Williams Reports Higher Results Across Key Metrics in Second Quarter

: Business Wire; Posted On Aug 03, 2021

TULSA, Okla.--(BUSINESS WIRE)--Williams (NYSE: WMB) today announced its unaudited financial results for the three and six months ended June 30, 2021.

Results exceed expectations and trend toward higher end of previously increased 2021 financial guidance

Net income of $304 million, or $0.25 per diluted share (EPS)
Adjusted EPS of $0.27 per diluted share – up 8% from 2Q 2020
Cash flow from operations (CFFO) of $1.1 billion – down $86 million or 8% from 2Q 2020; however, decline was due to working capital fluctuations
Available funds from operations (AFFO) of $919 million – up $47 million or 5% from 2Q 2020
Adjusted EBITDA of $1.317 billion – up $77 million or 6% from 2Q 2020
Achieved record quarterly gathering volumes of 13.79 Bcf/d
Debt-to-Adjusted EBITDA at quarter end: 4.13x
Dividend coverage ratio is 1.85x (AFFO basis)

Recently executed strategic transactions to drive optimization, synergies and volume growth across portfolio of assets

Finalized upstream JV with GeoSouthern in Haynesville, in addition to previously announced JV with Crowheart in Wamsutter
Closed Sequent Energy Management acquisition
Signed definitive agreements for Shenandoah deepwater Gulf of Mexico expansion project
Signed definitive agreements for Whale deepwater Gulf of Mexico expansion project following producer customer reaching final investment decision (FID)

CEO Perspective

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

“Williams once again posted another strong quarter of results with Adjusted EBITDA up 6 percent, reflecting record quarterly gas gathering volumes and the successful execution of several critical Transco expansion projects. Our natural gas focused strategy continues to deliver, driven by our connections in the best supply areas and evidenced in another quarter of growth in our gathering volumes despite flat production nationwide. As we move into the second half of the year, we are trending to the higher end of our previously increased 2021 financial guidance and are on track to bring into full service the Leidy South Transco expansion ahead of schedule and in time for the winter heating season.

“Our strategy of connecting the best supplies of affordable, reliable and clean natural gas with growing customer demand continues to produce sustainable growth for our shareholders. Our recent acquisition of Sequent is designed to enhance this strategy and accelerate our natural gas pipeline and storage optimization activities. In addition, our upstream joint ventures with Crowheart in the Wamsutter and GeoSouthern in the Haynesville enhance the value of our midstream infrastructure in those regions, while setting the stage for future clean energy development."

Armstrong added, “As detailed in our latest sustainability report published last week, we continue to capture near-term emissions reduction opportunities while driving a variety of other ESG initiatives focused on building strong communities, environmental stewardship and workforce diversity. I appreciate our employees for their commitment to sustainable operations as we meet today’s growing need for natural gas and leverage our leading infrastructure for additional low-carbon solutions.”

Williams Summary Financial Information	2Q				Year to Date
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.	2021		2020		2021		2020

GAAP Measures
Net Income (Loss)	$304		$303		$729		($215)
Net Income (Loss) Per Share	$0.25		$0.25		$0.60		($0.18)
Cash Flow From Operations	$1,057		$1,143		$1,972		$1,930

Non-GAAP Measures (1)
Adjusted EBITDA	$1,317		$1,240		$2,732		$2,502
Adjusted Income	$327		$305		$756		$618
Adjusted Income Per Share	$0.27		$0.25		$0.62		$0.51
Available Funds from Operations	$919		$872		$1,948		$1,792
Dividend Coverage Ratio	1.85	x	1.79	x	1.96	x	1.85	x

Other
Debt-to-Adjusted EBITDA at Quarter End (2)	4.13x		4.31	x
Capital Investments (3)	$460		$363		$737		$647

(1) Schedules reconciling Adjusted Income, Adjusted EBITDA, 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.
(2) 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.
(3) 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

Second-quarter 2021 net income was consistent with the prior year, reflecting $26 million of increased earnings from Northeast G&P equity-method investments and revenues from recently acquired upstream operations, as well as the benefit of increased service revenues from Transco expansion projects and Northeast G&P, partially offset by a decrease from lower gathering volumes in the West. These favorable impacts were substantially offset by $33 million of higher depreciation expense primarily related to accelerated depreciation on decommissioning assets and higher operating and maintenance costs.
Year-to-date 2021 net income improved by $944 million over the prior year, reflecting $136 million of higher commodity margins, $54 million of increased earnings from Northeast G&P equity-method investments, and revenues from recently acquired upstream operations, partially offset by $42 million of higher depreciation expense and higher operating and maintenance costs. The improvement over last year also reflects the absence of $1.2 billion in pre-tax charges in 2020 related to impairments of equity-method investments, goodwill and goodwill at an equity investee, of which $65 million was attributable to noncontrolling interests. The provision for income taxes changed unfavorably by $347 million primarily due to higher pre-tax income.
The severe winter weather impact in February 2021 and the associated effect on commodity prices is estimated to have had a net favorable impact on our pre-tax results of approximately $77 million, primarily within our commodity margins and results from upstream operations.
Cash flow from operations for the second quarter of 2021 decreased as compared to 2020 primarily due to net working capital and other changes, partially offset by $15 million higher distributions from equity-method investments. Year-to-date, cash flow from operations increased due to higher operating results exclusive of non-cash charges and $22 million higher distributions from equity-method investments, partially offset by net working capital and other changes.

Non-GAAP Measures

Second-quarter 2021 Adjusted EBITDA increased by $77 million over the prior year, driven by the previously described benefits from recently acquired upstream operations and increased service revenues, as well as $41 million higher proportional EBITDA from Northeast G&P equity-method investments. These improvements were partially offset by higher operating and maintenance costs.
Year-to-date Adjusted EBITDA increased by $230 million over the prior year, driven by the previously described benefits from commodity margins and recently acquired upstream operations, as well as $74 million higher proportional EBITDA from Northeast G&P equity-method investments. These improvements were partially offset by higher operating and maintenance costs.
Second-quarter 2021 Adjusted Income improved by $22 million over the prior year, while year-to-date Adjusted Income improved by $138 million. The year-to-date increase was driven by the previously described impacts to net income, adjusted to remove the effects of the absence of $1.2 billion in pre-tax charges in 2020 related to impairments and related noncontrolling interest and income tax effects. Second-quarter and year-to-date 2021 were also adjusted to remove the impact of accelerated depreciation on decommissioning assets.
Second-quarter 2021 Available Funds From Operations increased by $47 million, primarily due to higher operating results exclusive of non-cash charges, $15 million higher distributions from equity-method investments and lower distributions to noncontrolling interests. The year-to-date increase of $156 million largely reflects higher operating results exclusive of non-cash charges and $22 million higher distributions from equity-method investments.

Business Segment Results & Form 10-Q

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 second-quarter 2021 Form 10-Q.

	Second Quarter								Year to Date
Amounts in millions	Modified EBITDA				Adjusted EBITDA				Modified EBITDA			Adjusted EBITDA
Amounts in millions	2Q 2021	2Q 2020	Change		2Q 2021	2Q 2020	Change		2021	2020	Change	2021	2020	Change
Transmission & Gulf of Mexico	$646	$615	$31		$648	$617	$31		$1,306	$1,277	$29	$1,308	$1,286	$22
Northeast G&P	409	370	39		409	363	46		811	739	72	811	733	78
West	231	253	(22	)	231	252	(21	)	546	468	78	546	468	78
Other	20	8	12		29	8	21		53	15	38	67	15	52
Totals	$1,306	$1,246	$60		$1,317	$1,240	$77		$2,716	$2,499	$217	$2,732	$2,502	$230

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

Second-quarter 2021 Modified and Adjusted EBITDA improved compared to the prior year driven by higher natural gas transmission service revenues related to recent expansion projects.
Year-to-date Modified and Adjusted EBITDA also improved compared to the prior year, as higher service revenues, commodity margins, and proportional EBITDA from equity-method investments were partially offset by higher operating and administrative costs.

Northeast G&P

Second-quarter and year-to-date 2021 Modified and Adjusted EBITDA increased over the prior year driven by higher proportional EBITDA from equity-method investments associated with higher gathering volumes on our Bradford and Marcellus South systems, along with the benefit of an increased ownership in Blue Racer Midstream, acquired in November 2020.
Gross gathering volumes for second-quarter 2021, including 100% of operated equity-method investments, increased by 9% over the same period in 2020.

West

Second-quarter 2021 Modified and Adjusted EBITDA declined compared to the prior year primarily due to lower service revenues reflecting lower gathering volumes, lower Barnett deferred revenue amortization and the absence of a deficiency fee, partially offset by higher commodity margins driven by higher prices.
Year-to-date 2021 Modified and Adjusted EBITDA increased over the prior year primarily due to an estimated $55 million net favorable impact from the February 2021 severe winter weather, $63 million of higher commodity margins driven by higher prices and the absence of prior year inventory impacts, and lower operating and administrative costs. These favorable changes were partially offset by lower service revenues reflecting lower Haynesville gathering revenues from lower rates and volumes, lower Barnett deferred revenue amortization and the absence of a deficiency fee, as well as lower proportional EBITDA from equity method investments driven by reduced transportation volumes on Overland Pass Pipeline.

Other

Second-quarter and year-to-date 2021 Modified and Adjusted EBITDA improved compared to the prior year primarily due to our recently acquired oil and gas producing properties. The year-to-date increase reflects an estimated $22 million attributable to the February 2021 severe winter weather.

2021 Financial Guidance

The company expects 2021 Adjusted EBITDA at the higher end of the previously increased guidance range of $5.2 billion to $5.4 billion and Available Funds from Operations between $3.7 billion and $3.9 billion. Moreover, the leverage ratio is expected to be less than the 4.2x midpoint for year-end 2021; growth capex is reaffirmed at $1 billion to $1.2 billion. Importantly, Williams expects to generate positive free cash flow (after capital expenditures and dividends), allowing it to retain financial flexibility.

Williams' Second-Quarter 2021 Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow

Williams' second-quarter 2021 earnings presentation will be posted at www.williams.com. The company’s second-quarter 2021 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Aug. 3, 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/9217437

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 (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
	(Millions, except per-share amounts)
Revenues:
Service revenues	$	1,460		$	1,446		$	2,912		$	2,920
Service revenues – commodity consideration		51			25			100			53
Product sales		772			310			1,883			721
Total revenues		2,283			1,781			4,895			3,694
Costs and expenses:
Product costs		697			271			1,629			667
Processing commodity expenses		18			15			39			28
Operating and maintenance expenses		379			320			739			657
Depreciation and amortization expenses		463			430			901			859
Selling, general, and administrative expenses		114			127			237			240
Impairment of goodwill		—			—			—			187
Other (income) expense – net		12			6			11			13
Total costs and expenses		1,683			1,169			3,556			2,651
Operating income (loss)		600			612			1,339			1,043
Equity earnings (losses)		135			108			266			130
Impairment of equity-method investments		—			—			—			(938	)
Other investing income (loss) – net		2			1			4			4
Interest incurred		(301	)		(299	)		(597	)		(600	)
Interest capitalized		3			5			5			10
Other income (expense) – net		2			5			—			9
Income (loss) before income taxes		441			432			1,017			(342	)
Less: Provision (benefit) for income taxes		119			117			260			(87	)
Net income (loss)		322			315			757			(255	)
Less: Net income (loss) attributable to noncontrolling interests		18			12			27			(41	)
Net income (loss) attributable to The Williams Companies, Inc.		304			303			730			(214	)
Less: Preferred stock dividends		—			—			1			1
Net income (loss) available to common stockholders	$	304		$	303		$	729		$	(215	)
Basic earnings (loss) per common share:
Net income (loss)	$	.25		$	.25		$	.60		$	(.18	)
Weighted-average shares (thousands)		1,215,250			1,213,601			1,214,950			1,213,310
Diluted earnings (loss) per common share:
Net income (loss)	$	.25		$	.25		$	.60		$	(.18	)
Weighted-average shares (thousands)		1,217,476			1,214,581			1,217,344			1,213,310

The Williams Companies, Inc. Consolidated Balance Sheet (Unaudited)

	June 30, 2021			December 31, 2020
	(Millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	1,201		$	142
Trade accounts and other receivables		1,000			1,000
Allowance for doubtful accounts		(1	)		(1	)
Trade accounts and other receivables – net		999			999
Inventories		194			136
Other current assets and deferred charges		231			152
Total current assets		2,625			1,429
Investments		5,124			5,159
Property, plant, and equipment		43,543			42,489
Accumulated depreciation and amortization		(14,244	)		(13,560	)
Property, plant, and equipment – net		29,299			28,929
Intangible assets – net of accumulated amortization		7,277			7,444
Regulatory assets, deferred charges, and other		1,182			1,204
Total assets	$	45,507		$	44,165
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	611		$	482
Accrued liabilities		1,005			944
Long-term debt due within one year		2,143			893
Total current liabilities		3,759			2,319
Long-term debt		21,091			21,451
Deferred income tax liabilities		2,179			1,923
Regulatory liabilities, deferred income, and other		4,213			3,889
Contingent liabilities
Equity:
Stockholders’ equity:
Preferred stock		35			35
Common stock ($1 par value; 1,470 million shares authorized at June 30, 2021 and December 31, 2020; 1,249 million shares issued at June 30, 2021 and 1,248 million shares issued at December 31, 2020)		1,249			1,248
Capital in excess of par value		24,401			24,371
Retained deficit		(13,022	)		(12,748	)
Accumulated other comprehensive income (loss)		(110	)		(96	)
Treasury stock, at cost (35 million shares of common stock)		(1,041	)		(1,041	)
Total stockholders’ equity		11,512			11,769
Noncontrolling interests in consolidated subsidiaries		2,753			2,814
Total equity		14,265			14,583
Total liabilities and equity	$	45,507		$	44,165

The Williams Companies, Inc. Consolidated Statement of Cash Flows (Unaudited)

	Six Months Ended June 30,
	2021			2020
	(Millions)
OPERATING ACTIVITIES:
Net income (loss)	$	757		$	(255	)
Adjustments to reconcile to net cash provided (used) by operating activities:
Depreciation and amortization		901			859
Provision (benefit) for deferred income taxes		262			(59	)
Equity (earnings) losses		(266	)		(130	)
Distributions from unconsolidated affiliates		345			323
Impairment of goodwill		—			187
Impairment of equity-method investments		—			938
Amortization of stock-based awards		39			24
Cash provided (used) by changes in current assets and liabilities:
Accounts receivable		(50	)		85
Inventories		(58	)		(9	)
Other current assets and deferred charges		(56	)		(13	)
Accounts payable		94			236
Accrued liabilities		14			(236	)
Other, including changes in noncurrent assets and liabilities		(10	)		(20	)
Net cash provided (used) by operating activities		1,972			1,930
FINANCING ACTIVITIES:
Proceeds from long-term debt		898			3,896
Payments of long-term debt		(11	)		(3,226	)
Proceeds from issuance of common stock		3			6
Common dividends paid		(996	)		(971	)
Dividends and distributions paid to noncontrolling interests		(95	)		(98	)
Contributions from noncontrolling interests		6			4
Payments for debt issuance costs		(6	)		(17	)
Other – net		(12	)		(10	)
Net cash provided (used) by financing activities		(213	)		(416	)
INVESTING ACTIVITIES:
Property, plant, and equipment:
Capital expenditures (1)		(685	)		(613	)
Dispositions – net		(5	)		(16	)
Contributions in aid of construction		36			19
Proceeds from dispositions of equity-method investments		1			—
Purchases of and contributions to equity-method investments		(44	)		(66	)
Other – net		(3	)		6
Net cash provided (used) by investing activities		(700	)		(670	)
Increase (decrease) in cash and cash equivalents		1,059			844
Cash and cash equivalents at beginning of year		142			289
Cash and cash equivalents at end of period	$	1,201		$	1,133
_____________
(1) Increases to property, plant, and equipment	$	(693	)	$	(581	)
Changes in related accounts payable and accrued liabilities		8			(32	)
Capital expenditures	$	(685	)	$	(613	)

Transmission & Gulf of Mexico
(UNAUDITED)
	2020															2021
(Dollars in millions)	1st Qtr			2nd Qtr			3rd Qtr			4th Qtr			Year			1st Qtr			2nd Qtr			Year
Regulated interstate natural gas transportation, storage, and other revenues ⁽¹⁾	$	692		$	676		$	686		$	702		$	2,756		$	708		$	693		$	1,401
Gathering, processing, and transportation revenues		99			78			85			86			348			86			90			176
Other fee revenues ⁽¹⁾		4			5			3			6			18			4			4			8
Commodity margins		3			1			4			4			12			8			7			15
Operating and administrative costs ⁽¹⁾		(184	)		(189	)		(192	)		(192	)		(757	)		(198	)		(197	)		(395	)
Other segment income (expenses) - net		4			2			(8	)		8			6			5			5			10
Impairment of certain assets		—			—			—			(170	)		(170	)		—			(2	)		(2	)
Proportional Modified EBITDA of equity-method investments		44			42			38			42			166			47			46			93
Modified EBITDA		662			615			616			486			2,379			660			646			1,306
Adjustments		7			2			6			158			173			—			2			2
Adjusted EBITDA	$	669		$	617		$	622		$	644		$	2,552		$	660		$	648		$	1,308

Statistics for Operated Assets
Natural Gas Transmission
Transcontinental Gas Pipe Line
Avg. daily transportation volumes (Tbtu)		13.8			12.0			12.8			13.2			12.9			14.1			13.1			13.6
Avg. daily firm reserved capacity (Tbtu)		17.7			17.5			18.0			18.2			17.9			18.6			18.3			18.5
Northwest Pipeline LLC
Avg. daily transportation volumes (Tbtu)		2.6			1.9			1.8			2.5			2.2			2.8			2.2			2.5
Avg. daily firm reserved capacity (Tbtu) ⁽⁴⁾		3.9			3.9			3.9			3.8			3.8			3.8			3.8			3.8
Gulfstream - Non-consolidated
Avg. daily transportation volumes (Tbtu)		1.2			1.2			1.3			1.1			1.2			1.0			1.2			1.1
Avg. daily firm reserved capacity (Tbtu)		1.3			1.3			1.3			1.3			1.3			1.3			1.3			1.3
Gathering, Processing, and Crude Oil Transportation
Consolidated ⁽²⁾
Gathering volumes (Bcf/d)		0.30			0.23			0.23			0.26			0.25			0.28			0.31			0.30
Plant inlet natural gas volumes (Bcf/d)		0.58			0.50			0.40			0.46			0.48			0.46			0.41			0.44
NGL production (Mbbls/d)		32			25			27			30			29			29			26			28
NGL equity sales (Mbbls/d)		5			4			5			5			5			7			5			6
Crude oil transportation volumes (Mbbls/d)		138			92			121			132			121			130			151			141
Non-consolidated ⁽³⁾
Gathering volumes (Bcf/d)		0.35			0.31			0.26			0.30			0.30			0.36			0.40			0.38
Plant inlet natural gas volumes (Bcf/d)		0.35			0.31			0.25			0.30			0.30			0.37			0.40			0.38
NGL production (Mbbls/d)		24			23			17			21			21			28			31			30
NGL equity sales (Mbbls/d)		5			8			4			6			6			9			7			8

(1) Excludes certain amounts associated with revenues and operating costs for tracked or reimbursable charges.
(2) Excludes volumes associated with equity-method investments that are not consolidated in our results.
(3) Includes 100% of the volumes associated with operated equity-method investments.
(4) Revised to include daily maximum peak capacity.

Contacts

MEDIA CONTACT:
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(800) 945-8723

INVESTOR CONTACT:
Danilo Juvane
(918) 573-5075

Grace Scott
(918) 573-1092

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