The Williams Companies Inc. (WMB) filed Quarterly Report for the period ended 2009-09-30.
Williams Companies moves manages and markets a variety of energy products including natural gas liquid hydrocarbons petroleum and electricity. Based in Tulsa Oklahoma Williams' operations span the energy value chain from wellhead to burner tip. The Williams Companies Inc. has a market cap of $10.64 billion; its shares were traded at around $18.25 with a P/E ratio of 13.8 and P/S ratio of 0.9. The dividend yield of The Williams Companies Inc. stocks is 2.4%. The Williams Companies Inc. had an annual average earning growth of 5% over the past 5 years.
Highlight of Business Operations:
The determination of fair value for our assets and liabilities also incorporates the time value of money and various credit risk factors which can include the credit standing of the counterparties involved, master netting arrangements, the impact of credit enhancements (such as cash collateral posted and letters of credit), and our nonperformance risk on our liabilities. The determination of the fair value of our liabilities does not consider noncash collateral credit enhancements. For net derivative assets, we apply a credit spread, based on the credit rating of the counterparty, against the net derivative asset with that counterparty. For net derivative liabilities we apply our own credit rating. We derive the credit spreads by using the corporate industrial credit curves for each rating category and building a curve based on certain points in time for each rating category. The spread comes from the discount factor of the individual corporate curves versus the discount factor of the LIBOR curve. At September 30, 2009, the credit reserve is less than $1 million on our net derivative assets and $4 million on our net derivative liabilities. Considering these factors and that we do not have significant risk from our net credit exposure to derivative counterparties, the impact of credit risk is not significant to the overall fair value of our derivatives portfolio.
Other (income) expense – net within operating income in 2008 includes a $14 million impairment of certain natural gas producing properties at Exploration & Production, partially offset by a gain of $10 million on the sale of certain south Texas assets at Gas Pipeline and $7 million of net gains on foreign currency exchanges at Midstream.
Other (income) expense – net within operating income in 2008 includes a gain of $148 million on the sale of our Peru interests at Exploration & Production, $13 million of net gains on foreign currency exchanges at Midstream, and a gain of $10 million on the sale of certain south Texas assets at Gas Pipeline. These items are partially offset by $21 million of project development costs at Gas Pipeline and a $14 million impairment of certain natural gas producing properties at Exploration & Production.
The unfavorable change in investing income is due primarily to a $75 million impairment of Midstream’s Accroven investment and an $11 million impairment of a cost-based investment at Exploration & Production. (See Note 4 of Notes to Consolidated Financial Statements.) A decrease in equity earnings, primarily at Midstream, and a decrease in interest income, primarily due to lower average interest rates in 2009 compared to 2008, also contributed to the unfavorable change in investing income.
Segment revenues and segment profit for the first nine months of 2009 were significantly lower than the first nine months of 2008 primarily due to a sharp decline in net realized average prices partially offset by higher production volumes. Additionally, the first nine months of 2009 include expense of $32 million associated with contractual penalties from the early termination of drilling rig contracts. The first nine months of 2008 include a $148 million gain on sale of our Peru interests. Highlights of the comparative periods include:
In June 2009, we entered into an agreement that allows us to acquire, through a “drill to earn” structure, a 50 percent interest in approximately 44,000 net acres in Pennsylvania’s Marcellus Shale. This agreement requires us to fund $33 million of drilling and completion costs on behalf of our partner and $41 million of our own costs and expenses prior to the end of 2011 to earn our 50 percent interest. This growth opportunity leverages our experience in developing non-conventional natural gas reserves.
WMB is in the portfolios of Jean-Marie Eveillard of Arnhold & S. Bleichroeder Advisers, LLC, George Soros of Soros Fund Management LLC, Brian Rogers of T Rowe Price Equity Income Fund.
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