Williams continues to show red ink

Firm reshaping into new entity; debt dropping as billions in assets sold

Allen Baker

Petroleum News Contributing Writer

Williams Cos. Inc. continued its metamorphosis into a much different company in the first quarter, with a loss of $814 million coming from a huge accounting charge.

Even without the charge, Williams would have lost $57.7 million, compared with a profit of $107.7 million for the same period last year. The company lost $201 million in the fourth quarter.

But the numbers reflect a lot of charges and gains for sales and so on. It’s difficult to evaluate the remaining ongoing businesses.

For what executives see as the core businesses of the future — natural gas production, gathering and processing, along with pipeline transport — the Tulsa company had a profit of $327.6 million for the quarter. But that included a $109 million charge related to the sale of the Texas Gas Transmission subsidiary. For the same quarter last year, those businesses brought in $339.9 million.

Within the core business umbrella, the exploration and production unit brought in $126 million in profits, against $106.3 million a year ago. That came on a 6 percent decrease in volumes due to asset sales. Williams’ gas is found in the Rockies, the San Juan basin, and in the Midcontinent region.

The energy marketing and trading business, which Williams is trying to unload, showed a loss of $136.4 million. It was still churning out profits in the first quarter of last year, to the tune of $283.1 million. The accounting change that triggered the big loss was mostly related to the energy trading business.

The stake in Williams Energy Partners, which will be sold sometime this quarter, brought profits of $35.4 million, up from $26.9 million a year ago.

Higher operating profit at the Williams refinery in North Pole, Alaska, helped the petroleum services unit to a profit of $22.1 million. That was nearly even with the $22.6 million earned a year ago despite an $8 million impairment charge. Williams’ Alaska operations, refining and retail, form the bulk of that unit and are up for sale.

Williams made some progress on the borrowing front, cutting long-term debt to $10.49 billion from $11.90 billion a year ago. Asset sales already in the works will yield about $2 billion in cash in May and June, much of which will also go to pay down debt. In addition, some of the sales include assumption of debts.

Williams had revenues of $5.36 billion in the quarter, but that’s not really comparable with the $1.62 billion recorded a year ago. Part of the accounting change in the energy trading business means that revenues associated with some contracts are being included in the total revenue figure, instead of subtracting the cost of sales first, as was done in prior quarters.