Williams Reports Third-Quarter 2020 Financial Results

TULSA, Okla.–(BUSINESS WIRE)–Williams (NYSE: WMB) today announced its unaudited financial results for the three and nine months ended September 30, 2020.

Strong 3Q 2020 results demonstrate stability and predictability of business; on track to meet 2020 guidance expectations

Net income of $308 million ($0.25 per diluted share), up $88 million over 3Q 19
Adjusted EPS of $0.27 per diluted share
Adjusted EBITDA of $1.267 billion
Year-to-date Adjusted EBITDA of $3.769 billion, continues to exceed year-to-date 2019
Debt-to-Adjusted EBITDA leverage ratio of 4.42x, on track to be below 2020 guidance of 4.4x by year end

Natural gas focused strategy delivers strong, predictable results; Northeast G&P segment hits record volumes

Record gathering and processing volumes drive Northeast G&P segment up 19% in Modified EBITDA and 17% in Adjusted EBITDA year-to-date 2020 vs. year-to-date 2019
Transmission & Gulf of Mexico segment Modified EBITDA and Adjusted EBITDA consistent year-to-date 2020 vs. year-to-date 2019 with Transco growth overcoming hurricane impacts
Stable and reliable customer base of utilities, power plants, LNG facilities and industrial plants supports firm-committed capacity on demand-pull regulated pipelines
Continued strong project execution on Bluestem Pipeline, Southeastern Trail and Leidy South
Year-to-date 2020 earnings boosted by structurally lower operating and administrative costs
Issued climate commitment to reduce emissions by 56% from 2005 levels by 2030, grow renewables and embrace emerging opportunities such as hydrogen

CEO Perspective

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

“The ongoing stability of our financial performance continues to distinguish Williams during a year marked by disruption and uncertainty. We captured tailwinds in the markets we serve – particularly in the Northeast with record volumes – and have delivered consistently strong quarterly results and cash flow throughout the year. Williams is well positioned to meet our pre-COVID 2020 guidance ranges for earnings, adjusted EBITDA and cash flow set in December 2019. We attribute the durability of Williams today to the premier positions of our natural gas infrastructure as well as the proactive measures we have taken in recent years to reduce leverage, increase stability and lower costs.

“I am proud of our employees for their extraordinary commitment during this most unusual year and hurricane season to safely run our operations while also successfully executing on projects like Bluestem Pipeline, and Transco’s Southeastern Trail and Leidy South expansion projects. Williams’ large-scale and irreplaceable natural gas transmission pipelines are supported by steady demand from a diverse base of utility, industrial and residential/commercial distribution customers that are fully contracted for years to come. Our gathering and processing business continues to benefit from our basin diversity, specifically in gas-directed areas where drilling remains active. In addition, we continue to grow services to key producers in the Gulf of Mexico deepwater where we have major dedications.

“From an ESG perspective, we took a major step in the third quarter by becoming the first U.S. midstream company to announce a climate commitment and set a near-term goal of 56% absolute reduction from 2005 levels in company-wide greenhouse gas emissions by 2030 by focusing on immediate, practical and affordable solutions that we can accomplish right here, right now. This puts Williams on a positive trajectory to achieve net zero carbon emissions by 2050. As the world moves to a low-carbon future, we believe natural gas is key to reducing emissions on a global scale while supporting the growth of renewables and helping our customers and stakeholders meet their energy needs and climate goals.”

Williams Summary Financial Information	3Q				YTD
Amounts in millions, except ratios and per-share amounts. Per share amounts are reported on a diluted basis. Net income amounts are attributable to The Williams Companies, Inc. available to common stockholders.	2020		2019		2020		2019

GAAP Measures
Net Income	$308		$220		$93		$724
Net Income Per Share	$0.25		$0.18		$0.08		$0.60
Cash Flow From Operations (1)	$452		$858		$2,382		$2,702

Non-GAAP Measures (2)
Adjusted EBITDA	$1,267		$1,274		$3,769		$3,731
Adjusted Income	$333		$321		$951		$907
Adjusted Income Per Share	$0.27		$0.26		$0.78		$0.75
Distributable Cash Flow	$772		$822		$2,430		$2,469
Dividend Coverage Ratio	1.59	x	1.78	x	1.67	x	1.79	x

Other
Debt-to-Adjusted EBITDA at Quarter End (3)	4.42	x	4.47	x
Capital Investments (4) (5)	$415		$849		$1,062		$2,068

(1) Decline due primarily to net working capital changes including payment in July 2020 of approximately $284 million of rate refunds related to settlement of Transco’s general rate case.
(2) Schedules reconciling Adjusted Income, Adjusted EBITDA, Distributable Cash Flow 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

Third-quarter 2020 net income improved compared to the prior year reflecting the benefit of significantly lower operating and administrative costs from cost-savings initiatives, the absence of prior year severance charges, and a change in an employee benefit policy, as well as the absence of prior year impairments of equity-method investments.
These improvements were partially offset by slightly lower service revenue reflecting lower non-cash deferred revenue recognition at Gulfstar One and the impact of 2020 hurricane-related shut-ins in the Gulf of Mexico, partially offset by growth in our Northeast JV and Transco expansion projects, as well as the absence of a favorable cumulative adjustment in third quarter 2019 associated with Transco’s rate case settlement and unfavorable changes in other expenses including the reversal of both costs capitalized in prior periods and certain regulatory assets.
Year-to-date 2020 net income similarly benefited from significantly lower operating and administrative costs, while service revenues declined slightly as growth from our Northeast JV and Transco expansion projects 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 minimum volume commitment (“MVC”) in 2019.
The year-to-date change was also significantly impacted by first-quarter 2020 impairments of equity-method investments and goodwill, which resulted in a total $1.2 billion pre-tax charge, of which $65 million was attributable to noncontrolling interests. The 2019 year-to-date period included impairments of assets and equity-method investments totaling $262 million and a $122 million gain on the sale of our Jackalope investment. The provision for income taxes changed favorably by $220 million primarily due to the change in pre-tax earnings.
Cash flow from operations for the third quarter of 2020 decreased as compared to the same period of 2019 primarily due to the July 1, 2020, payment of rate refunds by Transco related to increased rates collected since March 2019 in its recently completed rate case and other changes in net working capital.

Non-GAAP Measures

Adjusted EBITDA for the quarter was consistent with the prior year as increased service revenues from growth in our Northeast JV and Transco expansion projects, lower operating and administrative costs and higher contributions from our Northeast G&P investments, were 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, as well as the absence of the favorable cumulative rate case adjustment in 2019.
Year-to-date 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.
Changes in Adjusted Income for the quarter and year-to-date periods were similarly driven by the changes in Adjusted EBITDA.
The decrease in third quarter 2020 DCF compared to the prior year is driven by an increase in distributions to noncontrolling interests primarily due to growth in our Northeast JV and higher maintenance capital. Year-to-date DCF is lower, reflecting the absence of a prior year income tax refund and increased distributions to noncontrolling interests, partially offset by increased Adjusted EBITDA and lower maintenance capital.

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 third-quarter 2020 Form 10-Q.

	Quarter-To-Date						Year-To-Date
Amounts in millions	Modified EBITDA			Adjusted EBITDA			Modified EBITDA			Adjusted EBITDA
Amounts in millions	3Q 2020	3Q 2019	Change	3Q 2020	3Q 2019	Change	2020	2019	Change	2020	2019	Change
Transmission & Gulf of Mexico	$616	$665	($49)	$622	$680	($58)	$1,893	$1,891	$2	$1,908	$1,944	($36)
Northeast G&P	387	345	42	396	343	53	1,126	947	179	1,129	964	165
West	247	245	2	245	244	1	715	713	2	713	801	(88)
Other	(7)	(2)	(5)	4	7	(3)	8	1	7	19	22	(3)
Totals	$1,243	$1,253	($10)	$1,267	$1,274	($7)	$3,742	$3,552	$190	$3,769	$3,731	$38

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

Third-quarter 2020 Modified and Adjusted EBITDA reflect the absence of the favorable cumulative rate case adjustment in 2019. In addition to these rate case impacts, service revenues for the quarter were down as lower non-cash deferred revenue amortization at Gulfstar One and the impact of 2020 hurricane-related shut-ins were partially offset by Transco expansion projects placed in service.
Year-to-date Modified and Adjusted EBITDA also saw decreased service revenues as lower non-cash deferred revenue amortization at Gulfstar One and the impact of 2020 shut-ins were partially offset by Transco expansion projects placed in service and new production in the Eastern Gulf. Year-to-date 2020 also benefited from lower operating and administrative costs.
Modified EBITDA for the comparative periods benefited from the absence of 2019 severance charges, while both comparative periods reflect the reversal of previously capitalized costs. These items have been excluded from Adjusted EBITDA.

Northeast G&P

Third-quarter and year-to-date 2020 Modified and Adjusted EBITDA reflect increased service revenues due to record gathering, processing and NGL production volumes. The year-to-date revenue comparison also benefited from the additional ownership in Utica East Ohio Midstream following the March 2019 acquisition and contribution to our Northeast JV.
Both comparative periods also reflect the benefit of cost reduction efforts and higher contributions from several equity-method investments including the Marcellus South system, Bradford system and Caiman II.
Gross gathering volumes for third-quarter 2020, including 100% of operated equity-method investments, increased by 8% over the same period in 2019. Gross processing plant inlet volumes for third-quarter 2020 increased by 17% over the same period in 2019.

West

The changes in third-quarter 2020 Modified and Adjusted EBITDA reflect slightly lower service revenues offset by reduced operating and administrative costs. The changes in year-to-date 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.
Modified EBITDA for the year-to-date period also benefited from the absence of prior year impairment and severance charges, which are excluded from Adjusted EBITDA.

2020 Financial Guidance

The company continues to expect 2020 Adjusted EBITDA in the lower half of its guidance range of between $4.95 billion and $5.25 billion. The company also continues to expect 2020 growth capex of $1 billion to $1.2 billion, down from the original guidance range of $1.1 billion to $1.3 billion, and 2020 Distributable Cash Flow toward the midpoint of the guidance range.

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

Williams’ third-quarter 2020 earnings presentation will be posted at www.williams.com. The company’s third-quarter 2020 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Nov. 3, at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). A limited number of phone lines will be available at (833) 350-1330. International callers should dial (778) 560-2598. The conference ID is 5398490. 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 Income
(Unaudited)

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
	(Millions, except per-share amounts)
Revenues:
Service revenues……………………………………………………………………………	$	1,479	$	1,495	$	4,399	$	4,424
Service revenues – commodity consideration……………………………………………………………………………	40		38		93		158
Product sales……………………………………………………………………………	414		466		1,135		1,512
Total revenues………………………………………………………………………….	1,933		1,999		5,627		6,094
Costs and expenses:
Product costs……………………………………………………………………………	380		434		1,047		1,442
Processing commodity expenses……………………………………………………………………………	21		19		49		83
Operating and maintenance expenses……………………………………………………………………………	336		364		993		1,091
Depreciation and amortization expenses……………………………………………………………………………	426		435		1,285		1,275
Selling, general, and administrative expenses……………………………………………………………………………	114		130		354		410
Impairment of certain assets……………………………………………………………………………	—		—		—		76
Impairment of goodwill……………………………………………………………………………	—		—		187		—
Other (income) expense – net……………………………………………………………………………	15		(11)		28		30
Total costs and expenses………………………………………………………………………….	1,292		1,371		3,943		4,407
Operating income (loss)………………………………………………………………………………	641		628		1,684		1,687
Equity earnings (losses)………………………………………………………………………………	106		93		236		260
Impairment of equity-method investments………………………………………………………………………………	—		(114)		(938)		(186)
Other investing income (loss) – net………………………………………………………………………………	2		7		6		132
Interest incurred………………………………………………………………………………	(298)		(303)		(898)		(915)
Interest capitalized………………………………………………………………………………	6		7		16		27
Other income (expense) – net………………………………………………………………………………	(23)		1		(14)		19
Income (loss) before income taxes………………………………………………………………………………	434		319		92		1,024
Provision (benefit) for income taxes………………………………………………………………………………	111		77		24		244
Net income (loss)……………………………………………………………………………	323		242		68		780
Less: Net income (loss) attributable to noncontrolling interests……………………………………………………………………….	14		21		(27)		54
Net income (loss) attributable to The Williams Companies, Inc………………………………………………………………………..	309		221		95		726
Preferred stock dividends………………………………………………………………………………	1		1		2		2
Net income (loss) available to common stockholders………………………………………………………………………………	$	308	$	220	$	93	$	724
Basic earnings (loss) per common share:
Net income (loss)………………………………………………………………………..	$	.25	$	.18	$	.08	$	.60
Weighted-average shares (thousands)………………………………………………………………………..	1,213,912		1,212,270		1,213,512		1,211,938
Diluted earnings (loss) per common share:
Net income (loss)………………………………………………………………………..	$	.25	$	.18	$	.08	$	.60
Weighted-average shares (thousands)………………………………………………………………………..	1,215,335		1,214,165		1,214,757		1,213,943

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

	September 30, 2020		December 31, 2019
	(Millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents…………………………………………………………………………………………………………………….	$	70	$	289
Trade accounts and other receivables…………………………………………………………………………………………………………………	1,021		1,002
Alowance for doubtful accounts…………………………………………………………………………………………………………………….	(10)		(6)
Trade accounts and other receivables – net………………………………………………………………………………………………………………..	1,011		996
Inventories…………………………………………………………………………………………………………………….	157		125
Other current assets and deferred charges…………………………………………………………………………………………………………………….	165		170
Total current assets………………………………………………………………………………………………………………..	1,403		1,580
Investments………………………………………………………………………………………………………………………	5,176		6,235
Property, plant, and equipment………………………………………………………………………………………………………………………	42,384		41,510
Accumulated depreciation and amortization………………………………………………………………………………………………………………………	(13,277)		(12,310)
Property, plant, and equipment – net…………………………………………………………………………………………………………………..	29,107		29,200
Intangible assets – net of accumulated amortization………………………………………………………………………………………………………………………	7,531		7,959
Regulatory assets, deferred charges, and other………………………………………………………………………………………………………………………	1,103		1,066
Total assets………………………………………………………………………………………………………………..	$	44,320	$	46,040
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable…………………………………………………………………………………………………………………….	$	464	$	552
Accrued liabilities…………………………………………………………………………………………………………………….	965		1,276
Commercial paper…………………………………………………………………………………………………………………….	40		—
Long-term debt due within one year…………………………………………………………………………………………………………………….	392		2,140
Total current liabilities………………………………………………………………………………………………………………..	1,861		3,968
Long-term debt………………………………………………………………………………………………………………………	21,951		20,148
Deferred income tax liabilities………………………………………………………………………………………………………………………	1,846		1,782
Regulatory liabilities, deferred income, and other………………………………………………………………………………………………………………………	3,764		3,778
Contingent liabilities
Equity:
Stockholders’ equity:
Preferred stock……………………………………………………………………………………………………………..	35		35
Common stock ($1 par value; 1,470 million shares authorized at September 30, 2020 and December 31, 2019; 1,248 million shares issued at September 30, 2020 and 1,247 million shares issued at December 31, 2019)……………………………………………………………………………………………………………..	1,248		1,247
Capital in excess of par value………………………………………………………………………………………………………………..	24,359		24,323
Retained deficit………………………………………………………………………………………………………………..	(12,376)		(11,002)
Accumulated other comprehensive income (loss)………………………………………………………………………………………………………………..	(160)		(199)
Treasury stock, at cost (35 million shares of common stock)………………………………………………………………………………………………………………..	(1,041)		(1,041)
Total stockholders’ equity…………………………………………………………………………………………………………….	12,065		13,363
Noncontrolling interests in consolidated subsidiaries…………………………………………………………………………………………………………………….	2,833		3,001
Total equity………………………………………………………………………………………………………………..	14,898		16,364
Total liabilities and equity…………………………………………………………………………………………………………….	$	44,320	$	46,040