of $3.356 billion - up $59 million or 2% over 2019
Record gathering volumes of 13.2 Bcf/d; record contracted transmission capacity of 22.2 Bcf/d
Debt-to-Adjusted EBITDA at quarter end: 4.35x, favorable to guidance
Expect strong natural gas market fundamentals to drive continued growth in 2021

4Q 2020 results demonstrate stability despite ongoing external volatility

Net income of $115 million, or $0.09 per diluted share, which includes net non-cash impairment impact of ($245 million), or ($0.20) per diluted share
Adjusted EPS of $0.31 per diluted share - up 29% vs. 4Q '19
CFFO of $1.114 billion - up $123 million or 12% over 4Q '19
AFFO of $983 million - up 2% over 4Q '19
Adjusted EBITDA of $1.336 billion - up $52 million or 4% over 4Q '19
DCF of $926 million - up $98 million or 12% over 4Q '19
Dividend coverage ratio is 1.91x

CEO Perspective

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

“Williams established all-time record results in 2020, demonstrating how durable our business can be against multiple headwinds faced by our industry including the COVID-19 pandemic, major customer bankruptcies and a highly active hurricane season, among other factors. We surpassed guidance midpoints in our key financial metrics and generated free cash flow, driven by strong operations with records for both gathered volumes and contracted transmission capacity. Looking ahead to 2021, we believe our continued operating efficiencies combined with a focus on safety performance and environmental stewardship positions Williams to generate long-term sustainable value. Our business strategy is centered on the economic and environmental benefits of natural gas and its ability to accelerate emissions reductions in a pragmatic and cost-effective way. In addition to implementing aggressive and actionable plans to reduce our own emissions by 2030, we are pursuing a broader clean energy strategy that leverages our best-in-class pipeline transportation and storage systems to integrate solar, renewable natural gas, hydrogen and other emerging opportunities.

“Over the past year, our employees have truly demonstrated our safety-driven culture by taking care to protect themselves and others during the pandemic while at the same time efficiently completing projects that deliver clean, affordable energy to key markets ahead of schedule. I am incredibly proud of the around-the-clock work of our employees and their unwavering focus on running one of the nation’s largest energy infrastructure networks with the high level of dependability that consumers have come to expect – reliability that was particularly evident on our gas transmission systems during the severe cold weather event that gripped much of the country last week. Our production supplies in the Northeast and along the Gulf Coast as well as our network of interconnections with other pipelines and strategic storage reserves ensured we were able to meet our commitments and deliver scheduled supplies with no issue. The resiliency of our natural gas network allows us to meet energy demand in the most cost-effective, reliable way possible and demonstrates the importance of natural gas in our country’s energy mix.”


Williams Summary Financial Information	4Q				Full Year
Amounts in millions, except ratios and per-share amounts. Per share amounts are reported on a diluted basis. Net income amounts are from continuing operations attributable to The Williams Companies, Inc. available to common stockholders.	2020		2019		2020		2019

GAAP Measures
Net Income	$115		$138		$208		$862
Net Income Per Share	$0.09		$0.11		$0.17		$0.71
Cash Flow From Operations (1)	$1,114		$991		$3,496		$3,693

Non-GAAP Measures (2)
Adjusted EBITDA	$1,336		$1,284		$5,105		$5,015
Adjusted Income	$382		$293		$1,333		$1,200
Adjusted Income Per Share	$0.31		$0.24		$1.10		$0.99
Distributable Cash Flow	$926		$828		$3,356		$3,297
Available Funds from Operations	$983		$962		$3,638		$3,611
Dividend Coverage Ratio (DCF basis)	1.91	x	1.80	x	1.73	x	1.79	x

Other
Debt-to-Adjusted EBITDA at Quarter End (3)	4.35	x	4.39	x
Capital Investments (4) (5)	$423		$408		$1,485		$2,476

(1) Decline due primarily to working capital changes of approximately $284 million of rate refunds related to settlement of Transco's general rate case paid in July net of approximately $95 million collected from January through June 2020.
(2) Schedules reconciling Adjusted Income, Adjusted EBITDA, Distributable Cash Flow, Available Funds from Operations and Dividend 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.
(3) Does not represent leverage ratios measured for WMB credit agreement compliance or leverage ratios as calculated by the major credit ratings agencies. Debt is net of cash on hand, and Adjusted EBITDA reflects the sum of the last four quarters.
(4) YTD 2019 excludes $728 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 Northeast JV by our JV partner, CPPIB, in June 2019.
(5) 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

Fourth-quarter 2020 net income from continuing operations attributable to Williams declined slightly compared to the prior year as the benefits of significantly lower operating and administrative costs from cost-savings initiatives and a change in an employee benefit policy, and higher service revenues were more than offset by higher net impairment charges.
Improved service revenues reflect growth from Transco and Northwest Pipeline expansion projects and the benefit of certain minimum volume commitment (MVC) revenue in the West, partially offset by lower non-cash deferred revenue recognition at Gulfstar One and the impact of 2020 hurricane-related shut-ins in the Gulf of Mexico. The higher net impairment charges include the 2020 impairments of the Northeast Supply Enhancement project and our investment in Rocky Mountain Midstream, partially offset by the 2019 impairment of the Constitution Pipeline project, net of amounts attributable to noncontrolling interests in that project.
Full-year 2020 net income similarly benefited from significantly lower operating and administrative costs, including the absence of prior year severance charges and the benefit of a change in an employee benefit policy, while service revenues declined slightly as growth from our Northeast JV and pipeline expansion projects and the benefit of certain MVCs was more than offset by decreases in non-cash deferred revenue recognition at Gulfstar One and in the Barnett Shale, as well as the expiration of a Barnett Shale MVC in 2019.
The year-over-year change was also significantly impacted by net impairment charges, reflecting 2020 impairments related to equity-method investments, goodwill, and certain assets which resulted in a total $1.54 billion pre-tax charge, of which $65 million was attributable to noncontrolling interests. The 2019 period included similar impairment charges totaling $650 million, of which $209 million was attributable to noncontrolling interests, along with a $122 million gain on the sale of our Jackalope investment. The provision for income taxes changed favorably by $256 million primarily due to the change in pre-tax earnings.
Cash flow from operations for the fourth quarter of 2020 increased as compared to the same period of 2019 primarily due to net favorable changes in net working capital. The decrease for the full-year period was primarily due to working capital changes involving $284 million of rate refunds related to the settlement of Transco’s general rate case paid in July, net of approximately $95 million of that amount collected from January through June 2020.

Non-GAAP Measures

Adjusted EBITDA for the quarter improved over the prior year as increased service revenues from pipeline expansion projects, higher Northeast G&P JV EBITDA, and lower operating and administrative costs were partially offset by lower non-cash deferred revenue recognition at Gulfstar One and the impact of 2020 hurricane-related shut-ins in the Gulf of Mexico.
Full-year Adjusted EBITDA improved driven by lower operating and administrative costs and higher contributions from our Northeast G&P investments, partially offset by the previously described slight decline in service revenues and lower commodity margins.
Changes in Adjusted Income for the quarter and full-year periods were similarly driven by the changes in Adjusted EBITDA.
The increase in fourth quarter 2020 DCF compared to the prior year is driven by the increase in adjusted EBITDA and an income tax refund received. The increase in full-year DCF is also driven by higher adjusted EBITDA, as well as lower maintenance capital, partially offset by increased distributions to noncontrolling interests driven by our Northeast JV.

Business Segment Results & Form 10-K

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


	Quarter-To-Date								Full Year
Amounts in millions	Modified EBITDA					Adjusted EBITDA			Modified EBITDA					Adjusted EBITDA
Amounts in millions	4Q 2020		4Q 2019	Change		4Q 2020	4Q 2019	Change	2020		2019	Change		2020	2019	Change
Transmission & Gulf of Mexico	$486		$284	$202		$644	$643	$1	$2,379		$2,175	$204		$2,552	$2,587	($35	)
Northeast G&P	363		367	(4	)	406	377	29	1,489		1,314	175		1,535	1,341	194
West	283		239	44		277	263	14	998		952	46		990	1,064	(74	)
Other	(23	)	5	(28	)	9	1	8	(15	)	6	(21	)	28	23	5
Totals	$1,109		$895	$214		$1,336	$1,284	$52	$4,851		$4,447	$404		$5,105	$5,015	$90

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

Fourth-quarter 2020 Modified and Adjusted EBITDA benefited from lower operating and administrative costs, partially offset by decreased service revenues from lower non-cash deferred revenue amortization at Gulfstar One and the impact of 2020 hurricane-related shut-ins, partially offset by Transco expansion projects placed in service.
Full-year Modified and Adjusted EBITDA also benefited from lower operating and administrative costs, partially offset by similar decreases in service revenues.
Modified EBITDA for the comparative periods benefited from the absence of both 2019 severance charges and the 2019 impairment of the Constitution Pipeline project, partially offset by the 2020 impairment of the Northeast Supply Enhancement project. Both comparative periods reflect the reversal of previously capitalized costs, while 2020 also benefited from a change in employee benefit policy. These items have been excluded from Adjusted EBITDA.

Northeast G&P

Fourth-quarter 2020 Modified and Adjusted EBITDA reflect lower operating and administrative costs and higher contributions from equity-method investments. Full-year 2020 Modified and Adjusted EBITDA also reflect lower operating and administrative costs and higher contributions from equity-method investments, as well as increased service revenues associated with higher volumes. The full-year revenue comparison also benefited from the additional ownership in Utica East Ohio Midstream following the March 2019 acquisition and contribution to our Northeast JV.
Modified EBITDA for both periods includes our share of impairments at equity-method investees and the benefit of a 2020 change in employee benefit policy, while the full-year comparison reflects the absence of 2019 severance charges. These items are all excluded from Adjusted EBITDA.
Excluding Blue Racer volumes for fourth-quarter 2020 operating stats, Northeast G&P gross gathering volumes for fourth-quarter 2020, including 100% of operated equity-method investments, increased by 7% over the same period in 2019 and gross processing plant inlet volumes for fourth-quarter 2020 increased by 9% over the same period in 2019.

West

The changes in fourth-quarter 2020 Modified and Adjusted EBITDA reflect higher service revenues associated with certain MVCs and higher rates partially offset by lower volumes, as well as reduced operating and administrative costs. The changes in full-year 2020 Modified and Adjusted EBITDA reflect decreases in non-cash deferred revenue recognition in the Barnett Shale, as well as the expiration of the Barnett Shale MVC in 2019, partially offset by lower operating and administrative costs. The benefit of higher MVCs was more than offset by the impact of lower volumes.
Modified EBITDA for the quarter and full-year period also benefited from the absence of prior year impairment charges, as well as the benefit of a change in employee benefit policy. The full-year comparison also reflects the absence of prior-year severance charges. All of these items are excluded from Adjusted EBITDA.

2021 Financial Guidance

The company expects 2021 Adjusted EBITDA between $5.05 billion and $5.35 billion. The company also expects 2021 growth capex between $1 billion to $1.2 billion and leverage ratio of 4.25x, providing visibility to the company’s 4.20x leverage metric objective. Importantly, Williams also anticipates it will generate positive free cash flow (after capex and dividends), allowing it to retain financial flexibility.

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

Williams' fourth-quarter 2020 earnings presentation will be posted at www.williams.com. The company’s fourth-quarter 2020 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Feb. 23, at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). Participants who wish to join the call by phone must register using the following link: http://www.directeventreg.com/registration/event/5346299

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

		Year Ended December 31,
		2020			2019			2018
	(Millions, except per-share amounts)
Revenues:
Service revenues		$	5,924		$	5,933		$	5,502
Service revenues – commodity consideration		129			203			400
Product sales		1,666			2,065			2,784
Total revenues		7,719			8,201			8,686
Costs and expenses:
Product costs		1,545			1,961			2,707
Processing commodity expenses		68			105			137
Operating and maintenance expenses		1,326			1,468			1,507
Depreciation and amortization expenses		1,721			1,714			1,725
Selling, general, and administrative expenses		466			558			569
Impairment of certain assets		182			464			1,915
Impairment of goodwill		187			—			—
Gain on sale of certain assets and businesses		—			2			(692		)
Other (income) expense – net		22			8			50
Total costs and expenses		5,517			6,280			7,918
Operating income (loss)		2,202			1,921			768
Equity earnings (losses)		328			375			396
Impairment of equity-method investments		(1,046		)	(186		)	(32		)
Other investing income (loss) – net		8			107			219
Interest incurred		(1,192		)	(1,218		)	(1,160		)
Interest capitalized		20			32			48
Other income (expense) – net		(43		)	33			92
Income (loss) from continuing operations before income taxes		277			1,064			331
Less: Provision (benefit) for income taxes		79			335			138
Income (loss) from continuing operations		198			729			193
Income (loss) from discontinued operations		—			(15		)	—
Net income (loss)		198			714			193
Less: Net income (loss) attributable to noncontrolling interests		(13		)	(136		)	348
Net income (loss) attributable to The Williams Companies, Inc		211			850			(155		)
Less: Preferred stock dividends		3			3			1
Net income (loss) available to common stockholders		$	208		$	847		$	(156	)
Amounts attributable to The Williams Companies, Inc. available to common stockholders:
Income (loss) from continuing operations		$	208		$	862		$	(156	)
Income (loss) from discontinued operations		—			(15		)	—
Net income (loss)		$	208		$	847		$	(156	)
Basic earnings (loss) per common share:
Income (loss) from continuing operations		$	.17		$	.71		$	(.16	)
Income (loss) from discontinued operations		—			(.01		)	—
Net income (loss)		$	.17		$	.70		$	(.16	)
Weighted-average shares (thousands)		1,213,631			1,212,037			973,626
Diluted earnings (loss) per common share:
Income (loss) from continuing operations		$	.17		$	.71		$	(.16	)
Income (loss) from discontinued operations		—			(.01		)	—
Net income (loss)		$	.17		$	.70		$	(.16	)
Weighted-average shares (thousands)		1,215,165			1,214,011			973,626


The Williams Companies, Inc. Consolidated Balance Sheet

	December 31,
	2020			2019
	(Millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	142		$	289
Trade accounts and other receivables	1,000			1,002
Allowance for doubtful accounts	(1		)	(6		)
Trade accounts and other receivables - net	999			996
Inventories	136			125
Other current assets and deferred charges	152			170
Total current assets	1,429			1,580

Investments	5,159			6,235
Property, plant, and equipment – net	28,929			29,200
Intangible assets – net of accumulated amortization	7,444			7,959
Regulatory assets, deferred charges, and other	1,204			1,066
Total assets	$	44,165		$	46,040

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	482		$	552
Accrued liabilities	944			1,276
Long-term debt due within one year	893			2,140
Total current liabilities	2,319			3,968

Long-term debt	21,451			20,148
Deferred income tax liabilities	1,923			1,782
Regulatory liabilities, deferred income, and other	3,889			3,778
Contingent liabilities and commitments

Equity:
Stockholders’ equity:
Preferred stock	35			35
Common stock ($1 par value; 1,470 million shares authorized at December 31, 2020 and December 31, 2019; 1,248 million shares issued at December 31, 2020 and 1,247 million shares issued at December 31, 2019)	1,248			1,247
Capital in excess of par value	24,371			24,323
Retained deficit	(12,748		)	(11,002		)
Accumulated other comprehensive income (loss)	(96		)	(199		)
Treasury stock, at cost (35 million shares of common stock)	(1,041		)	(1,041		)
Total stockholders’ equity	11,769			13,363
Noncontrolling interests in consolidated subsidiaries	2,814			3,001
Total equity	14,583			16,364
Total liabilities and equity	$	44,165		$	46,040


The Williams Companies, Inc. Consolidated Statement of Cash Flows

	Year Ended December 31,
	2020			2019			2018
	(Millions)
OPERATING ACTIVITIES:
Net income (loss)	$	198		$	714		$	193
Adjustments to reconcile to net cash provided (used) by operating activities:
Depreciation and amortization	1,721			1,714			1,725
Provision (benefit) for deferred income taxes	108			376			220
Equity (earnings) losses	(328		)	(375		)	(396		)
Distributions from unconsolidated affiliates	653			657			693
Gain on disposition of equity-method investments	—			(122		)	—
(Gain) on sale of certain assets and businesses	—			2			(692		)
(Gain) loss on deconsolidation of businesses	—			29			(203		)
Impairment of goodwill	187			—			—
Impairment of equity-method investments	1,046			186			32
Impairment of certain assets	182			464			1,915
Amortization of stock-based awards	52			57			55
Cash provided (used) by changes in current assets and liabilities:
Accounts receivable	(2		)	34			(36		)
Inventories	(11		)	5			(16		)
Other current assets and deferred charges	11			21			17
Accounts payable	(7		)	(46		)	(93		)
Accrued liabilities	(309		)	153			23
Other, including changes in noncurrent assets and liabilities	(5		)	(176		)	(144		)
Net cash provided (used) by operating activities	3,496			3,693			3,293
FINANCING ACTIVITIES:
Proceeds from long-term debt	3,899			767			3,926
Payments of long-term debt	(3,841		)	(909		)	(3,204		)
Proceeds from issuance of common stock	9			10			15
Proceeds from sale of partial interest in consolidated subsidiary	—			1,334			—
Common dividends paid	(1,941		)	(1,842		)	(1,386		)
Dividends and distributions paid to noncontrolling interests	(185		)	(124		)	(591		)
Contributions from noncontrolling interests	7			36			15
Payments for debt issuance costs	(20		)	—			(26		)
Other – net	(13		)	(17		)	(48		)
Net cash provided (used) by financing activities	(2,085		)	(745		)	(1,299		)
INVESTING ACTIVITIES:
Property, plant, and equipment:
Capital expenditures (1)	(1,239		)	(2,109		)	(3,256		)
Dispositions – net	(36		)	(40		)	(7		)
Contributions in aid of construction	37			52			411
Proceeds from sale of businesses, net of cash divested	—			(2		)	1,296
Purchases of businesses, net of cash acquired	—			(728		)	—
Proceeds from dispositions of equity-method investments	—			485			—
Purchases of and contributions to equity-method investments	(325		)	(453		)	(1,132		)
Other – net	5			(32		)	(37		)
Net cash provided (used) by investing activities	(1,558		)	(2,827		)	(2,725		)
Increase (decrease) in cash and cash equivalents	(147		)	121			(731		)
Cash and cash equivalents at beginning of year	289			168			899
Cash and cash equivalents at end of year	$	142		$	289		$	168
_________
(1) Increases to property, plant, and equipment	$	(1,160	)	$	(2,023	)	$	(3,021	)
Changes in related accounts payable and accrued liabilities	(79		)	(86		)	(235		)
Capital expenditures	$	(1,239	)	$	(2,109	)	$	(3,256	)

Contacts

MEDIA CONTACT:
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(800) 945-8723

INVESTOR CONTACTS:
Danilo Juvane
(918) 573-5075

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