Williams Reports Strong Quarterly Financial Results Driven by Record Operational Performance; Announces Another 2021 Guidance Increase

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

Continued financial strength and stability drove performance across key metrics

Net income of $164 million, or $0.13 per diluted share (EPS)
Adjusted EPS of $0.34 per diluted share – up 26% from 3Q 2020
Adjusted EBITDA of $1.420 billion – up $153 million or 12% from 3Q 2020
Achieved record quarterly gathering volumes of 14 Bcf/d
Achieved record quarterly contracted transmission capacity of 23.8 Bcf/d
Debt-to-Adjusted EBITDA at quarter end of 4.04x, exceeding previous goal of 4.2x
Increasing full-year 2021 Adjusted EBITDA guidance to $5.525 billion midpoint – up 8% over 2020
Dividend coverage ratio of 2.17x (AFFO basis) for 3Q 2021
Announced capital allocation strategy including opportunistic stock buyback program of up to $1.5 billion

Resilient natural gas business in position of growth; strategically aligned with lower-carbon energy future

Executing significant portfolio of gas transmission growth projects driven by demand-pull customers
Second phase of Leidy South project will be in full service in time for winter heating season
Advancing G&P customer expansion project in Northeast and across other key basins
Announced MOU with Ørsted to explore clean energy opportunities in the U.S.

CEO Perspective

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

“We achieved exceptional results in the third quarter with Adjusted EBITDA up 12% compared to the same period last year, driven by growth across our three major business segments including another quarter of record gas gathering and transmission volumes, increased revenues from transmission projects and favorable NGL marketing margins. Given our robust performance to date and continued strong fundamentals, we are raising our 2021 financial guidance midpoint for the second time this year to a level that is now 8% above our 2020 performance.

“Our natural gas focused strategy and unmatched infrastructure continue to be called upon by customers to meet continued growing demand for clean energy. The second phase of our Leidy South expansion will be in full service ahead of schedule and in time for this winter’s heating season. In addition, we are executing on another 1.5 Bcf/d in high-return expansions along existing Transco and Gulfstream corridors, underscoring the long-term demand commitments of our customers.

“From an environmental perspective, our highly reliable natural gas transmission and storage networks are extremely well-positioned to continue displacing higher carbon fuels while supporting the growth of renewable energy and responsibly sourced natural gas for LNG export. In addition, we have further advanced 12 solar projects and we are pursuing emerging opportunities like a hydrogen hub near our assets in southwestern Wyoming. As we work to balance sustainability and climate goals with growing energy demand, Williams is playing a leading role in a clean energy future by leveraging our infrastructure, our expertise and our strategic relationships to develop pragmatic solutions to today’s energy challenges.”

Williams Summary Financial Information	3Q						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	$	164		$	308		$	893		$	93
Net Income Per Share	$	0.13		$	0.25		$	0.73		$	0.08
Cash Flow From Operations	$	834		$	452		$	2,806		$	2,382

Non-GAAP Measures (1)
Adjusted EBITDA	$	1,420		$	1,267		$	4,152		$	3,769
Adjusted Net Income	$	410		$	333		$	1,166		$	951
Adjusted Earnings Per Share	$	0.34		$	0.27		$	0.96		$	0.78
Available Funds from Operations	$	1,080		$	863		$	3,028		$	2,655
Dividend Coverage Ratio		2.17	x		1.78	x		2.03	x		1.82	x

Other
Debt-to-Adjusted EBITDA at Quarter End (2)		4.04	x		4.42	x
Capital Investments (3)	$	469		$	415		$	1,206		$	1,062

(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 (growth & maintenance capital), purchases of businesses, net of cash acquired, and purchases of and contributions to equity-method investments.

GAAP Measures

Third-quarter 2021 net income decreased by $144 million compared to the prior year reflecting $46 million of higher joint venture earnings in the Northeast G&P segment, $37 million primarily from higher NGL prices in the West, $23 million of higher service revenues on Transco from expansion projects and $21 million of increased earnings from our new upstream operations, which was more than offset by a $277 million net unrealized loss in our Sequent business and higher operating and administrative expense. Beyond these business drivers there were also substantially offsetting increases in depreciation expense and decreases in the provision for income taxes.
The net unrealized losses on derivatives include $277 million related to derivative contracts within the Sequent segment that are not designated as hedges for accounting purposes. Sequent can experience significant earnings volatility from the fair value accounting required for the derivatives used to hedge a portion of the economic value of the underlying transportation and storage portfolio. However, the unrealized fair value measurement gains and losses are offset by valuation changes in the economic value of the underlying transportation and storage portfolio, which is not accounted for on a fair value basis.
Year-to-date 2021 net income improved by $800 million over the prior year, reflecting $190 million of higher commodity margins, $187 million of increased earnings from equity-method investments primarily within Northeast G&P, and $45 million of earnings from upstream operations acquired this year, partially offset by a $295 million change in net unrealized losses on derivatives, $69 million of higher depreciation and amortization expense and $79 million of higher operating and administrative 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 $289 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 both the third quarter and year-to-date periods of 2021 increased as compared to 2020 primarily due to higher operating results exclusive of non-cash charges, higher distributions from equity-method investments and favorable changes in net working capital, partially offset by higher margin deposits associated with increasing derivative liabilities. Working capital changes compared to the prior year benefited from the absence of $284 million of rate refunds paid in 2020 associated with Transco’s completed rate case.

Non-GAAP Measures

Third-quarter 2021 Adjusted EBITDA increased by $153 million over the prior year, driven by the previously described benefits from upstream operations, $43 million higher proportional EBITDA from Northeast G&P equity-method investments, and higher commodity margins. These improvements were partially offset by higher operating and administrative costs.
Year-to-date Adjusted EBITDA increased by $383 million over the prior year, driven by the previously described benefits from commodity margins and upstream operations, as well as $117 million higher proportional EBITDA from Northeast G&P equity-method investments. These improvements were partially offset by higher operating and administrative costs.
Third-quarter 2021 Adjusted Income improved by $77 million over the prior year, while year-to-date Adjusted Income improved by $215 million. Increases for both comparative periods were driven by the previously described impacts to net income, adjusted to remove the effects of unrealized losses on derivatives, the absence of 2020 impairments, and accelerated depreciation on decommissioning assets.
Third-quarter and year-to-date 2021 Available Funds From Operations increased by $217 million and $373 million, respectively, compared to the prior periods primarily due to higher operating results exclusive of non-cash charges and 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, Sequent and Other. For more information, see the company’s third-quarter 2021

Form 10-Q.

	Third Quarter																	Year to Date
Amounts in millions	Modified EBITDA									Adjusted EBITDA								Modified EBITDA								Adjusted EBITDA
Amounts in millions	3Q 2021			3Q 2020			Change			3Q 2021			3Q 2020		Change			2021			2020		Change			2021			2020		Change
Transmission & Gulf of Mexico	$	630		$	616		$	14		$	630		$	622	$	8		$	1,936		$	1,893	$	43		$	1,938		$	1,908	$	30
Northeast G&P		442			387			55			442			396		46			1,253			1,126		127			1,253			1,129		124
West		276			247			29			293			245		48			822			715		107			839			713		126
Sequent		(281	)		—			(281	)		(2	)		—		(2	)		(281	)		—		(281	)		(2	)		—		(2	)
Other		38			(7	)		45			57			4		53			91			8		83			124			19		105
Totals	$	1,105		$	1,243		($	138	)	$	1,420		$	1,267	$	153		$	3,821		$	3,742	$	79		$	4,152		$	3,769	$	383

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 and year-to-date Modified and Adjusted EBITDA improved compared to the prior year, as higher service revenues related to recent expansion projects, commodity margins, and proportional EBITDA from equity-method investments were partially offset by reduced revenues associated with lower Gulf of Mexico volumes and higher operating and administrative costs.

Northeast G&P

Third-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 and the benefit of an increased ownership in Blue Racer Midstream, acquired in November 2020.
Gross gathering volumes for third-quarter 2021, including 100% of operated equity-method investments, increased by 5% over the same period in 2020.

West

Third-quarter 2021 Modified and Adjusted EBITDA improved compared to the prior year primarily due to higher commodity margins.
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, $98 million of higher commodity margins, and lower operating and administrative costs. These favorable changes were partially offset by lower service revenues, primarily 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.

Sequent

Third-quarter and year-to-date 2021 Modified and Adjusted EBITDA reflect the results of this business acquired in July 2021. The Modified EBITDA loss was driven by $277 million of net unrealized losses on derivatives, which are excluded from Adjusted EBITDA. The related derivative contracts are not designated as hedges for accounting purposes. Sequent can experience significant earnings volatility from the fair value accounting required for the derivatives used to hedge a portion of the economic value of the underlying transportation and storage portfolio. However, the unrealized fair value measurement gains and losses are offset by valuation changes in the economic value of the underlying transportation and storage portfolio, which is not accounted for on a fair value basis.

Other

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

2021 Financial Guidance

The company now expects 2021 Adjusted EBITDA between $5.5 billion and $5.55 billion, a $325 million midpoint increase from guidance originally issued in February 2021. Also, we are increasing Available Funds from Operations guidance to a range of $4.025 billion to $4.075 billion. The leverage ratio midpoint has been updated to ~4.0x versus ~4.25x prior for year-end 2021 and growth capex is reaffirmed at between $1 billion to $1.2 billion. Importantly, Williams expects to generate excess cash flow (available funds from operations less capital expenditures and dividends), allowing it to retain financial flexibility.

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

Williams’ third-quarter 2021 earnings presentation will be posted at www.williams.com. The company’s third-quarter 2021 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Nov. 2, 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: https://event.on24.com/wcc/r/3404526/DA261E0446A7A8C1CD98B936760CDEC3

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,
	2021			2020			2021			2020
	(Millions, except per-share amounts)
Revenues:
Service revenues	$	1,506		$	1,479		$	4,418		$	4,399
Service revenues – commodity consideration	64			40			164			93
Product sales	1,296			418			3,229			1,139
Net gain (loss) on commodity derivatives	(391		)	(4		)	(441		)	(4		)
Total revenues	2,475			1,933			7,370			5,627
Costs and expenses:
Product costs	1,043			380			2,672			1,047
Processing commodity expenses	28			21			67			49
Operating and maintenance expenses	409			336			1,148			993
Depreciation and amortization expenses	487			426			1,388			1,285
Selling, general, and administrative expenses	152			114			389			354
Impairment of goodwill	—			—			—			187
Other (income) expense – net	1			15			12			28
Total costs and expenses	2,120			1,292			5,676			3,943
Operating income (loss)	355			641			1,694			1,684
Equity earnings (losses)	157			106			423			236
Impairment of equity-method investments	—			—			—			(938		)
Other investing income (loss) – net	2			2			6			6
Interest incurred	(295		)	(298		)	(892		)	(898		)
Interest capitalized	3			6			8			16
Other income (expense) – net	4			(23		)	4			(14		)
Income (loss) before income taxes	226			434			1,243			92
Less: Provision (benefit) for income taxes	53			111			313			24
Net income (loss)	173			323			930			68
Less: Net income (loss) attributable to noncontrolling interests	8			14			35			(27		)
Net income (loss) attributable to The Williams Companies, Inc.	165			309			895			95
Less: Preferred stock dividends	1			1			2			2
Net income (loss) available to common stockholders	$	164		$	308		$	893		$	93
Basic earnings (loss) per common share:
Net income (loss)	$	.14		$	.25		$	.74		$	.08
Weighted-average shares (thousands)	1,215,434			1,213,912			1,215,113			1,213,512
Diluted earnings (loss) per common share:
Net income (loss)	$	.13		$	.25		$	.73		$	.08
Weighted-average shares (thousands)	1,217,979			1,215,335			1,217,558			1,214,757

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

	September 30, 2021			December 31, 2020
	(Millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	214		$	142
Trade accounts and other receivables	1,987			1,000
Allowance for doubtful accounts	(1		)	(1		)
Trade accounts and other receivables – net	1,986			999
Inventories	368			136
Other current assets and deferred charges	317			152
Total current assets	2,885			1,429
Investments	5,085			5,159
Property, plant, and equipment	43,900			42,489
Accumulated depreciation and amortization	(14,586		)	(13,560		)
Property, plant, and equipment – net	29,314			28,929
Intangible assets – net of accumulated amortization	7,481			7,444
Regulatory assets, deferred charges, and other	1,220			1,204
Total assets	$	45,985		$	44,165
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	1,674		$	482
Accrued liabilities	1,242			944
Long-term debt due within one year	2,024			893
Total current liabilities	4,940			2,319
Long-term debt	20,338			21,451
Deferred income tax liabilities	2,233			1,923
Regulatory liabilities, deferred income, and other	4,555			3,889
Contingent liabilities and commitments
Equity:
Stockholders’ equity:
Preferred stock	35			35
Common stock ($1 par value; 1,470 million shares authorized at September 30, 2021 and December 31, 2020; 1,249 million shares issued at September 30, 2021 and 1,248 million shares issued at December 31, 2020)	1,249			1,248
Capital in excess of par value	24,425			24,371
Retained deficit	(13,361		)	(12,748		)
Accumulated other comprehensive income (loss)	(109		)	(96		)
Treasury stock, at cost (35 million shares of common stock)	(1,041		)	(1,041		)
Total stockholders’ equity	11,198			11,769
Noncontrolling interests in consolidated subsidiaries	2,721			2,814
Total equity	13,919			14,583
Total liabilities and equity	$	45,985		$	44,165

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

	Nine Months Ended September 30,
	2021			2020
	(Millions)
OPERATING ACTIVITIES:
Net income (loss)	$	930		$	68
Adjustments to reconcile to net cash provided (used) by operating activities:
Depreciation and amortization	1,388			1,285
Provision (benefit) for deferred income taxes	313			52
Equity (earnings) losses	(423		)	(236		)
Distributions from unconsolidated affiliates	574			466
Impairment of goodwill	—			187
Impairment of equity-method investments	—			938
Net unrealized gain (loss) from derivative instruments	317			—
Amortization of stock-based awards	60			39
Cash provided (used) by changes in current assets and liabilities:
Accounts receivable	(538		)	(18		)
Inventories	(112		)	(33		)
Other current assets and deferred charges	(67		)	(15		)
Accounts payable	570			(77		)
Accrued liabilities	67			(286		)
Changes in current and noncurrent derivative assets and liabilities	(267		)	(2		)
Other, including changes in noncurrent assets and liabilities	(6		)	14
Net cash provided (used) by operating activities	2,806			2,382
FINANCING ACTIVITIES:
Proceeds from (payments of) commercial paper – net	—			40
Proceeds from long-term debt	898			3,898
Payments of long-term debt	(887		)	(3,836		)
Proceeds from issuance of common stock	6			9
Common dividends paid	(1,494		)	(1,456		)
Dividends and distributions paid to noncontrolling interests	(135		)	(147		)
Contributions from noncontrolling interests	6			5
Payments for debt issuance costs	(7		)	(20		)
Other – net	(13		)	(12		)
Net cash provided (used) by financing activities	(1,626		)	(1,519		)
INVESTING ACTIVITIES:
Property, plant, and equipment:
Capital expenditures (1)	(957		)	(938		)
Dispositions – net	5			(30		)
Contributions in aid of construction	46			27
Purchases of businesses, net of cash acquired	(126		)	—
Proceeds from dispositions of equity-method investments	1			—
Purchases of and contributions to equity-method investments	(79		)	(150		)
Other – net	2			9
Net cash provided (used) by investing activities	(1,108		)	(1,082		)
Increase (decrease) in cash and cash equivalents	72			(219		)
Cash and cash equivalents at beginning of year	142			289
Cash and cash equivalents at end of period	$	214		$	70
_____________
(1) Increases to property, plant, and equipment	$	(1,001	)	$	(912	)
Changes in related accounts payable and accrued liabilities	44			(26		)
Capital expenditures	$	(957	)	$	(938	)

Transmission & Gulf of Mexico
(UNAUDITED)
	2020															2021
(Dollars in millions)	1st Qtr			2nd Qtr			3rd Qtr			4th Qtr			Year			1st Qtr			2nd Qtr			3rd Qtr			Year
Regulated interstate natural gas transportation, storage, and other revenues ⁽¹⁾	$	692		$	676		$	686		$	702		$	2,756		$	708		$	693		$	706		$	2,107
Gathering, processing, and transportation revenues	99			78			85			86			348			86			90			74			250
Other fee revenues ⁽¹⁾	4			5			3			6			18			4			4			5			13
Commodity margins	3			1			4			4			12			8			7			8			23
Operating and administrative costs ⁽¹⁾	(184		)	(189		)	(192		)	(192		)	(757		)	(198		)	(197		)	(215		)	(610		)
Other segment income (expenses) – net ⁽¹⁾	4			2			(8		)	8			6			5			5			7			17
Impairment of certain assets	—			—			—			(170		)	(170		)	—			(2		)	—			(2		)
Proportional Modified EBITDA of equity-method investments	44			42			38			42			166			47			46			45			138
Modified EBITDA	662			615			616			486			2,379			660			646			630			1,936
Adjustments	7			2			6			158			173			—			2			—			2
Adjusted EBITDA	$	669		$	617		$	622		$	644		$	2,552		$	660		$	648		$	630		$	1,938

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			13.8			13.7
Avg. daily firm reserved capacity (Tbtu)	17.7			17.5			18.0			18.2			17.9			18.6			18.3			18.7			18.5
Northwest Pipeline LLC
Avg. daily transportation volumes (Tbtu)	2.6			1.9			1.8			2.5			2.2			2.8			2.2			2.0			2.3
Avg. daily firm reserved capacity (Tbtu)	3.9			3.9			3.9			3.8			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			1.3			1.2
Avg. daily firm reserved capacity (Tbtu)	1.3			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			0.25			0.28
Plant inlet natural gas volumes (Bcf/d)	0.58			0.50			0.40			0.46			0.48			0.46			0.41			0.44			0.44
NGL production (Mbbls/d)	32			25			27			30			29			29			26			28			28
NGL equity sales (Mbbls/d)	5			4			5			5			5			7			5			6			6
Crude oil transportation volumes (Mbbls/d)	138			92			121			132			121			130			151			120			134
Non-consolidated ⁽³⁾
Gathering volumes (Bcf/d)	0.35			0.31			0.26			0.30			0.30			0.36			0.40			0.29			0.35
Plant inlet natural gas volumes (Bcf/d)	0.35			0.31			0.25			0.30			0.30			0.37			0.40			0.29			0.35
NGL production (Mbbls/d)	24			23			17			21			21			28			31			21			27
NGL equity sales (Mbbls/d)	5			8			4			6			6			9			7			6			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.