Energy, Automobile, EV, Renewable News | Williams Reports Higher Third-Quarter Earnings Driven by Strong Business Fundamentals and Natural Gas Demand

Williams Reports Higher Third-Quarter Earnings Driven by Strong Business Fundamentals and Natural Gas Demand

October 31, 2022

TULSA, Okla.–(BUSINESS WIRE)–Williams (NYSE: WMB) today announced its unaudited financial results for the three and nine months ended Sept. 30, 2022.

Upside exposure builds on stable earnings growth of base business

GAAP net income of $599 million, or $0.49 per diluted share
Adjusted net income of $592 million, or $0.48 per diluted share (Adjusted EPS)
Adjusted EBITDA of $1.637 billion – up $217 million or 15% vs. 3Q 2021
Cash flow from operations (CFFO) of $1.490 billion – up $656 million or 79% vs. 3Q 2021
Available funds from operations (AFFO) of $1.241 billion – up $161 million or 15% vs. 3Q 2021
Dividend coverage ratio of 2.40x (AFFO basis)
Strong operational performance with gathering volumes of approximately 17 Bcf/d and contracted transmission capacity of 24.4 Bcf/d – up 11% and 3%, respectively from 3Q 2021
Expect 2022 Adjusted EBITDA near high end of previously raised guidance range of $6.1 billion to $6.4 billion

Advancing clean energy strategy through project execution, acquisitions and partnerships

Expanded natural gas transmission and storage footprint with purchase of NorTex Midstream
Entered agreement with PennEnergy Resources to market and deliver low-emission next gen gas
Completed Gulfstream Phase VI expansion; executing slate of projects on Transco, Northeast G&P, Haynesville and Deepwater Gulf of Mexico
Advancing clean hydrogen commercialization strategy in Wyoming with Daroga Power agreement

CEO Perspective

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

“Williams third quarter Adjusted EBITDA growth of 15% demonstrates our ability to capture upside on top of the steady growth of our base business. Williams is thriving as demand for our critical services continues to expand, and we are well positioned to excel despite the macro-economic concerns for the broader markets. Our natural gas focused strategy and long-term approach to business is built to capture upside and at the same time weather commodity price down cycles like we saw in 2020. As an organization, we are energized by the opportunity to serve this growing demand for clean, secure and affordable energy.

“With the winter heating season now upon us, the need for secure natural gas supplies on a global scale has never been more pronounced, especially as the crisis in Ukraine continues to wreak havoc on energy markets and the global economy, which depends on access to affordable energy. The United States, with our abundance of natural gas, is well positioned to bring energy security to nations in need while at the same time reducing emissions, so long as we have comprehensive energy policies that allow us to build the infrastructure to connect these low cost supplies to growing demand here at home and abroad. If we don’t deal with permitting reform, we will continue to see higher utility bills at home and the unnecessary destruction of our allies’ economies.”

Armstrong added, “Williams is executing a number of high-return growth projects across our portfolio to meet growing long-term natural gas demand domestically and around the world. As we bring this critical infrastructure on line to meet growing demand, we expect to see continued earnings growth and value creation for our shareholders.”

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.		2022		2021		2022		2021

GAAP Measures
Net Income	$	599	$	164	$	1,378	$	893
Net Income Per Share	$	0.49	$	0.13	$	1.13	$	0.73
Cash Flow From Operations	$	1,490	$	834	$	3,670	$	2,806

Non-GAAP Measures (1)
Adjusted EBITDA	$	1,637	$	1,420	$	4,644	$	4,152
Adjusted Net Income	$	592	$	426	$	1,575	$	1,182
Adjusted Earnings Per Share	$	0.48	$	0.35	$	1.29	$	0.96
Available Funds from Operations	$	1,241	$	1,080	$	3,561	$	3,028
Dividend Coverage Ratio	2.40x		2.17x		2.29x		2.03x

Other
Debt-to-Adjusted EBITDA at Quarter End (2)	3.68x		4.04x
Capital Investments (3) (4) (5)	$	526	$	469	$	1,271	$	1,206

(1) Schedules reconciling Adjusted Net 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, purchases of and contributions to equity-method investments and purchases of other long-term investments.
(4) Year-to-date 2022 excludes $933 million for purchase of the Trace Midstream Haynesville gathering assets, which closed April 29, 2022.
(5) Third quarter and year-to-date 2022 exclude $424 million for purchase of the NorTex Midstream assets, which closed August 31, 2022.

GAAP Measures

Third-quarter 2022 net income increased by $435 million compared to the prior year reflecting the benefit of higher service revenues from commodity-based rates, higher Haynesville gathering volumes including the Trace Acquisition, and Transco’s Leidy South project being in service, higher results from our upstream operations, as well as a favorable change of $344 million in net unrealized gains/losses on commodity derivatives. These improvements were partially offset by higher operating and administrative expenses, including higher employee-related costs. The tax provision increased due to higher pretax income, partially offset by the net benefit from a reduction in our estimated state deferred income tax rate.

Year-to-date 2022 net income increased by $485 million compared to the prior year reflecting the benefit of higher service revenues as described above, higher results from our upstream operations, and higher commodity margins. These improvements were partially offset by increased intangible asset amortization, higher operating and administrative expenses driven by the increased scale of our upstream operations and higher employee-related costs, including costs from the Sequent acquisition for the full 2022 period, and the absence of a $77 million favorable impact in 2021 from Winter Storm Uri. The tax provision changed favorably as the impact of higher pretax income was more than offset by $134 million associated with the release of valuation allowances on deferred income tax assets and federal income tax settlements in the second quarter and the net benefit from a lower estimated state deferred income tax rate in the third quarter.

Cash flow from operations for the third quarter of 2022 increased as compared to 2021 primarily due to favorable changes in margin deposits associated with commodity derivatives, favorable net changes in working capital, higher operating results exclusive of non-cash items, and higher distributions from equity-method investments. Year-to-date cash flow from operations also increased compared to 2021 driven by similar factors.

Non-GAAP Measures

Third-quarter 2022 Adjusted EBITDA increased by $217 million over the prior year, driven by the previously described benefits from service revenues and upstream operations, partially offset by higher operating and administrative costs. Year-to-date 2022 Adjusted EBITDA increased by $492 million over the prior year due to similar drivers and higher commodity margins, but also reflecting the absence of the favorable impact in 2021 from Winter Storm Uri.

Third-quarter 2022 Adjusted Income improved by $166 million over the prior year, driven by the previously described impacts to net income, adjusted primarily to remove the effects of net unrealized gains/losses on commodity derivatives, amortization of certain assets from the Sequent acquisition, certain regulatory charges, and favorable income tax benefits. Year-to-date 2022 Adjusted Income improved by $393 million over the prior year for similar reasons.

Third-quarter 2022 Available Funds From Operations (AFFO) increased by $161 million compared to the prior year primarily due to higher operating results exclusive of non-cash items and higher distributions from equity-method investments. Year-to-date 2022 AFFO increased by $533 million reflecting similar drivers.

Business Segment Results & Form 10-Q

Williams’ operations are comprised of the following reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West and Gas & NGL Marketing Services, as well as Other. For more information, see the company’s third-quarter 2022 Form 10-Q.

	Third Quarter													Year to Date
Amounts in millions	Modified EBITDA							Adjusted EBITDA						Modified EBITDA									Adjusted EBITDA
Amounts in millions		3Q 2022		3Q 2021		Change			3Q 2022		3Q 2021	Change			2022			2021		Change				2022		2021	Change
Transmission & Gulf of Mexico	$	638	$	630		$	8	$	671	$	630	$	41	$	1,987		$	1,936		$	51		$	2,020	$	1,938	$	82
Northeast G&P		464		442			22		464		442		22		1,332			1,253			79			1,332		1,253		79
West		337		257			80		337		257		80		885			702			183			893		702		191
Gas & NGL Marketing Services		20		(262	)		282		38		34		4		(249	)		(161	)		(88	)		109		135		(26	)
Other		140		38			102		127		57		70		284			91			193			290		124		166
Total	$	1,599	$	1,105		$	494	$	1,637	$	1,420	$	217	$	4,239		$	3,821		$	418		$	4,644	$	4,152	$	492

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 2022 Modified and Adjusted EBITDA improved compared to the prior year driven by higher service revenues from Transco’s Leidy South expansion project and reduced hurricane impacts in the Gulf Coast region, partially offset by higher operating and administrative costs. Modified EBITDA for the 2022 periods was further impacted by certain regulatory and abandonment charges which are excluded from Adjusted EBITDA.

Northeast G&P

Third-quarter 2022 Modified and Adjusted EBITDA increased over the prior year driven by higher service revenues from Ohio Valley Midstream, partially offset by higher operating and administrative costs. Contributions from equity-investees increased reflecting higher commodity-based rates partially offset lower cost-of-service rates and volumes.

Both Modified and Adjusted EBITDA also improved for the year-to-date 2022 period, driven by Ohio Valley Midstream and gathering rate escalations, partially offset by higher operating and administrative costs. Net equity-investee contributions increased as previously described.

West

Third-quarter and year-to-date 2022 Modified and Adjusted EBITDA increased compared to the prior year benefiting from higher commodity-based rates and higher Haynesville gathering volumes including contributions from Trace Midstream acquired in April, partially offset by higher operating and administrative costs.

Gas & NGL Marketing Services

Third-quarter 2022 Modified EBITDA improved from the prior year primarily reflecting a $299 million net favorable change in unrealized gains/losses on commodity derivatives, which is excluded from Adjusted EBITDA. Both measures reflected stable commodity margins which included write-downs of inventory to lower period-end market prices, as well as higher administrative costs.

Year-to-date 2022 Modified EBITDA declined from the prior year primarily reflecting a $43 million net unfavorable change in unrealized loss on commodity derivatives, which is excluded from Adjusted EBITDA. Both measures were also impacted by higher commodity margins which included the impact of write-downs of inventory to lower period-end market prices, more than offset by the absence of a $58 million favorable impact in 2021 from Winter Storm Uri and higher administrative costs associated with the Sequent business acquired in July 2021.

Other

Third-quarter 2022 Modified EBITDA improved compared to the prior year primarily reflecting higher prices and volumes from our upstream operations and a $44 million net favorable change in unrealized gains/losses on commodity derivatives related to our upstream operations, which is excluded from Adjusted EBITDA.

Year-to-date 2022 Modified EBITDA also improved compared to the prior year primarily reflecting higher prices and volumes from our upstream operations and a $30 million net favorable change in unrealized gain/loss on commodity derivatives related to our upstream operations, which is excluded from Adjusted EBITDA. Both measures were also impacted by the absence of a $22 million favorable impact in 2021 from Winter Storm Uri.

2022 Financial Guidance

The company continues to expect 2022 Adjusted EBITDA near the high end of its previously announced guidance range of $6.1 billion and $6.4 billion. The company is also maintaining guidance for 2022 growth capital expenditures between $1.25 billion to $1.35 billion, which excludes approximately $1.5 billion in total acquisitions and follow-on expenditures for Trace Midstream and NorTex Midstream assets. The company is reaffirming maintenance capital expenditures between $650 million and $750 million, which includes capital for emissions reduction and modernization initiatives. Williams anticipates achieving a leverage ratio (net debt-to-Adjusted EBITDA) of approximately 3.6x, below the original guidance of 3.8x.

Williams’ Third-Quarter 2022 Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow

Williams third-quarter 2022 earnings presentation will be posted at www.williams.com. The company’s third-quarter 2022 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Nov. 1, 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://conferencingportals.com/event/MTgNWtxQ.

A webcast link to the conference call is available on Williams’ Investor Relations website. A replay of the webcast will be available on the website for at least 90 days following the event.

About Williams

As the world demands reliable, low-cost, low-carbon energy, Williams (NYSE: WMB) will be there with the best transport, storage and delivery solutions 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, storage, wholesale marketing and trading 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. Learn how the company is leveraging its nationwide footprint to incorporate clean hydrogen, next generation gas and other innovations at www.williams.com.

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

	Three Months Ended September 30,						Nine Months Ended September 30,
		2022			2021			2022			2021
	(Millions, except per-share amounts)
Revenues:
Service revenues	$	1,685		$	1,506		$	4,828		$	4,418
Service revenues – commodity consideration		60			64			223			164
Product sales		1,260			1,296			3,475			3,229
Net gain (loss) on commodity derivatives		16			(391	)		(491	)		(441	)
Total revenues		3,021			2,475			8,035			7,370
Costs and expenses:
Product costs		990			1,043			2,650			2,672
Net processing commodity expenses		29			28			99			67
Operating and maintenance expenses		486			409			1,345			1,148
Depreciation and amortization expenses		500			487			1,504			1,388
Selling, general, and administrative expenses		163			152			477			389
Other (income) expense – net		33			1			14			12
Total costs and expenses		2,201			2,120			6,089			5,676
Operating income (loss)		820			355			1,946			1,694
Equity earnings (losses)		193			157			492			423
Other investing income (loss) – net		1			2			4			6
Interest incurred		(296	)		(295	)		(871	)		(892	)
Interest capitalized		5			3			13			8
Other income (expense) – net		(6	)		4			5			4
Income (loss) before income taxes		717			226			1,589			1,243
Less: Provision (benefit) for income taxes		96			53			169			313
Net income (loss)		621			173			1,420			930
Less: Net income (loss) attributable to noncontrolling interests		21			8			40			35
Net income (loss) attributable to The Williams Companies, Inc.		600			165			1,380			895
Less: Preferred stock dividends		1			1			2			2
Net income (loss) available to common stockholders	$	599		$	164		$	1,378		$	893
Basic earnings (loss) per common share:
Net income (loss)	$	.49		$	.14		$	1.13		$	.74
Weighted-average shares (thousands)		1,218,964			1,215,434			1,218,202			1,215,113
Diluted earnings (loss) per common share:
Net income (loss)	$	.49		$	.13		$	1.13		$	.73
Weighted-average shares (thousands)		1,222,472			1,217,979			1,222,153			1,217,558

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

	September 30, 2022			December 31, 2021
	(Millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	859		$	1,680
Trade accounts and other receivables		2,674			1,986
Allowance for doubtful accounts		(15	)		(8	)
Trade accounts and other receivables – net		2,659			1,978
Inventories		447			379
Derivative assets		201			301
Other current assets and deferred charges		272			211
Total current assets		4,438			4,549
Investments		5,066			5,127
Property, plant, and equipment		46,186			44,184
Accumulated depreciation and amortization		(15,848	)		(14,926	)
Property, plant, and equipment – net		30,338			29,258
Intangible assets – net of accumulated amortization		7,493			7,402
Regulatory assets, deferred charges, and other		1,337			1,276
Total assets	$	48,672		$	47,612
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,613		$	1,746
Accrued liabilities		1,527			1,201
Long-term debt due within one year		877			2,025
Total current liabilities		5,017			4,972
Long-term debt		22,530			21,650
Deferred income tax liabilities		2,637			2,453
Regulatory liabilities, deferred income, and other		4,578			4,436
Contingent liabilities and commitments
Equity:
Stockholders’ equity:
Preferred stock ($1 par value; 30 million shares authorized at September 30, 2022 and December 31, 2021; 35,000 shares issued at September 30, 2022 and December 31, 2021)		35			35
Common stock ($1 par value; 1,470 million shares authorized at September 30, 2022 and December 31, 2021; 1,253 million shares issued at September 30, 2022 and 1,250 million shares issued at December 31, 2021)		1,253			1,250
Capital in excess of par value		24,527			24,449
Retained deficit		(13,419	)		(13,237	)
Accumulated other comprehensive income (loss)		(27	)		(33	)
Treasury stock, at cost (35 million shares of common stock)		(1,050	)		(1,041	)
Total stockholders’ equity		11,319			11,423
Noncontrolling interests in consolidated subsidiaries		2,591			2,678
Total equity		13,910			14,101
Total liabilities and equity	$	48,672		$	47,612

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

	Nine Months Ended September 30,
		2022			2021
	(Millions)
OPERATING ACTIVITIES:
Net income (loss)	$	1,420		$	930
Adjustments to reconcile to net cash provided (used) by operating activities:
Depreciation and amortization		1,504			1,388
Provision (benefit) for deferred income taxes		182			313
Equity (earnings) losses		(492	)		(423	)
Distributions from unconsolidated affiliates		688			574
Net unrealized (gain) loss from derivative instruments		329			317
Amortization of stock-based awards		58			60
Cash provided (used) by changes in current assets and liabilities:
Accounts receivable		(672	)		(538	)
Inventories		(76	)		(112	)
Other current assets and deferred charges		(62	)		(67	)
Accounts payable		743			570
Accrued liabilities		167			67
Changes in current and noncurrent derivative assets and liabilities		86			(267	)
Other, including changes in noncurrent assets and liabilities		(205	)		(6	)
Net cash provided (used) by operating activities		3,670			2,806
FINANCING ACTIVITIES:
Proceeds from long-term debt		1,752			898
Payments of long-term debt		(2,019	)		(887	)
Proceeds from issuance of common stock		53			6
Common dividends paid		(1,553	)		(1,494	)
Dividends and distributions paid to noncontrolling interests		(141	)		(135	)
Contributions from noncontrolling interests		15			6
Payments for debt issuance costs		(14	)		(7	)
Other – net		(49	)		(13	)
Net cash provided (used) by financing activities		(1,956	)		(1,626	)
INVESTING ACTIVITIES:
Property, plant, and equipment:
Capital expenditures (1)		(1,447	)		(957	)
Dispositions – net		(19	)		5
Contributions in aid of construction		8			46
Purchases of businesses, net of cash acquired		(933	)		(126	)
Purchases of and contributions to equity-method investments		(140	)		(79	)
Other – net		(4	)		3
Net cash provided (used) by investing activities		(2,535	)		(1,108	)
Increase (decrease) in cash and cash equivalents		(821	)		72
Cash and cash equivalents at beginning of year		1,680			142
Cash and cash equivalents at end of period	$	859		$	214
_____________
(1) Increases to property, plant, and equipment	$	(1,549	)	$	(1,001	)
Changes in related accounts payable and accrued liabilities		102			44
Capital expenditures	$	(1,447	)	$	(957	)

Transmission & Gulf of Mexico
(UNAUDITED)
	2021															2022
(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⁾	$	708		$	693		$	706		$	739		$	2,846		$	730		$	717		$	734		$	2,181
Gathering, processing, storage and transportation revenues		86			90			74			94			344			82			84			99			265
Other fee revenues ⁽¹⁾		4			4			5			5			18			5			5			4			14
Commodity margins		8			7			8			12			35			15			11			10			36
Net unrealized gain (loss) from derivative instruments		—			—			—			—			—			—			—			1			1
Operating and administrative costs ⁽¹⁾		(198	)		(197	)		(215	)		(226	)		(836	)		(202	)		(227	)		(238	)		(667	)
Other segment income (expenses) – net ⁽¹⁾		5			5			7			16			33			19			17			(22	)		14
Impairment of certain assets		—			(2	)		—			—			(2	)		—			—			—			—
Proportional Modified EBITDA of equity-method investments		47			46			45			45			183			48			45			50			143
Modified EBITDA		660			646			630			685			2,621			697			652			638			1,987
Adjustments		—			2			—			—			2			—			—			33			33
Adjusted EBITDA	$	660		$	648		$	630		$	685		$	2,623		$	697		$	652		$	671		$	2,020

Statistics for Operated Assets
Natural Gas Transmission
Transcontinental Gas Pipe Line
Avg. daily transportation volumes (Tbtu)		14.1			13.1			13.8			14.2			13.8			15.0			13.5			14.7			14.4
Avg. daily firm reserved capacity (Tbtu)		18.6			18.3			18.7			19.2			18.7			19.3			19.1			19.2			19.2
Northwest Pipeline LLC
Avg. daily transportation volumes (Tbtu)		2.8			2.2			2.0			2.6			2.4			2.8			2.1			2.0			2.3
Avg. daily firm reserved capacity (Tbtu)		3.8			3.8			3.8			3.8			3.8			3.8			3.8			3.8			3.8
Gulfstream – Non-consolidated
Avg. daily transportation volumes (Tbtu)		1.0			1.2			1.3			1.1			1.2			0.9			1.3			1.4			1.2
Avg. daily firm reserved capacity (Tbtu)		1.3			1.3			1.3			1.3			1.3			1.3			1.3			1.4			1.3
Gathering, Processing, and Crude Oil Transportation
Consolidated ⁽²⁾
Gathering volumes (Bcf/d)		0.28			0.31			0.25			0.29			0.28			0.30			0.28			0.29			0.29
Plant inlet natural gas volumes (Bcf/d)		0.46			0.41			0.44			0.48			0.45			0.48			0.46			0.49			0.48
NGL production (Mbbls/d)		29			26			28			33			29			31			31			26			29
NGL equity sales (Mbbls/d)		7			5			6			7			6			7			7			4			6
Crude oil transportation volumes (Mbbls/d)		130			151			120			135			134			110			124			125			120
Non-consolidated ⁽³⁾
Gathering volumes (Bcf/d)		0.36			0.40			0.29			0.36			0.35			0.39			0.37			0.41			0.39
Plant inlet natural gas volumes (Bcf/d)		0.37			0.40			0.29			0.36			0.35			0.38			0.37			0.41			0.39
NGL production (Mbbls/d)		28			31			21			27			27			28			26			29			28
NGL equity sales (Mbbls/d)		9			11			6			7			8			8			6			7			7

(1) Excludes certain amounts associated with revenues and operating costs for tracked or reimbursable charges. Also, Operating and administrative costs increased in 2021, particularly in third quarter and fourth quarter, due to higher incentive and equity compensation expense.
(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.