Williams 68 cent second quarter loss counters 69 cent gain last year

Exploration and production profit doubles due to higher natural gas production, energy marketing and trading loses $497 million

Steve Sutherlin

PNA Managing Editor

Williams said July 29 it produced an unaudited net second quarter loss of $349.1 million, or 68 cents per share, compared with net income of $339.5 million, or 69 cents per share, for the same period last year.

Williams’ energy marketing & trading unit reported a second quarter 2002 segment loss of $497.5 million, versus a segment profit of $262.2 million for the same period last year. The company said the loss primarily reflects a significant decline in the forward mark-to-market value of the unit’s portfolio, resulting from a limited ability to exercise hedging strategies due to market liquidity deterioration and lowered spark spreads. The company increased credit and liquidity reserves due to deterioration in the energy trading sector.

In exploration and production, Williams reported second quarter 2002 segment profit of $95.4 million, up from $45.2 million for the same period last year, The company said increased natural gas production sparked the gain, reflecting a strategy of low-risk development drilling with a focus on tight sand and coal seam areas, and the acquisition of Barrett Resources in third quarter 2001. Production volumes sold increased about 200 percent during the second quarter of 2002 over the same period in 2001, the company said.

The gas pipeline unit had a second quarter 2002 segment profit of $156.7 million versus $181 million for the same period last year.

Energy services reported second quarter 2002 segment profit of $131.8 million, compared with $263.9 million during the same period last year. The spread in large part is due to a $72.1 million gain on the sale of convenience stores second quarter 2001.

Petroleum services, the company’s refining, retail petroleum and bio-energy unit, reported second-quarter 2002 segment loss of $20.7 million versus $130.1 million segment profit for the same period in 2001. Williams said significant portions of the assets in this segment are for sale.

The Williams Energy Partners segment reported second-quarter segment profit of $29.5 million vs. $33.7 million for the same period last year. Williams said the decline was due to increased operating expenses and reduced ammonia shipments.

Former subsidiary restructures

Williams Communications Group said July 30 it had filed an amended plan of reorganization and disclosure statement with the U.S. Bankruptcy Court in New York. The filing reflected a July 26 settlement agreement reached by the company, the official committee of unsecured creditors, Williams, and Leucadia National Corp.

Leucadia will purchase 45 percent of Williams Communications of $150 million and purchase William’s major claims against Williams Communications for $180 million, Williams Communications said.

“Williams will receive aggregate consideration of $325 million, comprised of $225 million in cash and a $100 million note, and Williams’ ongoing involvement with WCG will be substantially terminated,” the company said. Williams took a $232 million charge against its first quarter earnings in connection with Williams Communications.

Williams said its bondholders will get 55 percent of shares in the restructured company but Williams will not have a stake after the restructuring.