The Williams Companies Inc. Reports Operating Results (10-Q)

Author's Avatar
Jul 29, 2010
The Williams Companies Inc. (WMB, Financial) filed Quarterly Report for the period ended 2010-06-30.

The Williams Companies Inc. has a market cap of $11.36 billion; its shares were traded at around $19.45 with a P/E ratio of 18 and P/S ratio of 1.4. The dividend yield of The Williams Companies Inc. stocks is 2.5%. The Williams Companies Inc. had an annual average earning growth of 8.5% over the past 5 years.WMB is in the portfolios of Brian Rogers of T Rowe Price Equity Income Fund, Murray Stahl of Horizon Asset Management, Jean-Marie Eveillard of First Eagle Investment Management, LLC, John Buckingham of Al Frank Asset Management, Inc., Bruce Kovner of Caxton Associates, Steven Cohen of SAC Capital Advisors, George Soros of Soros Fund Management LLC, Jeremy Grantham of GMO LLC, Manning & Napier Advisors, Inc.

Highlight of Business Operations:

This decrease is reflective of $645 million of pre-tax costs attributable to The Williams Companies, Inc., associated with our 2010 restructuring, including $606 million of early debt retirement costs. Partially offsetting the increased costs are:

In April 2010, our Board of Directors approved a regular quarterly dividend of $0.125 per share, which reflects an increase of 14 percent compared to the $0.11 per share that we paid in each of the eight prior quarters.

The determination of fair value for our energy derivative assets and energy derivative 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 energy derivative liabilities. The determination of the fair value of our energy derivative 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 June 30, 2010, the credit reserve is less than $1 million on our net derivative assets and $1 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.

The favorable change in investing income (loss) is primarily due to a $13 million pre-tax gain on the sale of our 50 percent interest in Accroven in the second quarter of 2010 (see Note 4 of Notes to Consolidated Financial Statements) and a $13 million increase in equity earnings, primarily at Williams Partners.

The increase in operating income generally reflects an improved energy commodity price environment in 2010 compared to 2009 and the absence of $32 million of penalties in 2009 from the early termination of certain drilling rig contracts at Exploration & Production, partially offset by $41 million of transaction costs associated with our 2010 restructuring transaction.

The favorable change in investing income (loss) is primarily due to the absence of both 2009 impairment charges of $75 million related to our Accroven equity investment at Other and $11 million related to a cost-based investment at Exploration & Production, a $30 million increase in equity earnings, primarily at Williams Partners, and a $13 million pre-tax gain on the sale of our 50 percent interest in Accroven in the second quarter of 2010.

Read the The complete Report