Williams Companies, Inc. (the) · NYSE:WMB
Williams Companies, Inc. (the) — The Williams Companies — Q3 2005 Earnings Presentation
95 slides from Williams Companies, Inc. (the)'s earnings presentation, Nov 3, 2005
Slide 1: Williams 2005 3rd Quarter Earnings Release
Williams 2005 3rd Quarter Earnings Release November 3, 2005
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” within the meaning of the Private Securities Litigatio
Slide 3: Oil & Gas Reserves Disclaimer
Oil & Gas Reserves Disclaimer The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves. We use certain terms in this presentation, such as “probable” reserves and “possible” reserves and “new opportunities potential” reserves that the SEC’s guidelines st
Slide 4: 3Q05 Review
3Q05 Review Steve Malcolm Chairman, President & CEO
Slide 5: 3rd Quarter Headlines
Overview 3rd Quarter Headlines Recurring earnings after mark-to-market effect climb nearly 150% over year-ago level Exploration & Production growth continues Continued strength in liquids margins drive Midstream results higher Gas Pipeline continues steady performance Mild weather, high ga
Slide 6: Headlines
Overview Headlines E&P ready to ramp up pace of growth again with arrival of new rigs in Piceance Basin Midstream captures significant deepwater production commitment, prepares to expand capacity in West Gas Pipeline continues to expand system to meet demand of growth markets Power completes
Slide 7: Effect of Hurricanes
Overview Effect of Hurricanes Overall effect on Williams expected to be minimal Interstate pipelines provided continuous service For Midstream, Katrina and Rita reduced volumes in the Gulf of Mexico area, but boosted margins in its western business Moving incremental volumes - stranded gas -
Slide 8: Financial Results and 2005 Outlook
Financial Results and 2005 Outlook Don Chappel CFO
Slide 9: Consolidated Financial Results
Consolidated Financial Results 3rd Qtr YTD Dollars in millions (except per share amounts) 2005 2004 2005 2004 Income (Loss) from Continuing Operations $6 $16 $249 ($2) Income (Loss) from Disc. Operations (2) 83 (2) 92 Net Income (Loss) $4 $99 $247 $90 Net Income (Loss)/Share $0.01 $0.19 $0.42 $0.17
Slide 10: Recurring Income from Cont. Operations
Consolidated Recurring Income from Cont. Operations 3rd Qtr YTD Dollars in millions 2005 2004 2005 2004 Income (Loss) from Continuing Operations $6 $16 $249 ($2) Nonrecurring Items Impairments/Losses/Write-offs 5 16 61 41 Expense related to Prior Periods - 17 (28) 11 Gain on Sale of Assets (22) - (3
Slide 11: Recurring Income After Mark-to-Market Adjustments
Consolidated Recurring Income from Cont. Operations After Mark-to-Market Adjustments 3rd Qtr YTD Dollars in millions, except for per-share amounts 2005 2004 2005 2004 Recurring Inc. (Loss) from Cont. Ops. Avail. To Common ($5) $136 $260 $194 Recurring Diluted Earnings (Loss) per Common Share ($0.01)
Slide 12: Net Income Components
Consolidated Net Income Components 3rd Qtr YTD 2005 2004 2005 2004 Segment Profit $205 $436 $971 $1,008 Net Interest Expense (164) (197) (491) (657) Debt Retirement expense - (155) - (252) Other Income (Expense) - Net (38) (19) (62) (58) Income from Cont. Ops. Before Tax 3 65 418 41 Provision for In
Slide 13: Third Quarter Segment Profit
Consolidated Third Quarter Segment Profit Reported Recurring Dollars in millions 3Q05 3Q04 3Q05 3Q04 Exploration & Production $159 $70 $137 $70 Midstream Gas & Liquids 121 105 121 128 Gas Pipeline 161 149 147 149 Power (226) 109 (226) 109 Other (10) 3 (10) 3 Segment Profit $205 $436 $169 $459 MTM Ad
Slide 14: 2005 YTD Segment Profit
Consolidated 2005 YTD Segment Profit Reported Recurring Dollars in millions 2005 2004 2005 2004 Exploration & Production $381 $165 $352 $176 Midstream Gas & Liquids 359 314 359 320 Gas Pipeline 493 429 444 438 Power (187) 121 (162) 121 Other (75) (21) (23) (3) Segment Profit $971 $1,008 $970 $1,052
Slide 15: Major Changes in Quarter Recurring Segment Profit
Consolidated Major Changes in Quarter Recurring Segment Profit After Mark-to-Market Adjustments Dollars in millions Recurring Segment Profit after MTM Adj. 3Q04 $317 Exploration & Production 67 - Higher production volumes +$14million - Higher net realized price +$82 million - Impact of hedge ineffec
Slide 16: Cash Information
Consolidated Cash Information Dollars in millions 3Q05 YTD05 Beginning Unrestricted $ 1,297 $ 930 Cash flow from Continuing Operations 289 1,082 Proceeds from Issuing Common1 7 303 Proceeds from sale of limited partnership units 111 111 Sale of WilTel Note - 55 Contract Termination Payment - 88 Debt
Slide 17: Debt Balance
Consolidated Debt Balance1 Dollars in millions Avg. Cost Debt Balance @ 12/31/04 $7,962 7.4% Scheduled Debt Retirements & Amortization (216) Capitalized Lease 4 Debt Balance @ 3/31/05 7,750 7.4% Scheduled Debt Retirements & Amortization (6) Debt Balance @ 6/30/05 7,744 7.5% Scheduled Debt Retirement
Slide 18: Business Unit Results
Business Unit Results Williams. ee
Slide 19: Exploration & Production
Exploration & Production Ralph Hill Senior Vice President
Slide 20: E&P Segment Profit
Exploration & Production Segment Profit 3rd Qtr YTD Dollars in millions 2005 2004 2005 2004 Segment Profit $159 $70 $381 $165 Nonrecurring: Ownership Issue - - - 11 Gain on sale of assets (22) - (29) - Recurring Segment Profit $137 $70 $352 $176 3Q04 to 3Q05 financial highlights include: Volume
Slide 21: Strong Domestic Production Growth
Exploration & Production Strong Domestic Production Growth 650 Net MMcfed 550 450 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 2004 2005 21 / Williams 2005 Third Quarter Earnings Release / Thursday, November 3, 2005 © 2005 The Williams Companies, Inc.
Slide 22: 3rd Quarter and 2005 Accomplishments
Exploration & Production 3rd Quarter and 2005 Accomplishments Impressive volume growth continues Recurring Segment Profit + Depreciation Full year with no lost time 240 accidents for E&P 200 Big George gross production up to 135 MMcf/d 160 12 rigs operating in Piceance Valley, 3 rigs in High
Slide 23: Powder River - Big George Coal Area
Exploration & Production Powder River - Big George Coal Area Up 67 MMcf/d or 98% over a year ago Up 25 MMcf/d or 23% sequentially Big George production increase continues to offset Wyodak decline Williams' Big George Production 160 140 120 MMcfd 100 80 60 40 20 0 Jun '04 Sep '04 Dec '04 Mar '0
Slide 24: Piceance Production Growth
Exploration & Production Piceance Production Growth Up 84 MMcf/d or 34% over a year ago Up 19 MMcf/d or 6% sequentially Williams' Piceance Production 350 300 250 200 150 100 50 0 2Q '04 3Q '04 4Q '04 1Q '05 2Q '05 3Q '05 24 / Williams 2005 Third Quarter Earnings Release / Thursday, November 3, 2
Slide 25: 3P Reserves
Exploration & Production 3P Reserves 8.5 Tcf 3P ’04 YE 7.0 Tcf 3 Tcf ’04 YE Proved '04 YE Proved Existing Proved, Prob. & Poss. August ’05 Announcement: 37.5% increase in probable and possible reserves since year end ‘04 Extensive study of Piceance Valley yielded additional 1,600 locations and a
Slide 26: Piceance Highlands – Operations Update
Exploration & Production Piceance Highlands – Operations Update 26 / Williams 2005 Third Quarter Earnings Release / Thursday, November 3, 2005 © 2005 The Williams Companies, Inc.
Slide 27: Piceance Highlands Projects Summary
Exploration & Production Piceance Highlands Projects Summary Estimated Estimated Net Gross Net Potential 2004 2005 2006 Project Area Acres Potential Reserves Wells Wells Wells Locations (BCF) (1) Trail Ridge 20,638 500 500 3 12 20 (40-acre density)(2) Ryan Gulch 15,780 770 700 3 8 15 (40-acre densit
Slide 28: Piceance Highlands – Year to Date Results
Exploration & Production Piceance Highlands – Year to Date Results Average Preliminary Wells Drilled / 30 Day Rate / Project Area Reserves Range Completed Completed Well (BCF/well) (MMCF/D) Trail Ridge 12 / 9 1.1 1.2 – 1.4 Ryan Gulch(1) 2/1 1.4 1.2 – 2.0 Red Point (2) - 1.2 1.2 – 1.4 Allen Point 3/1
Slide 29: Cash Margin Analysis
Exploration & Production Cash Margin Analysis 3-Year Average (2005-07) $5.00 Previous Previous $4.56 $3.75 Cash $3.71 Margin $3.00 $5.52 $2.50 $1.25 Cash Costs* $1.81 $1.56 $0.78 $0.00 Realized Gas Price Margin/Cost F&D Costs** Assumption Assumption Reflective of core basins * Includes LOE, G&A, tax
Slide 30: E&P 2005-2007 Guidance
Exploration & Production 2005-2007 Guidance Dollars in millions 2005 2006 2007 Segment profit $575 - 6001 $650 - 725 $775 - 900 410 - 485 520 - 595 595 - 720 Annual DD&A 235 - 265 335 - 375 425 - 475 295 - 335 365 - 415 Segment profit + DD&A $810 - 865 $985 - 1,100 $1,200 - 1,375 645 - 750 815 - 930
Slide 31: E&P 2006-07 Guidance Reconciliation
Exploration & Production 2006-07 Guidance Reconciliation Dollars in millions 2006 2007 Segment Segment Capital Profit Capital Profit Price/production $170 $225 Increased industry costs $100 (55) $80 (80) Total change to base 100 115 80 145 New Projects: Piceance Highlands, Ft. Worth, Facilities 90 1
Slide 32: E&P Key Points
Exploration & Production Key Points Strategy remains rapid development of our premier drilling inventory Delivering meaningful volume growth through expanded development drilling activity -- Piceance is primary growth driver Long history of high drilling success, low finding costs Short time
Slide 33: Midstream
Midstream Alan Armstrong Senior Vice President
Slide 34: Midstream Segment Profit
Midstream Segment Profit 3rd Qtr YTD Dollars in millions 2005 2004 2005 2004 Segment Profit $121 $105 $359 $314 Nonrecurring: Depreciable Life Adjustment - 6 6 Devils Tower Revenue Recognition1 - 17 - - Recurring Segment Profit $121 $128 $359 $320 Key Business Drivers: Higher Gathering and Process
Slide 35: Midstream 3rd Quarter and 2005 Highlights
Midstream 3rd Quarter and 2005 Highlights Rapidly responded to Katrina Recurring Segment Profit + Depreciation $ MM Providing industry solutions: 200 Discovery open seasons 180 Damaged by Rita 160 Cameron Plant still down 140 Max volume at Canada 120 Won Tahiti Gulf of Mexico 100 busin
Slide 36: Midstream 2005-07 Guidance
Midstream 2005-07 Guidance Dollars in millions 2005 2006 2007 Segment Profit $440-480 $400-500 $410-530 $400 - $470 $400 - $520 Annual DD&A 180-190 185-195 195-205 $190 - $200 Segment Profit + DDA $620-670 $585-695 $605-735 $580 - $660 $590 - $720 Capital Spending $120-140 $230-250 $180-220 $110 - $
Slide 37: Strong Free Cash Flow
Midstream Strong Free Cash Flow Dollars in millions Seg Profit & DDA 800 Discretionary 700 Expansion 600 Margin Uplift 500 Base 400 Capital Spending Historic 300 Expansion 200 Discretionary Expansion 100 Maintenance 0 Well Connects 2003 2004 2005 2006 2007 Capital Seg Capital Seg Capital Seg Capital
Slide 38: Delivering Promised Expansions: Blind Faith
Midstream Delivering Promised Expansions Blind Faith $177 MM to extend Canyon Chief and Mountaineer 37 miles Expected to be ready for service by 3Q 2007 Opportunity for gas processing at Mobile Bay Opportunity for gas transport through Transco and Gulfstream Liquids could be fractionated a
Slide 39: Delivering Promised Expansions: Opal TXP V
Midstream Delivering Promised Expansions Opal TXP V Adding capacity: Gas processing ~ 350 MMcf/day Liquids production ~ 17,000 BBls/day Total post-expansion capacity: Gas processing ~ 1.5 Bcf/day Liquids production ~ 68,000 BBls/day In service by 2Q 2007 Serving the Pinedale Anticlin
Slide 40: Midstream Key Points
Midstream Key Points Strong earnings and cash flows despite hurricanes MLP supplements growth strategy Capturing growth opportunities Delivered on “First Tranche” of expansion opportunities Organic growth around our Western assets Footprint expansion in the deepwater Robust opportuniti
Slide 41: Gas Pipeline
Gas Pipeline Phil Wright Senior Vice President
Slide 42: Gas Pipeline Segment Profit
Gas Pipeline Segment Profit 3rd Qtr YTD Dollars in millions 2005 2004 2005 2004 Segment Profit $161 $149 $493 $429 Nonrecurring 1999 Fuel Tracker adjustment1 (14) - (14) - Pension expense reduction1 - - (17) - Adjustment to carrying value of certain liabilities1 - - (18) - Write-off hydrostatic test
Slide 43: Gas Pipeline 3rd Quarter and 2005 Accomplishments
Gas Pipeline 3rd Quarter and 2005 Accomplishments Northwest’s 26” Replacement receives final FERC approval Recurring Segment Profit + Depreciation Transco and Gulfstream remained 240 operational and met market demands 220 throughout hurricane season Successful Gulfstream financing 200 Succes
Slide 44: Gas Pipeline 2005-2007 Guidance
Gas Pipeline 2005-2007 Guidance Dollars in millions 2005 2006 2007 Segment Profit $630 - 6451 $485 - 5302,3 $585 - 655 590 - 615 500 - 565 Annual DD&A 270 - 280 290 - 300 300 - 310 Segment Profit + DDA $900 - 925 $760 - 815 $885 - 965 860 - 895 790 - 865 Capital Spending $390 - 420 $600 - 6803 $300
Slide 45: 2005-2007 Capital Spending Detail
Gas Pipeline 2005-2007 Capital Spending Detail Dollars in millions 2005 2006 2007 Normal Maintenance/ Compliance $325 - 335 $305 - 370 $180 - 235 305 - 335 310 - 400 NWP 26” Replacement 48 276 2 Expansion1 20 - 30 20 - 35 120 - 155 10 - 20 70 - 90 Total $390 - 420 $600 - 680 $300 - 390 370 - 420 600
Slide 46: Gas Pipeline Key Points
Gas Pipeline Key Points Strong performance continues; operationally and financially Strong cash flow provider Continued progress Compliance and reliability projects Expansion developments Preparation for rate cases on schedule to be in effect 2007 46 / Williams 2005 Third Quarter Earning
Slide 47: Power
Power Bill Hobbs Senior Vice President
Slide 48: Power Segment Profit
Power Segment Profit 3rd Qtr YTD Dollars in millions 2005 2004 2005 2004 Gross Margin (Includes MTM) ($203) $131 ($98) $202 SG&A (21) (20) (54) (56) Operating & Other Inc./(Expense) (2) (2) (35) (25) Segment Profit/(Loss) (Includes MTM) (226) 109 (187) 121 MTM Adjustments 201 (142) 149 (87) Segment
Slide 49: Power YTD - Segment Profit to Cash Flow
Power YTD - Segment Profit to Cash Flow Power and Dollars in Millions Natural Gas Other Total YTD Gross Margin ($98) ($98) SG&A & Other Inc/(Exp) (89) (89) Segment Profit/(Loss) 1 (187) 0 (187) MTM Adjustments: Reverse Forward Unrealized MTM (Gains) (101) (101) Add Realized Gains from MTM previously
Slide 50: Items Impacting 3Q Performance
Power Items Impacting 3Q Performance Dollars in millions Segment Profit After MTM Adjustments: Q305 Forecast (as of 6/30/05) $54 Estimated impact of mild weather in the West: (30) Cooling Degree Days (CDDs) at Los Angeles (LAX) YTD are 17% below 5 yr avg and 43% below ‘04 Average September pea
Slide 51: Power Cash Flow Analysis
Power Cash Flow Analysis Undiscounted dollars in millions (GAAP Measure) Combined Power Portfolio Actual v. Forecast 3Q'05 Q3'05A Q3'05F YTD05A YTD05F Tolling Demand Payment Obligations ($126) ($126) ($310) ($310) Resale of Tolling 34 14 116 87 Full Requirements (6) 0 (1) 6 Long-term Physical Forwar
Slide 52: Power 2005-07 Guidance
Power 2005-07 Guidance Dollars in millions 2005 2006 2007 Prior Segment Profit Guidance ($50) - 50 ($270) - (120) ($220) - (70) MTM Earnings (3Q05) (141) Est. Forward MTM Impact 50 50 40 Chg due to Mkt Conditions, New deals & Other (108) 0 - (50) Total Impact (199) 50 - 0 40 Change in Segment Profit
Slide 53: New Power Contracts – 2005 Highlights
Power New Power Contracts – 2005 Highlights Deals Consummated Around Each Toll All Customer Classes Have Been Represented Utilities Co-ops & Munis Hedge funds & banks Favorable Credit Terms Zero margining provisions in two deals in excess of 4 years Margin Caps in place for approx. 2
Slide 54: Power 2005 Successes
Power 2005 Successes West 1,500 MW resale of tolling from AES 4000: 854 MW starting in 2006 and growing to 1,500 MW in 2007-10 490-MW resale of toll from AES 4000 for 2006-08 100-MW heat rate call option for 2008 690-MW capacity sales: from AES 4000 for June-Sept 2005 Resale of tolling a
Slide 55: 2005 Forecast: Recurring Segment Profit After MTM Adjustments
Power 2005 Forecast: Recurring Segment Profit After MTM Adjustments Dollars in millions Recurring Segment Profit After MTM Adjustments: 2005 Full Year Forecast $(25) - 25 Estimated cash flows from new hedges 50 - 60 Estimated improvement in weather 15 - 55 Reduced plant outages 10 - 10 _______
Slide 56: Power Key Points
Power Key Points Results for 3rd quarter impacted by Mild weather in west Unplanned outage in east Hurricanes and high natural gas prices CFFO YTD positive Full year recurring segment profit guidance is at break even despite higher NG prices and weak market conditions. Deal flow has in
Slide 57: 2005-07 Consolidated Outlook
2005-07 Consolidated Outlook Don Chappel CFO
Slide 58: 2005 Forecast Guidance
Consolidated 2005 Forecast Guidance Dollars in millions, except per-share amounts Nov 3 Guidance Aug 4 Guidance Segment profit before MTM adjustment $1,375 - $1,525 $1,300 - $1,585 Net Interest Expense (650) - (670) (650) - (670) Other (Primarily General Corp. Costs) (70) - (100) (70) - (100) Pretax
Slide 59: 2005-07 Segment Profit
Consolidated 2005-07 Segment Profit Dollars in millions 2005 2006 2007 Exploration & Production $575 - 600 $650 - 725 $775 - 900 410 - 485 520 - 595 595 - 720 Midstream 440 - 480 400 - 500 410 - 530 400 - 470 400 - 520 Gas Pipeline 630 - 645 485 - 530 585 - 655 590 - 615 500 - 565 Power (225) - (175
Slide 60: 2005-07 Capital Expenditures
Consolidated 2005-07 Capital Expenditures Dollars in millions 2005 2006 2007 Exploration & Prod. $675 - 725 $950 - 1,050 $950 - 1,050 605 - 680 760 - 860 735 - 885 Midstream 120 - 140 230 - 250 180 - 220 110 - 130 100 - 130 Gas Pipeline 390 - 420 600 - 680 300 - 390 370 700 250 - 325 Power - - - Oth
Slide 61: 2005-07 Outlook
Consolidated 2005-07 Outlook Dollars in millions 2005 2006 2007 Segment Profit Reported Seg. Profit $1,375 - 1,525 1 $1,250 - 1,550 $1,600 - 2,025 1,300 - 1,585 1,195 - 1,495 1,370 - 1,795 MTM Adjustment 175 270 230 75 320 270 After MTM Adjust. 1,550 - 1,700 1,520 - 1,820 1,830 - 2,255 1,375 - 1,660
Slide 62: Strong Operating Cash Flow Growth & Increasing Investment Opportunities
Consolidated Strong Operating Cash Flow Growth & Increasing Investment Opportunities . . . Cash Flow 1 / Debt / Cap 2 Cap Ex $1,850 to $1,825 $2,150 2,200 to 80% 75% $2,050 2,000 Opportunity 1,800 Rich 70% Ca $1,325 to $1,625 p Ex 1,600 $1,525 to $1,925 $1,425 62% to $ Millions Declining Debt / Cap
Slide 63: Segment Profit Guidance Trend
Consolidated Segment Profit Guidance Trend 2,800 $2,050 to $2,600 2,600 $1,830 2,400 to $2,255 1 2,200 r t of i nt s tP e m en justm g d 2,000 Se M A 16.5% $ Millions $1,520 T (4-Yr CAGR) $1,550 to t erM to $1,820 Af 1,800 $1,700 17.4% (3-Yr CAGR) 1,600 28.7% 15.0% (1-Yr CAGR) (2-Yr CAGR) 1,400 $1,2
Slide 64: 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 Opportun
Slide 65: Summary
Summary Steve Malcolm Chairman, President & CEO
Slide 66: Summary Key Points
Summary Key Points Current growth activity continues to move key performance measures up Investing in future growth First planned sale to Williams Partners to deliver growth capital while retaining asset control Scope, scale of growth opportunities continues to expand Raising earnings, cas
Slide 67: Q&A
Q&A Williams. ee
Slide 68: Non-GAAP Reconciliations
Non-GAAP Reconciliations Williams. ee
Slide 69: Non-GAAP Disclaimer
Non-GAAP Disclaimer This presentation includes certain financial measures, EBITDA, recurring earnings, free cash flow and recurring segment profit, that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission. EBITDA represents the sum of net income (loss
Slide 70: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Non-GAAP Reconciliation Schedule Reconciliation of Income (Loss) from Continuing Operations to Recurring Earnings (UNAUDITED) 2004 2005 (Dollars in millions, except for per-share amounts) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr 3rd Qtr Year Income (loss) from con
Slide 71: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Non-GAAP Reconciliation Schedule Reconciliation of Segment Profit (Loss) to Recurring Segment Profit (Loss) (UNAUDITED) 2004 2005 (Dollars in millions) 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year 1st Qtr 2nd Qtr 3rd Qtr Year Segment profit (loss): Power* $ (32.0) $ 43.8 $ 109.3 $ (4
Slide 72: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Non-GAAP Reconciliation Schedule 2005 Dollars in millions except for per share amounts 1Q 2Q 3Q 4Q Year Recurring income from cont. ops available to common shareholders $ 198 $ 66 $ (5) $ 260 Recurring diluted earnings per common share $ 0.33 $ 0.11 $ (0.01) $ 0.44 Mark-to-Ma
Slide 73: EBITDA Reconciliation
Non-GAAP Reconciliation EBITDA Reconciliation Dollars in millions 3Q05 YTD Net Income $4 $247 Loss from Disc. Operations 1 2 Net Interest Expense 164 491 DD&A 190 546 Provision (benefit) for Income Taxes (3) 169 EBITDA $356 $1,455 73 / Williams 2005 Third Quarter Earnings Release / Thursday, Novembe
Slide 74: 3Q 2005 Segment Contribution
Non-GAAP Reconciliation 3Q 2005 Segment Contribution Dollars in millions Corp/ Gas Pipes E&P Midstream Power Other Total Segment Profit (Loss) 161 159 121 (226) (10) 205 DD&A 67 66 49 4 3 189 Segment Profit before DDA 228 225 170 (222) (7) 394 General Corporate Expense (43) Investing Income* 13 Othe
Slide 75: 2005 Forecast EBITDA Reconciliation
Consolidated 2005 Forecast EBITDA Reconciliation Dollars in millions Nov 3 Guidance Aug 4 Guidance Net Income $385 – 455 $350 – 480 Income from Disc. Ops. 10 – 0 10 – 0 Net Interest 650 – 670 650 – 670 DD&A 700 – 775 700 – 775 Provision for Income Taxes 260 – 300 220 – 335 Other/Rounding (5) – 0 (5)
Slide 76: 2005 Forecast Segment Contribution
Non-GAAP Reconciliation 2005 Forecast Segment Contribution Corp/ Dollars in millions E&P Midstream Gas Pipeline Power 1 Other Total * Segment Profit (Loss) 575 - 600 440 - 480 630 - 645 (225) - (175) (45) - (25) 1,375 - 1,525 DD&A 235 - 265 180 - 190 270 - 280 10 - 20 5 - 20 700 - 775 Segment Profit
Slide 77: 2005 Segment Profit - Recurring
Consolidated 2005 Segment Profit - Recurring YTD Dollars in millions Reported Non-Recurring Recurring Exploration & Production $575 - 600 ($29) $546 - 571 Midstream 440 - 480 - 440 - 480 Gas Pipeline 630 - 645 (49) 581 - 596 Power (225) - (175) 25 (200) - (150) Other/Corp. (45) - (25) 53 8 - 28 Tota
Slide 78: 2005 Forecast Guidance Reconciliation
Non-GAAP Reconciliation 2005 Forecast Guidance Reconciliation Dollars in millions, except per-share amounts Nov 3 Guidance Aug 4 Guidance Net Income $385 – 455 $350 – 480 Less: Discontinued Operations 10 – 0 10 – 0 Income from Continuing Ops $395 – 455 $360 – 480 Non-Recurring Items (Pretax) 7 23 Le
Slide 79: 2005-07 Guidance Reconciliation
Consolidated 2005-07 Guidance Reconciliation Dollars in millions 2005 2006 2007 CAP EX: Aug. 4 Guidance $1,100 - 1,300 $1,525 - 1,750 $1,100 - 1,300 E&P: Incremental Drilling & costs 60 190 190 Midstream: Expansion (Opal & Blind Faith) - 120 85 Gas Pipes: Expansions - 10 60 Other Misc / Rounding 40
Slide 80: 2005-07 Guidance Reconciliation: Cash Flow from Operations
Consolidated 2005- 07 Guidance Reconciliation Dollars in millions 2005 2006 2007 CASH FLOW FROM OPERATIONS (CFFO): Aug. 4 Guidance $1,150 - 1,450 $1,550 - 1,850 $1,650 - 1,950 E&P Seg Profit / DD&A Increases 140 140 220 Midstream Segment Profit Increase 25 - 10 Gas Pipes Segment Profit Changes 35 (1
Slide 81: Appendix
Appendix Williams. ee
Slide 82: EPS Metrics
Consolidated EPS Metrics 2005 1Q 2Q 3Q 4Q Total EPS $0.34 $0.07 $0.01 - $0.42 Recurring EPS 0.33 0.11 ($0.01) - 0.44 Rec. EPS after MTM Adj. 0.22 0.16 0.22 - 0.60 Average Shares (MM) 599 579 581 - 605 2004 1Q 2Q 3Q 4Q Total EPS $0.02 ($0.03) $0.19 $0.13 $0.31 Recurring EPS 0.01 0.10 0.26 0.12 0.49 R
Slide 83: 2005 Interest Expense Guidance
Consolidated 2005 Interest Expense Guidance Dollars in millions 2005 Interest on Long-Term Debt $575 - 583 Amortization Discount/Premium and 25 - 27 other Debt Expense Credit Facilities: 32 - 40 (incl. Commitment Fees plus LC Usage) Interest on other Liabilities 23 - 30 Interest Expense $655 - 680 L
Slide 84: 2005 Effective Tax Rates
Consolidated 2005 Effective Tax Rates 2005 First Quarter Second Quarter Third Quarter YTD Statutory Rate 115 35% 29 35% 1 35% 145 35% State 14 4% 1 3% 2 49% 17 4% Foreign (5) -2% 5 6% (2) -49% (2) -1% Other 5 2% 7 7% (4) -115% 8 2% Tax Provision 129 39% 42 51% (3) -80% 168 40% 2005 2006 2007 1 Effec
Slide 85: 2005-2007 Hedge Update
Exploration & Production 2005-2007 Hedge Update Dollars in millions 2005 2006 2007 Fixed Price: 4th Qtr NYMEX Volume (MMcfe/d) 283 299 172 Price ($/Mcfe) $4.49 $4.39 $4.18 Collars : NYMEX Volume (MMcfe/d) 50 65 15 Price ($/Mcfe) $6.75 - $8.50 $6.62 - $8.42 $6.50 - $8.25 Regional NWPL Rockies1 Volume
Slide 86: 3Q 2005 Net Realized Price Calculation
Exploration & Production 3Q 2005 Net Realized Price Calculation 3Q '05 Unhedged Hedge Market Price: NYMEX $8.95 - $9.25 4.46 NYMEX collars 0.00 Basis Differential (1.50 - 1.65) (0.47) Net basin market price $7.30 - $7.75 $3.99 Net basin market price $7.30 - $7.75 $3.99 Fuel & Shrinkage/Gathering/ (0
Slide 87: 2005 4th Quarter Price Modeling
Exploration & Production 2005 4th Quarter Price Modeling 2005 Unhedged Hedge Market Price: NYMEX $13.00 - $13.60 $4.49 Basis Differential (3.00 - 3.60) (0.47) Net basin market price $9.40 - $10.60 $4.02 Fuel & Shrinkage/Gathering/ (0.80 - 1.00) (0.80 - 1.00) Transportation Net Price $8.40 - $9.80 $3
Slide 88: Margins Above Average
Midstream Margins Above Average Domestic NGL Average Realized Net Margin and Volumes by Quarter Margin Total Production & Equity (Cents / Gallon) Volumes by Quarter (MM Gallons) 25 700 600 20 500 15 400 300 10 200 5 100 0 0 Q1'02 Q2'02 Q3'02 Q4'02 Q1'03 Q2'03 Q3'03 Q4'03 Q1'04 Q2'04 Q3'04 Q4'04 Q1'0
Slide 89: Fee-Based Bedrock of Earnings
Midstream Fee-Based Bedrock of Earnings Net Revenues $1,200 $1,100 $1,000 20% $900 30% 26% 22% $800 $ 000's $700 $600 $500 70% 74% 78% 80% $400 $300 $200 $100 $0 2004 2005 2006 2007 Fee Commodity Note: Total revenues less cost of goods sold. Reflects forecasted margins in 2006-2007 at mid- point of
Slide 90: Strong Free Cash Flow
Midstream Strong Free Cash Flow Dollars in millions Seg Profit & DDA 800 Discretionary 700 Expansion 600 Margin Uplift 500 Base 400 Capital Spending Historic 300 Expansion 200 Discretionary Expansion 100 Maintenance 0 Well Connects 2003 2004 2005 2006 2007 Capital Seg Capital Seg Capital Seg Capital
Slide 91: Strong Free Cash Flow
Gas Pipeline Strong Free Cash Flow Dollars in millions 1,000 Seg Profit + DDA Seg Profit + DDA 900 800 Capital Spending 700 Expansion 600 Maintenance 500 Mandatory 400 300 200 100 0 2003 2004 2005 2006 2007 Note: - Segment Profit is stated on a recurring basis. - Segment Profit + DDA and Capital Spe
Slide 92: WMB Collateral Outstanding
WMB Collateral Outstanding As of 9/30/05 Corp./ Dollars in millions E&P Midstream Power Other Total Margins & Ad. Assurances1 $2 $0 $51 $0 $53 Prepayments $0 $1 $24 $0 $25 Subtotal $2 $1 $75 $0 $78 Letters of Credit $1,145 $224 $247 $91 $1,707 Total as of 9/30/05 $1,147 $225 $322 $91 $1,785 Total as
Slide 93: WMB Collateral Sensitivity
WMB Collateral Sensitivity Dollars in millions Margin volatility (1% chance of exceeding) - Potential incremental collateral requirement 9/30/05 6/30/05 3/31/05 – 30 days ($469) ($178) ($124) – 180 days ($868) ($458) ($328) – 360 days ($926) ($351) ($341) Increased margin volatility results from
Slide 94: Enterprise Risk Management
Enterprise Risk Management Estimated dollars in millions Sensitivities Analysis WMB 1 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 2005 $0-$2 $0-5 $5-10 2006 $4-$6 $5-15 $10-15 2007 $12-15
Slide 95: Types of Sales Around Tolling Deals
Types of Sales Around Tolling Deals -Generally, from the most to least effective hedges Type of Sale How It Works Williams buys tolling rights for a certain dollar amount per kilowatt-year and: Resale of tolling Sells the same or similar tolling rights to another party. Example: CDWR Product D.
The Williams Companies — Q3 2005 Earnings Presentation on 6ix