Energy, Automobile, EV, Renewable News | Williams Reports Strong Second-Quarter Results; Announces Another 2022 Guidance Increase

Williams Reports Strong Second-Quarter Results; Announces Another 2022 Guidance Increase

August 2, 2022

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

Natural gas market fundamentals drive growth across key financial metrics

GAAP net income of $400 million, or $0.33 per diluted share – up 32% vs. 2Q 2021
Adjusted net income of $484 million, or $0.40 per diluted share (Adjusted EPS) – up 48% vs. 2Q 2021
Adjusted EBITDA of $1.496 billion – up $179 million or 14% vs. 2Q 2021
Cash flow from operations (CFFO) of $1.098 billion – up $41 million or 4% vs. 2Q 2021
Available funds from operations (AFFO) of $1.130 billion – up $211 million or 23% vs. 2Q 2021
Dividend coverage ratio of 2.19x (AFFO basis)
Raising 2022 Adjusted EBITDA guidance again with midpoint of $6.25 billion; expect 11% Adjusted EBITDA year-over-year growth in 2022, yielding 7% CAGR over the last five years

Steadfast execution and focus on sustainable operations position company for future opportunities

Reached final investment decision on Louisiana Energy Gateway pipeline project to advance wellhead to water strategy
Completed Gulfstream Phase VI expansion; executing slate of projects on Transco, Northeast G&P and Deepwater Gulf of Mexico
Strong operational performance with gathering volumes of 17 Bcf/d and transmission volumes of 16.9 Bcf/d – up 13% and 2%, respectively from 2Q 2021
Closed on acquisition of Trace Midstream gathering assets in Haynesville
Reached rate case settlement in principle with Northwest Pipeline customers
Released Sustainability Report showing progress toward Williams’ 2030 climate commitment; focus on social and governance issues

CEO Perspective

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

“Our natural gas focused strategy continues to outperform with second-quarter Adjusted EBITDA up 14 percent over the same period last year due to the strong earnings growth of our core business and also at our JV upstream operations in the Wamsutter and Haynesville supply areas. Record gathering volumes, continued execution of expansion projects, as well as favorable commodity prices drove the quarterly increase. As a result of our core business strength and better-than-planned market fundamentals, we are raising our 2022 EBITDA guidance midpoint to $6.25 billion, which is an 8% increase from our original guidance midpoint of $5.8 billion.

“As we enter the back half of the year, we are executing on a full slate of growth projects in and around our existing infrastructure to move additional natural gas from key supply basins to growing markets for clean-power generation, residential and commercial use. We recently closed on the strategic acquisition of gathering assets from Trace Midstream and reached a final investment decision on the Louisiana Energy Gateway, a 1.8 Bcf/d project to gather Haynesville natural gas into premium markets, including growing LNG export demand along the Gulf Coast. In addition, we continue to grow our network in the deepwater Gulf of Mexico while advancing multiple gas gathering projects in the Northeast and progressing on expansions along our Transco system.

Armstrong added, “With the strong outlook for global natural gas demand and the growing need for secure and reliable supplies amid geopolitical volatility and climate concerns, Williams is well positioned to create long-term shareholder value. Our latest Sustainability Report, published last week, details the progress we are making on critical ESG-related fronts, including our climate commitment and initiatives focused on building thriving communities, environmental stewardship and workforce diversity. I appreciate our employees for their commitment to sustainable operations and emissions reductions efforts as we leverage our leading infrastructure to deliver the natural gas that is driving the clean energy economy.”

Williams Summary Financial Information	2Q		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	$400	$304	$779	$729
Net Income Per Share	$0.33	$0.25	$0.64	$0.60
Cash Flow From Operations	$1,098	$1,057	$2,180	$1,972

Non-GAAP Measures (1)
Adjusted EBITDA	$1,496	$1,317	$3,007	$2,732
Adjusted Net Income	$484	$327	$983	$756
Adjusted Earnings Per Share	$0.40	$0.27	$0.80	$0.62
Available Funds from Operations	$1,130	$919	$2,320	$1,948
Dividend Coverage Ratio	2.19x	1.85x	2.24x	1.96x

Other
Debt-to-Adjusted EBITDA at Quarter End (2)	3.82x	4.13x
Capital Investments (3) (4)	$429	$460	$745	$737

(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) Second quarter 2022 and year-to-date 2022 exclude $933 million for purchase of the Trace Midstream Haynesville gathering assets, which closed April 29, 2022.

GAAP Measures

Second-quarter 2022 net income increased by $96 million compared to the prior year reflecting the benefit of higher service revenues from commodity-based rates, the Trace Acquisition and Transco’s Leidy South project being in service, higher commodity margins, and higher results from our upstream operations associated with increased scale of operations, more than offset by a $241 million net unrealized loss on commodity derivatives in 2022, increased intangible asset amortization, and planned higher operating and administrative expenses driven by the increased scale of our upstream operations and higher employee-related costs, including those resulting from the Sequent acquisition. The tax provision benefited from $134 million associated with the release of valuation allowances on deferred income tax assets and federal income tax settlements.
Year-to-date 2022 net income increased by $50 million compared to the prior year reflecting similar drivers to those described for the quarter, further impacted by the absence of a $77 million favorable impact in 2021 from Winter Storm Uri.
Cash flow from operations for the second quarter of 2022 increased as compared to 2021 primarily due to higher operating results exclusive of non-cash items, and higher distributions from equity-method investments, partially offset by an unfavorable change in margin deposits associated with commodity derivatives. Year-to-date cash flow from operations also increased compared to 2021 driven by similar factors, except for a favorable change in margin deposits associated with commodity derivatives.

Non-GAAP Measures

Second-quarter 2022 Adjusted EBITDA increased by $179 million over the prior year, driven by the previously described benefits from service revenues, commodity margins, and upstream operations, partially offset by planned higher operating and administrative costs. Year-to-date 2022 Adjusted EBITDA increased by $275 million over the prior year due to similar drivers and also reflecting the absence of the favorable impact in 2021 from Winter Storm Uri.
Second-quarter 2022 Adjusted Income improved by $157 million over the prior year, driven by the previously described impacts to net income, adjusted primarily to remove the effects of net unrealized losses on commodity derivatives, amortization of certain assets from the Sequent acquisition, and favorable income tax benefits. Year-to-date 2022 Adjusted Income improved by $227 million over the prior year for similar reasons.
Second-quarter 2022 Available Funds From Operations (AFFO) increased by $211 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 $372 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 second-quarter 2022 Form 10-Q.

	Second Quarter									Year to Date
Amounts in millions	Modified EBITDA					Adjusted EBITDA				Modified EBITDA					Adjusted EBITDA
Amounts in millions	2Q 2022		2Q 2021	Change		2Q 2022	2Q 2021	Change		2022		2021	Change		2022	2021	Change
Transmission & Gulf of Mexico	$652		$646	$6		$652	$648	$4		$1,349		$1,306	$43		$1,349	$1,308	$41
Northeast G&P	450		409	41		450	409	41		868		811	57		868	811	57
West	288		223	65		296	223	73		548		445	103		556	445	111
Gas & NGL Marketing Services	(282	)	8	(290	)	6	8	(2	)	(269	)	101	(370	)	71	101	(30	)
Other	139		20	119		92	29	63		144		53	91		163	67	96
Total	$1,247		$1,306	($59	)	$1,496	$1,317	$179		$2,640		$2,716	($76	)	$3,007	$2,732	$275

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

Second-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 largely offset by higher operating and administrative costs.

Northeast G&P

Second-quarter 2022 Modified and Adjusted EBITDA increased over the prior year driven by higher service revenues, primarily related to higher volumes and gathering rate escalations.
Both Modified and Adjusted EBITDA also improved for the year-to-date 2022 period, similarly reflecting gathering rate escalations and net increased contributions from equity-investees, partially offset by higher operating and administrative costs.

West

Second-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, as well as contributions from Trace Midstream acquired in April.

Gas & NGL Marketing Services

Second-quarter 2022 Modified EBITDA declined from the prior year primarily reflecting a $288 million net unrealized loss on commodity derivatives in 2022, which is excluded from Adjusted EBITDA. Both measures were also impacted by higher commodity margins and higher administrative costs associated with the Sequent business acquired in July 2021.
Year-to-date 2022 Modified EBITDA also declined from the prior year primarily reflecting a $345 million net unrealized loss on commodity derivatives in 2022, which is excluded from Adjusted EBITDA. Both measures were also impacted by higher commodity margins, 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

Second-quarter 2022 Modified EBITDA improved compared to the prior year primarily reflecting the increased scale of our upstream operations and a second-quarter 2022 $47 million net unrealized gain 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 the increased scale of our upstream operations, partially offset by a $19 million net unrealized loss in 2022 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 now expects 2022 Adjusted EBITDA between $6.1 billion and $6.4 billion, a $450 million midpoint increase from guidance originally issued February 2022. The company continues to expect 2022 growth capital expenditures between $2.25 billion to $2.35 billion, a $1 billion midpoint increase from guidance originally issued February 2022 driven by the strategic acquisition of Trace Midstream assets. The company also continues to expect maintenance capital expenditures between $650 million and $750 million, which includes capital for emissions reduction and modernization initiatives. Importantly, Williams anticipates achieving a leverage ratio (net debt-to-Adjusted EBITDA) midpoint of 3.6x, below the original guidance of 3.8x.

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

Williams second-quarter 2022 earnings presentation will be posted at www.williams.com. The company’s second-quarter 2022 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Aug. 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://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 June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(Millions, except per-share amounts)
Revenues:
Service revenues	$	1,606		$	1,460		$	3,143		$	2,912
Service revenues – commodity consideration		86			51			163			100
Product sales		1,111			786			2,215			1,933
Net gain (loss) on commodity derivatives		(313	)		(14	)		(507	)		(50	)
Total revenues		2,490			2,283			5,014			4,895
Costs and expenses:
Product costs		857			697			1,660			1,629
Net processing commodity expenses		40			18			70			39
Operating and maintenance expenses		465			379			859			739
Depreciation and amortization expenses		506			463			1,004			901
Selling, general, and administrative expenses		160			114			314			237
Other (income) expense – net		(10	)		12			(19	)		11
Total costs and expenses		2,018			1,683			3,888			3,556
Operating income (loss)		472			600			1,126			1,339
Equity earnings (losses)		163			135			299			266
Other investing income (loss) – net		2			2			3			4
Interest incurred		(286	)		(301	)		(575	)		(597	)
Interest capitalized		5			3			8			5
Other income (expense) – net		6			2			11			—
Income (loss) before income taxes		362			441			872			1,017
Less: Provision (benefit) for income taxes		(45	)		119			73			260
Net income (loss)		407			322			799			757
Less: Net income (loss) attributable to noncontrolling interests		7			18			19			27
Net income (loss) attributable to The Williams Companies, Inc.		400			304			780			730
Less: Preferred stock dividends		—			—			1			1
Net income (loss) available to common stockholders	$	400		$	304		$	779		$	729
Basic earnings (loss) per common share:
Net income (loss)	$	.33		$	.25		$	.64		$	.60
Weighted-average shares (thousands)		1,218,678			1,215,250			1,217,814			1,214,950
Diluted earnings (loss) per common share:
Net income (loss)	$	.33		$	.25		$	.64		$	.60
Weighted-average shares (thousands)		1,222,694			1,217,476			1,221,991			1,217,344

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

	June 30, 2022			December 31, 2021
	(Millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	133		$	1,680
Trade accounts and other receivables		2,799			1,986
Allowance for doubtful accounts		(15	)		(8	)
Trade accounts and other receivables – net		2,784			1,978
Inventories		371			379
Derivative assets		280			301
Other current assets and deferred charges		219			211
Total current assets		3,787			4,549
Investments		5,116			5,127
Property, plant, and equipment		45,195			44,184
Accumulated depreciation and amortization		(15,535	)		(14,926	)
Property, plant, and equipment – net		29,660			29,258
Intangible assets – net of accumulated amortization		7,633			7,402
Regulatory assets, deferred charges, and other		1,359			1,276
Total assets	$	47,555		$	47,612
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	2,496		$	1,746
Accrued liabilities		1,427			1,201
Commercial paper		1,039			—
Long-term debt due within one year		876			2,025
Total current liabilities		5,838			4,972
Long-term debt		20,800			21,650
Deferred income tax liabilities		2,547			2,453
Regulatory liabilities, deferred income, and other		4,534			4,436
Contingent liabilities and commitments
Equity:
Stockholders’ equity:
Preferred stock ($1 par value; 30 million shares authorized at June 30, 2022 and December 31, 2021; 35,000 shares issued at June 30, 2022 and December 31, 2021)		35			35
Common stock ($1 par value; 1,470 million shares authorized at June 30, 2022 and December 31, 2021; 1,253 million shares issued at June 30, 2022 and 1,250 million shares issued at December 31, 2021)		1,253			1,250
Capital in excess of par value		24,500			24,449
Retained deficit		(13,498	)		(13,237	)
Accumulated other comprehensive income (loss)		(23	)		(33	)
Treasury stock, at cost (35 million shares of common stock)		(1,041	)		(1,041	)
Total stockholders’ equity		11,226			11,423
Noncontrolling interests in consolidated subsidiaries		2,610			2,678
Total equity		13,836			14,101
Total liabilities and equity	$	47,555		$	47,612

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

	Six Months Ended June 30,
	2022			2021
	(Millions)
OPERATING ACTIVITIES:
Net income (loss)	$	799		$	757
Adjustments to reconcile to net cash provided (used) by operating activities:
Depreciation and amortization		1,004			901
Provision (benefit) for deferred income taxes		90			262
Equity (earnings) losses		(299	)		(266	)
Distributions from unconsolidated affiliates		414			345
Net unrealized (gain) loss from derivative instruments		364			8
Amortization of stock-based awards		36			39
Cash provided (used) by changes in current assets and liabilities:
Accounts receivable		(797	)		(50	)
Inventories		1			(58	)
Other current assets and deferred charges		(15	)		(56	)
Accounts payable		690			94
Accrued liabilities		(24	)		14
Changes in current and noncurrent derivative assets and liabilities		49			(31	)
Other, including changes in noncurrent assets and liabilities		(132	)		13
Net cash provided (used) by operating activities		2,180			1,972
FINANCING ACTIVITIES:
Proceeds from (payments of) commercial paper – net		1,037			—
Proceeds from long-term debt		5			898
Payments of long-term debt		(2,012	)		(11	)
Proceeds from issuance of common stock		48			3
Common dividends paid		(1,035	)		(996	)
Dividends and distributions paid to noncontrolling interests		(95	)		(95	)
Contributions from noncontrolling interests		8			6
Payments for debt issuance costs		—			(6	)
Other – net		(31	)		(12	)
Net cash provided (used) by financing activities		(2,075	)		(213	)
INVESTING ACTIVITIES:
Property, plant, and equipment:
Capital expenditures (1)		(606	)		(685	)
Dispositions – net		(11	)		(5	)
Contributions in aid of construction		6			36
Purchases of businesses, net of cash acquired		(933	)		—
Purchases of and contributions to equity-method investments		(100	)		(44	)
Other – net		(8	)		(2	)
Net cash provided (used) by investing activities		(1,652	)		(700	)
Increase (decrease) in cash and cash equivalents		(1,547	)		1,059
Cash and cash equivalents at beginning of year		1,680			142
Cash and cash equivalents at end of period	$	133		$	1,201
_____________
(1) Increases to property, plant, and equipment	$	(642	)	$	(693	)
Changes in related accounts payable and accrued liabilities		36			8
Capital expenditures	$	(606	)	$	(685	)

Transmission & Gulf of Mexico
(UNAUDITED)
	2021															2022
(Dollars in millions)	1st Qtr			2nd Qtr			3rd Qtr			4th Qtr			Year			1st Qtr			2nd Qtr			Year
Regulated interstate natural gas transportation, storage, and other revenues ⁽¹⁾	$	708		$	693		$	706		$	739		$	2,846		$	730		$	717		$	1,447
Gathering, processing, and transportation revenues		86			90			74			94			344			82			84			166
Other fee revenues ⁽¹⁾		4			4			5			5			18			5			5			10
Commodity margins		8			7			8			12			35			15			11			26
Operating and administrative costs ⁽¹⁾		(198	)		(197	)		(215	)		(226	)		(836	)		(202	)		(227	)		(429	)
Other segment income (expenses) – net ⁽¹⁾		5			5			7			16			33			19			17			36
Impairment of certain assets		—			(2	)		—			—			(2	)		—			—			—
Proportional Modified EBITDA of equity-method investments		47			46			45			45			183			48			45			93
Modified EBITDA		660			646			630			685			2,621			697			652			1,349
Adjustments		—			2			—			—			2			—			—			—
Adjusted EBITDA	$	660		$	648		$	630		$	685		$	2,623		$	697		$	652		$	1,349

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			14.3
Avg. daily firm reserved capacity (Tbtu)		18.6			18.3			18.7			19.2			18.7			19.3			19.1			19.2
Northwest Pipeline LLC
Avg. daily transportation volumes (Tbtu)		2.8			2.2			2.0			2.6			2.4			2.8			2.1			2.5
Avg. daily firm reserved capacity (Tbtu)		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			1.1
Avg. daily firm reserved capacity (Tbtu)		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)		0.28			0.31			0.25			0.29			0.28			0.30			0.28			0.29
Plant inlet natural gas volumes (Bcf/d)		0.46			0.41			0.44			0.48			0.45			0.48			0.46			0.47
NGL production (Mbbls/d)		29			26			28			33			29			31			31			31
NGL equity sales (Mbbls/d)		7			5			6			7			6			7			7			7
Crude oil transportation volumes (Mbbls/d)		130			151			120			135			134			110			124			117
Non-consolidated ⁽³⁾
Gathering volumes (Bcf/d)		0.36			0.40			0.29			0.36			0.35			0.39			0.37			0.38
Plant inlet natural gas volumes (Bcf/d)		0.37			0.40			0.29			0.36			0.35			0.38			0.37			0.38
NGL production (Mbbls/d)		28			31			21			27			27			28			26			27
NGL equity sales (Mbbls/d)		9			11			6			7			8			8			6			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.