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Williams quarterly results show promise, negotiating Alaska sale
Allen Baker PNA Contributing Writer
Williams Cos. Inc. showed progress in the fourth quarter in its quest for profitability as a new and smaller company. The company’s stock rose 28 percent in one day on the news, which reassured investors that the company will have the cash to pay off huge amounts of debt coming due this year.
The overall loss for the quarter came to $201 million, which compares to a staggering $1.24 billion loss a year earlier when the company was reeling from reverberations of the Enron bankruptcy. The company lost $294 million in the third quarter of this year. Big loss for year For the full year 2002, Tulsa-based Williams had a loss of $737 million, then paid $90 million in preferred stock dividends. So the loss for common shareholders amounted to $827 million. That compares with a loss of $478 million for 2001, when the preferred stock wasn’t an issue.
Williams’ energy trading segment bled huge losses this year as abysmal credit ratings constrained that business. But in the final quarter, Williams actually posted an operating profit for energy trading of $81.2 million. The segment had positive revenues for the quarter, which it didn’t manage in the two prior periods. For the year, that business lost $353 million, compared with a profit from energy trading of $1.31 billion in 2001. Alaska sale still pending In the earnings announcement, the company mentioned it was “currently engaged in negotiations toward the sale of its Alaska operations,” which Williams announced last summer it was putting on the block.
At that time, Williams said it had a potential buyer who expressed interest, and negotiations have continued, according to Jeff Cook, who heads Williams Alaska.
“It’s ongoing. We expect sooner rather than later, but we don’t know,” Cook said. The company did take a charge against earnings of $18.4 million in the fourth quarter to lower the carrying value of the Alaska assets, which include the North Pole refinery, a 3 percent share of the trans Alaska pipeline, convenience stores, and terminals in Anchorage and Fairbanks. Pipelines profitable The company’s major divisions showed good results for the quarter, with the big gas pipeline segment reporting profit of $163.3 million, up 20 percent from a restated $135.7 million for the same quarter a year ago. But the fourth quarter number was down from $173 million in the third quarter.
Exploration and production had fourth-quarter earnings of $87 million, up 27 percent from $68.7 million in the same quarter a year earlier. The midstream gas and liquids business showed a loss of $20.7 million as the company booked a $115 million charge against the value of its Canadian assets. A year ago, that segment made $45.5 million, so without that adjustment the profit would have more than doubled to $94.3 million in the 2002 quarter. Margins were higher for gas liquids in both the U.S. and Canada, the company said.
The petroleum services division, now mostly consisting of the Alaska properties and some others where the sales haven’t been completed yet, brought in a profit of $40.8 million, down from $145.7 million for the last quarter of 2001. The 2001 period included a special gain of $75.3 million, while 2002’s fourth quarter had the $18.4 million adjustment for revaluing the Alaska investment.
Partnership for sale The company’s stake in Williams Energy Partners yielded a profit of $29.5 million for the quarter. That’s up 68 percent from $17.6 million a year ago. But that investment, which Williams was calling one of its core operations just a few months ago, is now for sale along with other assets, the company said in the earnings announcement. Also on the block are the 6,000-miles Texas Gas pipeline system and up to 20 percent of its assets in both E&P and midstream.
Big debt payments ahead Williams needs cash to pay off a $1.3 billion loan coming due this July, a time that could be a big milestone for the company one way or the other. Standard & Poor’s Ratings Services says if Williams can pay off that loan and stem the cash drain from its energy trading business, the rating agency would likely take Williams off its CreditWatch status.
Williams has been slicing off parts of the company trying to reduce debt since Enron imploded. At the end of the third quarter, debt stood at $14.5 billion.
The total debt was down to $13.9 billion by the end of the fourth quarter, but interest payments continued to grow, cutting $383 million from the bottom line in the fourth quarter compared with $364 million in the third quarter. A year earlier, Williams paid out $214 million in interest. Company executives say they’re aiming to reduce total debt to $11 billion by the end of this year, and to $9.5 billion when 2004 is done. Lower debt and a higher credit rating, which would cut interest rates, would go a long way toward making Williams successful again. Shrinking workforce With the various asset sales, the company expects its workforce to shrink to 6,000 or fewer people, down from 10,000 at the end of 2002. Alaska accounts for about 500 of those. Revenues for the fourth quarter totaled $1.70 billion, up 8 percent from the same period in 2001, and nearly half a billion dollars higher than in the third quarter, when the energy trading revenues were negative. For the year, revenues shrank 21 percent to $5.61 billion.
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