Williams Companies, Inc. (the) · NYSE:WMB
Williams Companies, Inc. (the) — The Williams Companies — Q3 2004 Earnings Presentation
84 slides from Williams Companies, Inc. (the)'s earnings presentation, Nov 4, 2004
Slide 1: Williams Analyst Conference Call 3rd Quarter 2004
Williams Analyst Conference Call 3rd Quarter 2004 November 4, 2004
Slide 2: Forward Looking Statements
Forward Looking Statements Our reports, filings, and other public announcements might contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” with in the meaning of Private Securities Litigation R
Slide 3: 3Q04 Review
3Q04 Review Steve Malcolm, Chairman, President & CEO
Slide 4: Headlines
Headlines Results show discipline – Stronger balance sheet, moving towards growth – Debt reduction efforts ahead of schedule • 3Q 2003 $13.0 billion • 3Q 2004 $ 8.9 billion – Year to date CFFO from continuing operations almost double • 3Q 2003 $567 million • 3Q 2004 $1.1 billion – Debt to total bo
Slide 5: Headlines for the Quarter
Headlines for the Quarter Williams delivers strong 3Q performance – Exploration & Production production volumes continue to increase – Midstream has another outstanding quarter, despite Hurricane Ivan – Gas Pipeline steady performance – Power continues positive cash flows – Consolidated strong cas
Slide 6: Headlines: Williams ceases efforts to sell Power business
Headlines Williams ceases efforts to sell Power business – Natural gas businesses continue as focal point for strategy, investment – Company has greater financial strength, lower Power liquidity requirements – Adoption of hedge accounting expected to reduce earnings volatility – Residual impact of
Slide 7: Headlines: poised for growth, value-creation
Headlines Williams poised for growth, value-creation – Natural gas businesses provide growth opportunities – Investments today preserve, enhance competitive position and create value • Drilling activity, production levels both increase • Deepwater Gulf and West infrastructure prime for incremental
Slide 8: The Road Ahead
The Road Ahead 2004 2005 2006 2007 & beyond Exploration Accelerate Piceance drilling Continue production growth & Production Powder River permits and dewatering CORE BUSINESSES Complete deepwater Enhance competitive position- Capture our share Disciplined Midstream projects consider MLP of new deepw
Slide 9: Financial Results & 2004 Outlook
Financial Results & 2004 Outlook Don Chappel, CFO
Slide 10: Financial Results
Financial Results Dollars in millions (except per share amounts) 3rd Quarter YTD 2004 2003 2004 2003 Income (Loss) from Continuing Ops.* $16 $20 ($3) $91 Income (Loss) from Discont. Ops.* 83 86 93 232 Effect of Accounting Change - - - (761) Net Income/(Loss)* $99 $106 $90 ($438) Net Income/(Loss) Sh
Slide 11: Recurring Income from Cont. Operations
Recurring Income from Cont. Operations Dollars in millions 3rd Quarter YTD 2004 2003 2004 2003 Income/(Loss) from Cont. Ops. $16 $20 ($3) $91 Gains on Sale of Assets - (47) - (320) Impairments/Losses/Write-offs 16 9 39 158 Income (Expense) Related to Prior Periods 17 (1) 11 (108) Debt Retirement Exp
Slide 12: Mark to Market Adjustments
Mark to Market Adjustments Dollars in millions, except for per-share amounts 3rd Quarter YTD 2004 2003 2004 2003 Recurring income from continuing operations available to common shareholders $ 136 $ (0) $ 193 $ (56) Recurring diluted earnings per common share $ 0.26 $ (0.00) $ 0.37 $ (0.10) 1 Mark-to
Slide 13: Net Income Components
Net Income Components Dollars in millions (except per share amounts) 3rd Quarter YTD 2004 2003 2004 2003 Segment Profit* $436 $319 $1,006 $1,199 Net Interest Expense (196) (265) (657) (1,000) Debt Retirement Expense (155) - (252) - Other Income (Expense) - Net (21) (11) (58) 28 Income from Cont. Ops
Slide 14: Third Quarter Segment Profit
Third Quarter Segment Profit Dollars in millions Reported Recurring 3Q04 3Q03 3Q04 3Q03 Gas Pipeline $149 $142 $149 $142 Exploration & Production 70 59 70 59 Midstream Gas & Liquids 105 77 128 70 Power(1) 109 37 109 15 Other 3 4 3 (5) Segment Profit(2) $436 $319 $459 $281 (1) Power includes unrealiz
Slide 15: YTD Segment Profit
YTD Segment Profit Reported Recurring Dollars in millions 2004 2003 2004 2003 Gas Pipeline $429 $407 $438 $434 Exploration & Production(1) 165 351 176 260 Midstream Gas & Liquids 312 247 318 240 Power(2) 121 236 121 (34) Other (21) (42) (3) (2) Segment Profit(3) $1,006 $1,199 $1,050 $898 (1) E&P YTD
Slide 16: Major Changes in Recurring Segment Profit
Major Changes in Recurring Segment Profit Dollars in millions Recurring Segment Profit 3Q2003 $281 Power 94 - Higher unrealized MTM gains +$242 million - Lower gains on contract suspension -$126 million - Lower realized margins and SG&A -$22 million Midstream 57 - Higher NGL margins +$45 million - I
Slide 17: Cash Information
Cash Information Dollars in millions 3Q04 YTD04 Beginning Cash * $1,030 $2,318 Cash Flow from Continuing Operations 462 1,065 Cash Flow from Discontinued Operations 11 23 Asset Sales 618 1,013 Restricted Investments (LC Collateral) - 380 Debt Retirements (816) (3,036) Capital Expenditures/Investment
Slide 18: Debt Balance
Debt Balance Dollars in millions Avg. Cost Debt Balance @ 12/31/03 * $11,978 7.7% Scheduled Debt Retirements & Amortization (801) Tendered Debt Retirements (1,964) Open Market Purchases (269) Debt Balance @ 9/30/04 $8,944 7.3% FELINE PACS Exchange (827) Estimated Debt Balance @ 10/22/04 $8,117 7.3%
Slide 19: 2004 Forecast EBITDA Reconciliation
2004 Forecast EBITDA Reconciliation Dollars in millions Nov. 4 Guidance Aug. 5 Guidance Net Income $25 – $160 $115 – $275 Income from Disc. Operations (50) – (100) (160) – (185) Net Interest 810 – 860 820 – 860 DD&A 660 – 710 650 – 700 Prov. (Benefit) for Income Taxes 0 – 80 (5) – 125 Other/Rounding
Slide 20: 2004 Segment Profit Guidance
Consolidated 2004 Segment Profit Guidance Dollars in millions 2004 Forecast Gas Pipeline $550 – 570 540 – 570 Exploration & Production 235 – 260 Midstream 435 – 485 325 – 375 Other/Rounding (45) – (40) 0 – 45 $1,175 – 1,275 $1,100 – 1,250 Power 0 – 100 0 – 150 Total $1,175 – 1,375 $1,100 – 1,400 20
Slide 21: 2004 Forecast Guidance
Consolidated 2004 Forecast Guidance Dollars in millions, except per-share amounts Nov. 4 Guidance Aug. 5 Guidance Segment profit $1,175 - $1,375 $1,100 - $1,400 Net Interest Expense (810) – (860) (820) – (860) Early Debt Retirement Costs (300) – (250) (250) – (200) Other (Primarily General Corp. Cos
Slide 22: Business Unit Results
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Slide 23: Exploration & Production
Exploration & Production Ralph Hill, Senior Vice President
Slide 24: Exploration & Production Segment Profit
Exploration & Production Segment Profit 3rd Quarter YTD Dollars in millions 2004 2003 2004 2003 Segment Profit $70 $59 $165 $351 Non recurring: Ownership issue - - 11 - Gain on sale of assets - - - (91) Recurring Segment Profit $70 $59 $176 $260 ■ 3Q04 to 3Q03 increase includes ■ $10 million due to
Slide 25: E&P Third Quarter Accomplishments
Exploration & Production Third Quarter Accomplishments Recurring Segment Profit + Depreciation* Piceance volumes up 15% 180 from last quarter Big George volumes up 10% 160 to 68 MMcfd 140 Add’l Powder River permits 120 received, WMB up to 424 100 $ Million Piceance Trail Ridge area 80 flows
Slide 26: Piceance area – Ryan Gulch
Exploration & Production Piceance area – Ryan Gulch Ryan Gulch is north of existing Piceance production, and adjacent to a major pipeline hub Entered area through farm-in Spud first well in 3rd Quarter Commitment to drill 3 wells in ’05, increasing in following years 15,000 net acres Denve
Slide 27: 2005-06 Guidance Reconciliation
Exploration & Production 2005-06 Guidance Reconciliation Dollars in millions 2005 2006 Segment Segment Capital Profit Capital Profit Production/price $- $5 $- $- Increased industry costs 35 (12) 45 (12) Total change to base $35 ($7) $45 ($12) 8% 1% 9% 2% New Projects: Add'l Piceance, Trail Ridge & R
Slide 28: Year-Over-Year Performance
Exploration & Production Year-Over-Year Performance Dollars in millions 2004 2005 2006 Segment profit $235 - 260 $400 - 475 $450 - 525 Midpoint of range $247 $437 $487 Incremental increase +$190 +$50 Price impact +$98 ($29) Volumes (including new projects) +$92 +$79 Production (MMcfe/d) 525 - 550 60
Slide 29: E&P 2004-2006 Guidance
Exploration & Production 2004-2006 Guidance Dollars in millions 2004 2005 2006 Segment profit $235 - 260 $400 - 475 $450 - 525 $375 $425 Annual DD&A $160 - 180 $220 - 250 $250 - 290 $195 - 225 $230 - 260 Capital spending $400 - 450 $500 - 575 $525 - 625 $400 - 450 $450 - 500 Production (MMcfe/d) 525
Slide 30: Midstream
Midstream Alan Armstrong, Senior Vice President
Slide 31: Midstream Segment Profit
Midstream Segment Profit 3rd Quarter YTD Dollars in millions 2004 2003 2004 2003 Segment Profit $105 $77 $312 $247 Non recurring: Depreciable Life Adjustment 6 4 6 4 Gain on Asset Sales - (11) - (11) Rev. Recognition Adjust. to 2Q 17 - - - Recurring Segment Profit $128 $70 $318 $240 3Q04 vs. 3Q03 in
Slide 32: Midstream Third Quarter Accomplishments
Midstream Third Quarter Accomplishments Recurring Segment Profit + Depreciation* Near record margins 180 Hurricane Ivan repair progress Closed Canadian straddle 160 plants sale, $190 million in 3Q 140 PSA signed for Ethylene 120 Distribution System, $28 million cash in 4Q 100 $ MM Complete
Slide 33: Domestic NGL Actual Average Net Margin by Quarter
Midstream Domestic NGL Actual Average Net Margin by Qtr. 20.00 15.00 Cents/Gallon 10.00 5.00 0.00 Q1'02 Q3'02 Q1'03 Q3'03 Q1'04 Q3'04 Note: Based on actual realized prices, contractual obligations, shrink, fuel, actual equity liquids percentages, etc. 33
Slide 34: Midstream 2004-2006 Guidance
Midstream 2004-2006 Guidance Dollars in millions 2004 2005 2006 Segment Profit $435-485 $310-410 $400-500 $325-375 $300-400 $350-450 Annual DD&A $175-185 $180-190 $185-195 $170-180 $175-185 $175-185 Capital Spending $95-105 $120-140 $110-130 $90-110 $60-80 $50-70 Capital Spending Increase New Well C
Slide 35: Segment Profit + DDA & Capital Spending
Midstream Segment Profit + DDA & Capital Spending Dollars in Millions Operating Profit New Expansion 700 Segment Profit Forecast Margin Uplift Segment 600 Profit (Q4) Actual Margin Uplift Segment Profit 500 (thru Q3) Base Segment Profit + DDA* 400 Capital Projects $ MM Old Expansion 300 New Expansio
Slide 36: Gas Pipeline
Gas Pipeline Doug Whisenant, Senior Vice President
Slide 37: Gas Pipeline Segment Profit
Gas Pipeline Segment Profit 3rd Quarter YTD Dollars in millions 2004 2003 2004 2003 Segment profit $149 $142 $429 $407 Includes: Write-off software project - - - 26 Write-off of previously capitalized cost for idled segment - - 9 Recurring Segment Profit $149 $142 $438 $434 3Q04 vs. 3Q03 increase in
Slide 38: Gas Pipeline Third Quarter Accomplishments
Gas Pipeline Third Quarter Accomplishments Gulfstream 220 – Peak day delivery record set 9/7/04 200 – Phase II construction began 7/21/04 Central New Jersey expansion 180 project filed with FERC Leidy to Long Island expansion; $ MM 160 binding 100 MDtd, 20-year term 140 Began design, environ
Slide 39: Gas Pipeline 2004-2006 Guidance
Gas Pipeline 2004-2006 Guidance Dollars in millions 2004 2005 2006 Segment profit1 $550 - 570 $525 - 575 $525 - 575 $540 - 570 Annual DD&A2 $265 - 275 $280 - 290 $290 - 300 $270-280 Capital spending $260 - 300 $370 - 420 $475 - 550 $280 - 320 $350 - 400 $450 - 520 Note: 1) Reported income and includ
Slide 40: 2004-2006 Capital Spending Detail
Gas Pipeline 2004-2006 Capital Spending Detail Dollars in millions 2004 2005 2006 Normal Maintenance $135 - 150 $220 - 235 $180 - 210 140 - 155 195 - 215 140 - 150 Clean Air Act 60 - 70 80 - 90 30 - 45 70 - 75 90 - 100 NWP 26” Restore/Replace 35 - 40 50 - 65 255 - 275 35 - 45 45 - 55 260 - 300 Expan
Slide 41: Power
Power Bill Hobbs, Senior Vice President
Slide 42: Power Key Messages
Power Key Messages Portfolio continues to generate positive cash flows Market conditions continue to slowly rebound – Improving market liquidity – Spark spreads are stabilizing – Favorable political messages from California and FERC Cash management continues to improve New risk reducing cont
Slide 43: Power Segment Profit
Power Segment Profit 3rd Quarter YTD Dollars in millions 2004 2003 2004 2003 Gross Margin $131 $60 $202 $198 SG&A (20) (26) (56) (107) Op. Exp. & Other Inc / (Exp) (3) 4 (25) 150 Equity Earnings (Losses) 1 (1) 0 (5) Segment Profit $109 $37 $121 $236 Includes: Aux Sable Impairment - 6 - 14 Regulatory
Slide 44: Segment Profit to Cash Flow
Power Segment Profit to Cash Flow Dollars in millions Power Legacy Other 3Q Total YTD 2004 Gross Margin $161 ($30) $131 $202 SG&A (20) (20) (56) Oper Exp & Other Inc / (Exp) (2) (2) (25) Segment Profit $141 ($30) ($2) $109 $121 MTM Adjustments: Reverse Forward Unrealized MTM Gains / Losses (168) (19
Slide 45: Power Segment Undiscounted Cash Flows Variance Analysis
Power Segment Undiscounted Cash Flows Variance Analysis Dollarsininmillions Dollars millions 4Q03 4Q02 2003 2002 Combined Power Portfolio Actual Q3'04 v. Forecast Q3'04 3Q04 A 3Q04 F YTD'04 A YTD'04 F Tolling Demand Payment Obligations ($126) ($125) ($313) ($307) Resale of Tolling 29 25 105 102 Full
Slide 46: Power Segment Profit after MTM Adjust. Forecast
Power Segment Profit after MTM Adjust. Forecast Dollars in millions Combined Power Portfolio YTD Estimated as of 9/30/04 3Q04 A 2004 A 4Q04 F 2004 A+F 2005 F 2006 F Net Revenues $257 $515 $41 $556 $310 $351 Tolling Demand Payment Obligations (126) (313) (84) (397) (397) (401) Gross Margin $131 $202
Slide 47: Power 2004-2006 Guidance
Power 2004-2006 Guidance Dollars in millions 2004 2005 2006 Previous Segment Profit Guidance $0 - $150 $50 - $150 $50 - $200 Current Forecast: Segment Profit after MTM Adjustment (20) 100 154 MTM Adjustments 67 (254) (269) Segment Profit $47 ($154) ($115) Revised Segment Profit Guidance $0 - $100 ($
Slide 48: Power Summary
Power Summary Portfolio continues to generate positive cash flows Managing business to maximize cash flows, reduce risk and honor commitments Accounting change does not impact cash flow guidance or economic value Continued focus on greater reporting transparency Next Power Tutorial on Nove
Slide 49: Financial Overview & 3-Year Outlook
Financial Overview & 3-Year Outlook Don Chappel
Slide 50: 2004 - 2006 Outlook
Consolidated 2004 - 2006 Outlook Dollars in millions 2004 2005 2006 Segment Profit: Prior Guidance $1,100 – 1,400 $1,300 – 1,600 $1,400 – 1,700 Power Changes (50) (250) (250) Other BU Changes 125 - 25 0 50 New Guidance 1,175 – 1,375 1,050 – 1,350 1,200 – 1,500 After MTM Adjust. 1,225 – 1,425 1,300 –
Slide 51: 2004-2006 Capital Exp. By Business
Consolidated 2004-2006 Capital Exp. By Business Dollars in millions 2004 2005 2006 Exploration & Production $400 - 450 $500 - 575 $525 - 625 400 - 450 450 - 500 Midstream 95 - 105 120 - 140 110 - 130 90 - 110 60 - 80 50 - 70 Gas Pipeline 260 - 300 370 - 420 475 - 550 280 - 320 350 - 400 450 - 520 Po
Slide 52: Guidance Trends
Consolidated Guidance Trends 2,200 2,000 $1,550 to 1,800 $2,050 $1,450 1,600 $1,300 to $1,750 $1,300 to $1,225 to $1,800 1,400 $1,600 $ Millions to $1,425 $1,200 $1,050 to $1,175 $1,500 1,200 to $1,375 to $1,350 $1,150 to 1,000 $1,000 $1,350 $775 to $900 800 to $875 $1,200 to $1,200 600 400 200 - 20
Slide 53: Progress as Promised
Consolidated Progress as Promised Cash Flow 1 Debt / Cap 2 2,000 $1,450 80% to 75% 1,800 $1,300 to $1,750 $1,250 $1,600 1,600 to 70% $1,450 1,400 $ Millions 1,200 62% to 60% 63% 1,000 59% 57% to to 59% 800 60% 50% 600 570 400 40% 200 - 30% 2003 2004 2005 2006 1 Cash Flow from Continuing Operations (
Slide 54: FELINE PACS Update
Consolidated FELINE PACS Update Received tenders to exchange $827 million – Issued 33.1 million common shares on Oct. 22 – Paid cash of $49 million; expect pre-tax charge of $25 million in 4Q04 First remarketing for remaining $273 million debt scheduled for Nov. 16 – Williams may choose to purch
Slide 55: Scheduled Debt Maturities
Consolidated Scheduled Debt Maturities Dollars in millions 1,250 1,000 750 1170 1018 998 500 273 850 757 751 640 250 323 300 292 247 221 119 100 53 31 - 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 04 05 06 07 08 09 10 11 12 13 21 23 27 31 32 33 -2 -2 -2 -2 0 0 0 0 20 22 26 30 Misc. Notes Remaini
Slide 56: Financial Strategy/Key Points
Consolidated Financial Strategy/Key Points Drive/enable sustainable growth in EVA®/ shareholder value Maintain a cash/liquidity cushion of $1.0 billion plus Continue to steadily improve credit ratios/ratings; ultimately achieving investment grade ratios Reduce risk in Power segment Increas
Slide 57: Summary
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Slide 58: The Road Ahead
The Road Ahead 2004 2005 2006 2007 & beyond Exploration Accelerate Piceance drilling Continue production growth & Production Powder River permits and dewatering CORE BUSINESSES Complete deepwater Enhance competitive Capture our share Disciplined Midstream projects position- of new deepwater producti
Slide 59: Summary
Summary 3rd quarter results strong Restructuring nears the finish line Asset sales program essentially completed Adequate liquidity continues Pursuing growth opportunities Retaining Power and continuing strategy to – Reduce risk – Generate cash – Meet contractual commitments 59
Slide 60: Scorecard Update
Scorecard Update Execute Initiate & Stabilize Emerge Restructuring Measures of Success Avoid bankruptcy Complete asset sales Position company for integrated natural Address liquidity Rationalize cost gas growth crisis structure Optimize capital Restore customer Manage liquidity structure and supplie
Slide 61: Wiliams.
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Slide 62: Non-GAAP Reconciliations
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Slide 63: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Schedule Reconciliation of Income (Loss) from Continuing Operations to Recurring Earnings (UNAUDITED) 2003 2004 (Dollars in millions, except for per-share amounts) 1st Qtr * 2nd Qtr * 3rd Qtr * 1st Qtr * 2nd Qtr* 3rd Qtr (1) Income (loss) from continuing operations ($43.1) $1
Slide 64: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Schedule Reconciliation of Segment Profit (Loss) to Recurring Segment Profit (Loss) (UNAUDITED) 2003 2004 (Dollars in millions) 1st Qtr (2) 2nd Qtr (2) 3rd Qtr (2) 1st Qtr (2) 2nd Qtr (2) 3rd Qtr Segment profit (loss): Power (1) $ (137.0) $ 335.9 $ 37.2 $ (32.0) $ 43.8 $ 109.
Slide 65: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Schedule Dollars in millions except for per share amounts 2004 2003 1Q 2Q 3Q 1Q 2Q 3Q Recurring income from continuing operations available to common shareholders $ 3 $ 54 $ 136 $ (44) $ (12) $ (0) Recurring diluted earnings per common share $ 0.00 $ 0.10 $ 0.26 $ (0.08) $ (0
Slide 66: 3Q 2004 EBITDA Reconciliation
3Q 2004 EBITDA Reconciliation Dollars in millions Net Income* $99 Income from Disc. Operations (83) Net Interest Expense 196 DD&A 167 Provision for Income Taxes 48 EBITDA* $427 * Includes gains and impairments on asset sales and prior period adjustments 66
Slide 67: 2004 YTD EBITDA Reconciliation
2004 YTD EBITDA Reconciliation Dollars in millions Net Income* $90 Income from Disc. Operations (93) Net Interest Expense 657 DD&A 495 Provision for Income Taxes 42 EBITDA* $1,191 * Includes gains and impairments on asset sales and prior period adjustments 67
Slide 68: 3Q 2004 Segment Contributions
3Q 2004 Segment Contributions Dollars in millions Gas Pipeline E&P Midstream Power Corp/Other Total Segment Profit (Loss) $149 $70 $105 $109 $2 $436 DD&A 63 52 44 5 3 167 Segment Profit before DDA $212 $122 $149 $114 $5 $602 General Corporate Expense (24) Investing Income* (7) Other Income (145) TOT
Slide 69: 2004 Forecast Segment Contribution
Consolidated 2004 Forecast Segment Contribution Gas Pipeline E&P Midstream Power Corp/Other Total Segment Profit (Loss) 550 - 570 235 - 260 435 - 485 0 - 100 (45) – (40) 1,175 - 1,375 540 - 570 325 - 375 0 - 150 0 - 45 1,100 – 1,400 DD&A 265 - 275 160 - 180 175 - 185 20 - 25 40 - 45 660 - 710 270 -
Slide 70: 2004 Forecast Guidance
Consolidated 2004 Forecast Guidance Dollars in millions, except per-share amounts Net Income / (Loss) Reported $25 – $160 Less: Discontinued Operations (50) – (100) Net Income / (Loss) Continuing Ops Reported ($25) – $60 Adjustments: Early Debt Retirement Costs (Pretax) 300 – 250 Other Non-Recurring
Slide 71: Appendix
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Slide 72: Net Realized Price Calculation
Exploration & Production Net Realized Price Calculation 3Q04 Unhedged Hedge Market Price: NYMEX $6.00 - $7.00 $4.03 Basis Differential (0.65 - 0.85) (0.42) Net Basin Market price $5.35 - $6.15 $3.61 Net Basin Market price $5.35 - $6.15 $3.61 Fuel & Shrink/Gathering/ (0.80 - 1.00) (0.80 - 1.00) Trans
Slide 73: Midstream Domestic NGL Quarterly Average Net Margins
Midstream Domestic NGL Quarterly Average Net Margins 25 Qtr Avg Net Margin 20 5-Yr High 5-Yr Avg 15 ¢/gal 5-Yr Low 10 2002 Avg 5 2003 Avg 2004 - 3Q Avg 0 1Q '02 2Q '02 3Q '02 4Q '02 1Q '03 2Q '03 3Q '03 4Q '03 1Q '04 2Q '04 3Q '04 Note: Computed using NGL prices FOB plant tailgate less shrinkage cos
Slide 74: Enterprise Risk Management
Enterprise Risk Management As of 9/30/04 Dollars in millions Corp./ 12/31/03 E&P Midstream Power Other Total Total Margins & Ad. Assur. $19 $2 $133 - $154 $527 Prepayments - 5 32 - 37 151 Subtotal $19 $7 $165 $- $191 $678 Letters of Credit 429 184 204 114 931 378 Total as of 9/30/04 $448 $191 $369 $
Slide 75: Enterprise Risk Management
Enterprise Risk Management Dollars in millions ■ Margin volatility (99% confidence interval) - Incremental liquidity requirement 9/30/04 12/31/03 – 30 days ($118) ($185) – 180 days ($234) ($309) – 360 days ($336) ($390) Assumption: The margin numbers above consist of only the forward marginable posi
Slide 76: Enterprise Risk Management Sensitivities Analysis
Enterprise Risk Management Estimated dollars in millions Sensitivities Analysis WMB1 Power 2 Midstream3 Natural Gas West Spark Spread Processing Margin (Per MMBtu) Power Price (Per MWh) NGL Price (Per Gallon) Price Increase $0.10 $5.00 $0.01 2004 ($2) $0-5 $3-5 2005 ($2) $5-10 $10-15 2006 $6 $5-15 $
Slide 77: Future Hedge Realization
Power Future Hedge Realization Dollars in millions (estimated as of 9/30/04) Designated Hedges 1 2004 $83 2005 347 2006 285 2007 127 2008 & Beyond 137 Total $979 1 Represents the fair value and expected future realization of those derivatives which qualify for hedge accounting under SFAS 133. Future
Slide 78: Derivative Net Asset Reconciliation
Power Derivative Net Asset Reconciliation Dollars in millions Balance at 9/30/04 Power - Fair Value of Designated FAS 133 Hedges1 $979 Power - Other Derivatives (134) E&P - Fair Value of Designated FAS 133 Hedges (612) Corporate 12 Net Derivative Assets Per Balance Sheet $244 1 Represents the fair v
Slide 79: Total Undiscounted Cash Flows
Power Total Undiscounted Cash Flows Combined Power Portfolio Estimated as of 9/30/04 Q1 A Q2 A Q3 A 2004 A+ F 2005 F 2006 F Tolling Demand Payment Obligations ($88) ($99) ($126) ($397) ($397) ($401) Resale of Tolling 41 35 29 144 124 103 Full Requirements (1) 11 4 18 24 9 Long-term Physical Forward
Slide 80: West - Total Undiscounted Cash Flows
Power West - Total Undiscounted Cash Flows Dollars in millions West Power Portfolio Estimated as of 9/30/04 Q1 A Q2 A Q3 A 2004 A+F 2005 F 2006 F Tolling Demand Payment Obligations ($39) ($39) ($38) ($154) ($154) ($155) Resale of Tolling 41 35 29 144 124 103 Long-term Physical Forward Power Sales 29
Slide 81: Central - Total Undiscounted Cash Flows
Power Central - Total Undiscounted Cash Flows Dollars in millions Mid-Continent Power Portfolio Estimated as of 9/30/04 Q1 A Q2 A Q3 A 2004 A+F 2005 F 2006F Tolling Demand Payment Obligations ($13) ($22) ($41) ($87) ($88) ($89) Long-term Physical Forward Power Sales (2) (3) (1) (15) 2 0 OTC Hedges 1
Slide 82: East - Total Undiscounted Cash Flows
Power East - Total Undiscounted Cash Flows Dollars in millions East Power Portfolio Estimated as of 9/30/04 Q1 A Q2 A Q3 A 2004 A+F 2005 F 2006 F Tolling Demand Payment Obligations ($36) ($39) ($47) ($156) ($155) ($157) Full Requirements (1) 11 4 18 24 9 OTC Hedges 19 4 1 37 36 46 Tolling Cash Flows
Slide 83: Effective Tax Rates
Consolidated Effective Tax Rates Dollars in millions Combined Continuing Ops. Discontinued Ops. Third Quarter 2004 Federal $46 35% $23 35% $23 35% State 19 15% 16 25% 3 5% Foreign (41) (31%) 2 3% (43) (65%) Other 8 6% 7 11% 0 0% Tax Provision $32 25% $48 74% (17) (25%) Year to Date 2005 Federal $42
Slide 84: Drivers
Consolidated Drivers Segment Profit CFFO Dollars in millions Low High Low High 2003 1,370 1,370 770 770 Interest savings - - 400 425 Gains on Asset Sales (337) (337) - - Impairments 220 220 - - Midstream 125 175 - - Power (150) (50) - - Other (53) (3) 80 * 255 2004 1,175 1,375 1,250 1,450 Interest s
The Williams Companies — Q3 2004 Earnings Presentation on 6ix