76 slides from Williams Companies, Inc. (the)'s earnings presentation, May 5, 2005
Slide 1: Williams 2005 1st Quarter Earnings Release
Williams 2005 1st Quarter Earnings Release May 5, 2005
Slide 2: Forward-looking statements
Our reports, filings, and other public announcements might contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. You t
Slide 3: Oil & Gas Reserves Disclaimer
Oil & Gas Reserves Disclaimer The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves. We use certain terms in this presentation, such as "probable and possible" reserves that the SEC's guidelines strictly prohibit us from including in filings with the
Slide 4: Overview
Overview Steve Malcolm, Chairman, President & CEO
Slide 5: Headlines: Williams delivers strong 1Q performance
Headlines Williams delivers strong 1Q performance Midstream benefits again from above average margins, strong volumes Exploration & Production boosts year-over- year production Gas Pipeline posts another solid quarter Power continues to deliver positive cash flow Strength in consolidated cash flows
Slide 6: Headlines: Williams seizes rich opportunities for growth
Headlines Williams seizes rich opportunities for growth Picking up the pace to grow Piceance production Expanding pipelines to meet market demand Pursuing deep-water infrastructure opportunities Contracting existing power capacity Business overview set for May 12 Power Gas Pipeline E&P Overview
Slide 7: Williams Partners L.P. files registration statement
Headlines Williams Partners L.P. files registration statement $270 million expected initial enterprise value 100% equity capitalization at IPO 3Q expected completion Williams ownership 2% General Partner Interest 61% Limited Partner Interest $85 million cash to Williams expected at closing Williams
Slide 8: MLP Foundation Assets
MLP Foundation Assets Discovery 40% interest Integrated wellhead-to-market midstream services for Gulf of Mexico producers Offshore gathering and transportation system with 600 MMcf/d capacity Onshore gas processing and fractionation facilities Carbonate Trend Pipeline Sour-gas gathering pipeline of
Slide 9: MLP Benefits to Williams
MLP Benefits to Williams Gain access to new, lower cost source of equity capital Receive premium valuation for assets Retain control of monetized assets Redeploy IPO proceeds Create Economic Value Added(r) Deliver WMB shareholders increased equity value Williams Partners L.P.
Slide 10: 2005 Financial Results
2005 Financial Results Don Chappel, CFO
Slide 11: Consolidated Financial Results
1st Quarter 2005 2004 Income from Continuing Operations $202 $0 Income (Loss) from Disc. Operations (1) 10 Net Income $201 $10 Net Income/Share $0.34 $0.02 Recurring Inc. from Cont. Ops. /Share $0.33 $0.01 Recurring Inc. from Continuing Ops. After MTM Adjustments/Share $0.22 $0.14 Financial Results
Slide 12: Recurring Income from Continuing Operations
2005 2004 Income from Continuing Operations $202 $0 Gains on Sale of Assets (8) - Income Related to Prior Periods (6) - Other - Net 7 7 Tax effect of adjustments 3 (3) Recurring Inc. from Cont. Ops. Avail. to Com. $198 $4 Recurring Income from Cont. Ops./Share $0.33 $0.01 Recurring Income from Cont.
Slide 13: Recurring Income After Mark-to-Market Adjustments
Recurring Income from Cont. Ops. After Mark-to-Market Adjustments Consolidated Note: Adjustments have been made to reverse estimated forward unrealized MTM gains and add estimated realized gains from MTM previously recognized, i.e. assumes MTM accounting had never been applied to designated hedges a
Slide 14: Net Income Components
2005 2004 Segment Profit $510 $268 Net Interest Expense (164) (239) Other Income/(Expense) - Net (14) (17) Income from Cont. Ops. Before Tax 332 12 Provision for Income Tax 130 12 Income/(Loss) from Continuing Ops. $202 $0 Income/(Loss) from Discontinued Ops. (1) 10 Net Income $201 $10 Net Income Co
Slide 15: First Quarter Segment Profit
First Quarter Segment Profit Reported Recurring 1Q05 1Q04 1Q05 1Q04 Exploration & Production $104 $52 $96 $52 Midstream Gas & Liquids 129 110 129 110 Gas Pipeline 167 147 154 147 Power 114 (32) 125 (32) Other (4) (9) (4) (2) Segment Profit $510 $268 $500 $275 MTM Adjustments - Power (108) 112 Segmen
Slide 16: Major Changes in Quarter
Major Changes in Quarter Recurring Segment Profit After Mark-to-Market Adjustments Consolidated Recurring Segment Profit after MTM Adj. 1Q04 $387 Exploration & Production 44 - Higher production volumes +$16 million - Higher net realized price +$36 million Midstream 19 - Increased NGL margins +$19 mi
Slide 17: Cash Information
1Q05 Beginning Unrestricted $930 Cash flow from Continuing Operations 304 Proceeds from Issuing Common* 288 Sale of WilTel Note 54 Contract Termination Payment 88 Debt Retirements (216) Capital Expenditures/Investments (223) Dividends (29) Other-Net 14 Ending Unrestricted Cash at 3/31/05 $1,210 Rest
Slide 18: Debt Balance
Debt Balance Debt Balance @ 12/31/04* $7,962 7.4% Scheduled Debt Retirements & Amortization (216) Capitalized Lease 4 Debt Balance @ 3/31/05* $7,750 7.4% Fixed Rate Debt @ 3/31/05 $7,094 7.7% Variable Rate Debt @ 3/31/05 $656 5.0% Avg. Cost * Debt is long-term debt due within 1 year plus long-term d
Slide 19: Business Unit Results
Business Unit Results Willian [
Slide 20: Exploration & Production
Exploration & Production Ralph Hill, Senior Vice President
Slide 21: Exploration & Production 1st Quarter Segment Profit
1st Quarter 2005 2004 Segment Profit Dollars in millions Segment Profit $104 $52 Nonrecurring: Gain on sale of assets (8) - Recurring Segment Profit $96 $52 Exploration & Production 1Q04 to 1Q05 financial highlights include: Volume increase of 22% Net realized price increase of 31% Recurring profit
Slide 22: Strong Domestic Production Growth
Strong Domestic Production Growth Exploration & Production 2004 2005 400 500 600 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr Net MMcfed
Slide 23: 2005 Accomplishments
2005 Accomplishments 1Q05 production up 22%, 113 MMcfed since 1Q04 Piceance production up 59% since 1Q04 Piceance higher activity, 10 new H&P rigs contracted Additional Piceance 10-acre spacing approved Trail Ridge/Ryan Gulch additional drilling this year Big George volumes continue to increase San
Slide 24: Exploration & Production 2005-2007 Guidance
2005 2006 2007 Segment profit $400 - 475 $480 - 555 $550 - 675 Annual DD&A 235 - 265 280 - 320 350 - 400 Segment Profit + DD&A $635 - 740 $760 - 875 $900 - 1,075 Capital spending $530 - 605 $725 - 825 $725 - 875 Production (MMcfe/d) 600 - 700 720 - 820 825 - 925 Hedges (NYMEX Equivalent) Fixed Price
Slide 25: Key Points: Exploration & Production
Key Points Exploration & Production Achieving strong volume growth Continuing to expand development drilling activity - Piceance is primary growth driver Long history of high drilling success, low finding costs Short time cycle investments, fast cash returns Maintaining top quartile cost and efficie
Slide 26: Midstream
Midstream Alan Armstrong, Senior Vice President
Slide 27: Midstream Segment Profit
1st Quarter 2005 2004 Segment Profit $129 $110 Nonrecurring: - - Recurring Segment Profit $129 $110 Dollars in millions 1Q04 to 1Q05 financial highlights include: $19 million increase in NGL margins $7 million increase in NGL volume $6 million due to better performance in Olefins $(6) million increa
Slide 28: 1st Quarter and 2005 Accomplishments
1st Quarter and 2005 Accomplishments Three key operating statistics up: Gathering volumes up 3% Processing volumes up 3% NGL sales volumes up 22% Two new Letters of Intent executed for Deepwater Acquired ENI's interest in Discovery Gulf Liquids sale, 2Q05 S-1 for Williams Partners L.P. * Excludes ga
Slide 29: Midstream 2005-2007 Guidance
2005 2006 2007 Segment Profit $370-450 $400-500 $400-520 Annual DD&A 180-190 185-195 190-200 Segment Profit + DDA $550-640 $585-695 $590-720 Capital Spending $120-140 $110-130 $100-130 Note: - - Guidance does not include any new major deepwater capital projects - - If guidance has changed, previous
Slide 30: Key Points: Midstream
Key Points Raising 2005 guidance, again Strong demand for services is yielding Higher key operating statistics High return organic growth opportunities Continued strong free cash flows Deepwater expansion continues One-two punch Premier assets in growth basins Attracting volumes through reliability
Slide 31: Gas Pipeline
Gas Pipeline Phil Wright, Senior Vice President
Slide 32: Gas Pipeline Segment Profit
Segment Profit $167 $147 Nonrecurring: Expense reduction related to prior period* (13) - Recurring Segment Profit $154 $147 1Q04 to 1Q05 financial highlights include: $5 million - Gulfstream completion fee $3 million - Increased earnings at Gulfstream Segment Profit 1st Quarter 2005 2004 Dollars in
Slide 33: Gas Pipeline 1st Quarter and 2005 Accomplishments
Transco sets three-day delivery record in January Gulfstream Phase II placed into service FERC approves the Central New Jersey project Leidy to Long Island project - agreement executed with KeySpan Transco and Northwest receive top ranking by the Mastio & Co. customer survey in their respective regi
Slide 34: Gas Pipeline 2005-2007 Guidance
2005 2006 2007 Segment Profit (1) $555 - 585 $500 - 565 $565 - 635 Annual DD&A 280 - 290 290 - 300 300 - 310 Segment Profit + DDA $835 - 875 $790 - 865 $865 - 945 Capital Spending $370 - 420 $475 - 550 $250 - 325 Dollars in millions 2005-2007 Guidance Note: If guidance has changed, previous guidance
Slide 35: 2005-2007 Capital Spending Detail
2005-2007 Capital Spending Detail Total Normal Maintenance/ Compliance Dollars in millions NWP 26" Replacement Expansion $370 - 420 20 - 30 48 $305 - 335 2005 $475 - 550 10 - 20 276 $190 - 245 2006 $250 - 325 70 - 90 2 $180 - 235 2007 Note: Amounts include AFUDC Sum of ranges may not add due to roun
Slide 36: Key Points: Gas Pipeline
Key Points Another strong quarter, operationally and financially Strong free cash flow generator Achieving substantial progress in operational compliance and reliability projects Continued success in... Customer satisfaction Expansion development System operations Gas Pipeline
Slide 37: Power
Power Bill Hobbs, Senior Vice President
Slide 38: Power Segment Profit
Gross Margin $140 ($2) SG&A (16) (16) Op. & Other Inc / (Expense) (10) (14) Segment Profit $114 $(32) Nonrecurring: Expense related to prior period and other 11 - Recurring Segment Profit 125 (32) MTM Adjustments (108) 112 Recurring Segment Profit after MTM Adjustments $17 $80 1st Quarter 2005 2004
Slide 39: Segment Profit to Cash Flow
Segment Profit to Cash Flow Power Dollars in millions Power & Natural Gas Other Total Gross Margin $140 $140 SG&A & Other Inc/(Exp) (26) (26) Segment Profit $114 $0 $114 MTM Adjustments: Reverse Forward Unrealized MTM (Gains) (221) (221) Add Realized Gains from MTM previously recognized 113 113 Segm
Slide 40: Power 2005-2007 Guidance
2005 2006 2007 2/23/05 Segment Profit Guidance ($250) - (150) ($200) - (50) ($100) - 50 1st Quarter 2005 Impact: MTM Earnings 221 Est. Forward Impact of MTM (32) (54) (92) Total 1st Quarter 2005 Impact 189 (54) (92) Change in Segment Profit Guidance 200 (50) (100) Revised Segment Profit Guidance ($5
Slide 41: Key Points: Power
Key Points Positive CFFO in a shoulder quarter CFFO expected to remain positive Risk reducing contracts term sales are occurring Expect to see improvements Market liquidity Spark spreads Williams credit Active E&P drilling program will increase natural gas sales Factors impacting guidance Spark spre
Slide 42: 2005-2007 Consolidated Outlook
2005-2007 Consolidated Outlook Don Chappel, CFO
Slide 43: 2005 Forecast Guidance
Segment profit before MTM adjustment $1,275 - 1,575 $1,050 - 1,350 Net Interest Expense (630) - (665) (625) - (660) Other (Primarily General Corp. Costs) (80) - (110) (90) - (125) Pretax Income 565 - 800 335 - 565 Provision for Income Tax (235) - (320) (155) - (245) Income from Continuing Ops 330 -
Slide 44: 2005-2007 Segment Profit
Dollars in millions 2005-2007 Segment Profit Exploration & Production Midstream Gas Pipeline Power Other/Corp. Total MTM Adjustment Total After MTM Adj. 2005 2006 Consolidated $400 - 475 370 - 450 555 - 585 (50) - 50 0 - 15 $1,275 - 1,575 100 $1,375 - 1,675 $480 - 555 400 - 500 500 - 565 (250) - (10
Slide 45: 2005-2007 Outlook
(1) Free cash flow is defined as cash flow from operations less capital expenditures, before dividend or principal payments (2) An additional $25 million income tax expense is forecast in 2005 - 2007 Note: If guidance has changed, previous guidance from 2/23/05 is shown in italics directly below Dol
Slide 46: Consolidated 2005-2007 Capital Expenditures
2005 2006 2007 Exploration & Prod. $530 - 605 $725 - 825 $725 - 875 Midstream 120 - 140 110 - 130 100 - 130 Gas Pipeline 370 - 420 475 - 550 250 - 325 Power - - - Other/Corporate 10 - 30 10 - 30 10 - 30 Total $1,025 - 1,225 $1,350 - 1,550 $1,100 - 1,300 Dollars in millions Notes: - - Sum of ranges f
Slide 47: 2005-2007 Maintenance vs. Growth Capital
Dollars in millions 2005-2007 Maintenance vs. Growth Capital Note: Sum of ranges for each business line does not necessarily match total range Explor. & Prod. Growth Maintenance Total Midstream Growth Maintenance Total Gas Pipeline Growth Maintenance Total Power Other/Corp - Maint. Total: Growth Mai
Slide 48: Steady Improvement
Steady Improvement . . . 2004 2005 2006 2007 CFFO-Low 1482 1300 1450 1600 CFFO-High 1473 1600 1750 1900 Debt to Cap 0.623 0.58 0.57 0.54 0.623 0.59 0.58 0.56 Cash Flow 1 Debt / Cap 2 Increasing Cash Flow $1,473 $1,300 to $1,600 $1,450 to $1,750 $ Millions 1 Cash Flow from Continuing Operations (CFFO
Slide 49: Guidance Trends
Guidance Trends 2004 2005 2006 2007 SPAM Low 1263 1375 1475 1575 SPAM High 1263 1675 1775 2000 SP Low 1381 1275 1175 1375 SP High 1381 1575 1475 1800 Cap Ex-Low 790 1025 1350 1100 Cap Ex-High 790 1225 1550 1300 $1,025 to $1,225 $1,350 to $1,550 $1,100 to $1,300 $ Millions $790 $1,375 to $1,675 $1,47
Slide 50: Financial Strategy/Key Points
Drive/enable sustainable growth in EVA(r)/shareholder value Maintain a cash/liquidity cushion of $1.0 billion plus Continue to steadily improve credit ratios/ratings; ultimately achieving investment grade ratios Reduce risk in Power segment Increase focus and disciplined EVA(r) -based investments in
Slide 51: Summary
Summary Steve Malcolm Willian [
Slide 52: Key Points Summary
Hitting on all cylinders Another strong quarter Raising earnings guidance Seizing rich opportunities to grow shareholder value Williams Partners L.P. files registration statement Business overview on May 12 Key Points Summary
Slide 53: Q&A
Q&A Willian [
Slide 54: Non-GAAP Reconciliations
Non-GAAP Reconciliations
Slide 55: Non-GAAP Disclaimer
Non-GAAP Disclaimer This presentation includes certain financial measures, EBITDA, recurring earnings, free cash flow and recurring segment profit, that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission. EBITDA represents the sum of net income (loss
Slide 56: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Schedule Non-GAAP Reconciliation
Slide 57: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Schedule Non-GAAP Reconciliation
Slide 58: Non-GAAP Reconciliation Schedule
Non-GAAP Reconciliation Schedule Non-GAAP Reconciliation
Slide 59: EBITDA Reconciliation
EBITDA Reconciliation 178 DD&A 130 Provision for Income Taxes 164 Net Interest Expense $201 Net Income $674 EBITDA 1 Loss from Disc. Operations Non-GAAP Reconciliation 1Q05 Dollars in millions
Slide 60: 1Q 2005 Segment Contribution
* Excluding equity earnings and income (loss) from investments contained in segment profit Dollars in millions Total Segment Profit (Loss) $510 DD&A 179 Segment Profit before DDA $689 General Corporate Expense (28) Investing Income* 13 Other Income - - TOTAL $674 Gas Pipeline $129 46 $175 Corp/Other
Slide 61: 2005 Forecast EBITDA Reconciliation
Net Income $320 - 480 $175 - 325 Income (Loss) from Disc. Ops. 10 - 0 5 - (5) Net Interest 630 - 665 625 - 660 DD&A 700 - 775 700 - 775 Provision for Income Taxes 235 - 320 155 - 245 Other/Rounding (20) - (15) (10) - 0 EBITDA - Reported & Recurring $1,875 - 2,225 $1,650 - 2,000 MTM Adjustments 100 3
Slide 62: 2005 Forecast Segment Contribution
Power * (50) - 50 10 - 20 (40) - 70 Gas Pipeline 555 - 585 280 - 290 835 - 875 Segment Profit (Loss) DD&A Segment Profit before DDA Other (Primarily General Corporate Expense & Investing Income) TOTAL RECURRING E&P 400 - 475 235 - 265 635 - 740 Midstream 370 - 450 180 - 190 550 - 640 Total * 1,275 -
Slide 63: 2005 Forecast Guidance Reconciliation
Net Income $320 - 480 $175 - 325 Less: Discontinued Operations 10 - 0 5 - (5) Income from Continuing Ops $330 - 480 $180 - 320 Non-Recurring Items (Pretax) (7) - Less Taxes @ 39% 3 - Non-Recurring After Tax (4) - Recurring Income from Cont. Ops $326 - 476 $180 - 320 Recurring EPS $0.54 - $0.80 $0.31
Slide 64: Appendix
Appendix Willian [
Slide 65: EPS Metrics
EPS Metrics Consolidated EPS $0.34 - - - Recurring EPS 0.33 - - - Rec. EPS after MTM Adj. 0.22 - - - Average Shares (MM) 599 - - - 2005 1Q 2Q 3Q 4Q Total EPS $0.02 ($0.03) $0.19 $0.13 $0.31 Recurring EPS 0.01 0.10 0.26 0.12 0.49 Rec. EPS after MTM Adj. 0.14 0.03 0.09 0.09 0.35 Average Shares (MM) 51
Slide 66: 2005 Interest Expense Guidance
Interest on Long-Term Debt $560 - 580 Amortization Discount/Premium and other Debt Expense 25 Credit Facilities: (incl. Commitment Fees plus LC Usage) 30 - 40 Interest on other Liabilities 20 - 30 Interest Expense $635 - 675 Less: Capitalized Interest (5) - (10) Net Interest Expense Guidance $630 -
Slide 67: Drivers
Drivers Consolidated Dollars in millions
Slide 68: 2005 Effective Tax Rate
2005 Effective Tax Rate Combined Continuing Ops. Disc. Ops. First Quarter 2005 Federal $115 35% $116 35% $(1) 35% State 14 4% 14 4% * 3% Foreign (5) (2%) (5) (2%) - 0% Other 5 5% 5 2% - 0% Tax Provision $129 39% $130 39% ($1) 38% Dollars in millions Consolidated * Rounding - less than .1 million ben
Slide 69: 1Q 2005 Net Realized Price Calculation
1Q 2005 Net Realized Price Calculation Exploration & Production 1Q05 Unhedged Hedge Market Price: NYMEX including collars $6.20 - $6.30 $4.59 Basis Differential (0.50 - 1.00) (0.49) Net basin market price $5.30 - $5.70 $4.10 Fuel & Shrinkage/Gathering/ (0.80 - 1.00) (0.80 - 1.00) Transportation Net
Slide 70: 2005 Price Modeling
2005 Price Modeling Unhedged Price (NYMEX) $6.34 $5.96 $5.75 2005 2006 2007 Note: Economic impact of hedges may be different from the volume hedged due primarily to fuel and shrink and direct taxes Exploration & Production
Slide 71: Midstream Margins Above Average
Q1'02 Q2'02 Q3'02 Q4'02 Q1'03 Q2'03 Q3'03 Q4'03 Q1'04 Q2'04 Q3'04 Q4'04 Q1'05 Margin 5.21 7.7 11.75 12.75 17.16 7.99 6.18 11.01 10.08 8.84 17.64 22.6 15.03 Volume (MM Gallons) 292 296 333 271 300 199 228 298 327 328 373 400.5 399 Note: Based on actual realized prices, contractual obligations, shrink
Slide 72: Fee-Based Bedrock of Earnings
Fee-Based Bedrock of Earnings 2004 2005 2006 2007 Fee 694 755.6 799 823 Commodity 301 227 207.7 210 Note: Total revenues less cost of goods sold. Reflects 5 year average (Jan '00 - Dec '04) margins in 2006-2007 at mid-point of range. Midstream 30% 70% 23% 21% 20% 77% 79% 80%
Slide 73: Strong Free Cash Flow
Strong Free Cash Flow Dollars in millions Note: - - Segment Profit is stated on a recurring basis. Segment Profit for 2003 & 2004 has been restated to reflect reclassifications - - Segment Profit + DDA and Capital Spending reflect midpoint of ranges. - - 2004 margin uplift represents actual realized
Slide 74: Cash Flow Variance Analysis
Cash Flow Variance Analysis Undiscounted dollars in millions Note: 1Q05 forecast estimated as of 12/30/04. 1Q05 actual cash flows agree in total with Power's Cash Flow Statement; however the allocation of actual cash flows to the various deal types is based on estimates. Power
Slide 75: Enterprise Risk Management
Enterprise Risk Management Margins & Ad. Assur. $70 $1 $87 - $158 $134 Prepayments - 4 27 - 31 40 Subtotal $70 $5 $114 $ - $189 $174 Letters of Credit 496 104 257 90 947 855 Total as of 3/31/05 $566 $109 $371 $90 $1,136 $1,029 Total as of 12/31/04 $449 $135 $350 $95 $1,029 Change $117 ($26) $21 ($5)
Slide 76: Enterprise Risk Management
Enterprise Risk Management Margin volatility (99% confidence interval) - - Incremental liquidity requirement 3/31/05 12/30/04 30 days ($124) ($106) 180 days ($328) ($268) 360 days ($341) ($353) Assumption: The margin numbers above consist of only the forward marginable position values, starting from