Williams Reports Fourth-Quarter and Full-Year 2020 Financial Results

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Williams (NYSE: WMB) today announced its unaudited financial results for the three and 12 months ended December 31, 2020.

Full-year 2020 results validate strength of natural gas strategy in the face of significant headwinds; results exceed pre-COVID-19 guidance midpoints in key metrics

  • Net income of $208 million, or $0.17 per diluted share (EPS), which includes net non-cash impairment impact of ($1.107 billion), or ($0.91) per diluted share

  • Adjusted EPS of $1.10 per diluted share - up 11% from 2019

  • Cash flow from operations (CFFO) of $3.496 billion – down approximately $200 million from 2019 primarily due to the Transco rate case refund impact

  • Available funds from operations (AFFO) of $3.638 billion increased by 1% over 2019

  • Adjusted EBITDA of $5.105 billion - up $90 million or 2%

  • DCF of $3.356 billion - up $59 million or 2% over 2019

  • Record gathering volumes of 13.2 Bcf/d; record contracted transmission capacity of 22.2 Bcf/d

  • Debt-to-Adjusted EBITDA at quarter end: 4.35x, favorable to guidance

  • Expect strong natural gas market fundamentals to drive continued growth in 2021

4Q 2020 results demonstrate stability despite ongoing external volatility

  • Net income of $115 million, or $0.09 per diluted share, which includes net non-cash impairment impact of ($245 million), or ($0.20) per diluted share

  • Adjusted EPS of $0.31 per diluted share - up 29% vs. 4Q '19

  • CFFO of $1.114 billion - up $123 million or 12% over 4Q '19

  • AFFO of $983 million - up 2% over 4Q '19

  • Adjusted EBITDA of $1.336 billion - up $52 million or 4% over 4Q '19

  • DCF of $926 million - up $98 million or 12% over 4Q '19

  • Dividend coverage ratio is 1.91x

CEO Perspective

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

"Williams established all-time record results in 2020, demonstrating how durable our business can be against multiple headwinds faced by our industry including the COVID-19 pandemic, major customer bankruptcies and a highly active hurricane season, among other factors. We surpassed guidance midpoints in our key financial metrics and generated free cash flow, driven by strong operations with records for both gathered volumes and contracted transmission capacity. Looking ahead to 2021, we believe our continued operating efficiencies combined with a focus on safety performance and environmental stewardship positions Williams to generate long-term sustainable value. Our business strategy is centered on the economic and environmental benefits of natural gas and its ability to accelerate emissions reductions in a pragmatic and cost-effective way. In addition to implementing aggressive and actionable plans to reduce our own emissions by 2030, we are pursuing a broader clean energy strategy that leverages our best-in-class pipeline transportation and storage systems to integrate solar, renewable natural gas, hydrogen and other emerging opportunities.

"Over the past year, our employees have truly demonstrated our safety-driven culture by taking care to protect themselves and others during the pandemic while at the same time efficiently completing projects that deliver clean, affordable energy to key markets ahead of schedule. I am incredibly proud of the around-the-clock work of our employees and their unwavering focus on running one of the nation’s largest energy infrastructure networks with the high level of dependability that consumers have come to expect – reliability that was particularly evident on our gas transmission systems during the severe cold weather event that gripped much of the country last week. Our production supplies in the Northeast and along the Gulf Coast as well as our network of interconnections with other pipelines and strategic storage reserves ensured we were able to meet our commitments and deliver scheduled supplies with no issue. The resiliency of our natural gas network allows us to meet energy demand in the most cost-effective, reliable way possible and demonstrates the importance of natural gas in our country’s energy mix."

Williams Summary Financial Information

4Q

Full Year

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.

2020

2019

2020

2019

GAAP Measures

Net Income

$115

$138

$208

$862

Net Income Per Share

$0.09

$0.11

$0.17

$0.71

Cash Flow From Operations (1)

$1,114

$991

$3,496

$3,693

Non-GAAP Measures (2)

Adjusted EBITDA

$1,336

$1,284

$5,105

$5,015

Adjusted Income

$382

$293

$1,333

$1,200

Adjusted Income Per Share

$0.31

$0.24

$1.10

$0.99

Distributable Cash Flow

$926

$828

$3,356

$3,297

Available Funds from Operations

$983

$962

$3,638

$3,611

Dividend Coverage Ratio (DCF basis)

1.91

x

1.80

x

1.73

x

1.79

x

Other

Debt-to-Adjusted EBITDA at Quarter End (3)

4.35

x

4.39

x

Capital Investments (4) (5)

$423

$408

$1,485

$2,476

(1) Decline due primarily to working capital changes of approximately $284 million of rate refunds related to settlement of Transco's general rate case paid in July net of approximately $95 million collected from January through June 2020.

(2) Schedules reconciling Adjusted Income, Adjusted EBITDA, Distributable Cash Flow, 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.

(3) 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.

(4) YTD 2019 excludes $728 million (net of cash acquired) for the purchase of the remaining 38% of UEOM as this amount was provided for at the close of the Northeast JV by our JV partner, CPPIB, in June 2019.

(5) Capital Investments includes increases to property, plant, and equipment, purchases of businesses, net of cash acquired, and purchases of and contributions to equity-method investments.

GAAP Measures

  • Fourth-quarter 2020 net income from continuing operations attributable to Williams declined slightly compared to the prior year as the benefits of significantly lower operating and administrative costs from cost-savings initiatives and a change in an employee benefit policy, and higher service revenues were more than offset by higher net impairment charges.

  • Improved service revenues reflect growth from Transco and Northwest Pipeline expansion projects and the benefit of certain minimum volume commitment (MVC) revenue in the West, partially offset by lower non-cash deferred revenue recognition at Gulfstar One and the impact of 2020 hurricane-related shut-ins in the Gulf of Mexico. The higher net impairment charges include the 2020 impairments of the Northeast Supply Enhancement project and our investment in Rocky Mountain Midstream, partially offset by the 2019 impairment of the Constitution Pipeline project, net of amounts attributable to noncontrolling interests in that project.

  • Full-year 2020 net income similarly benefited from significantly lower operating and administrative costs, including the absence of prior year severance charges and the benefit of a change in an employee benefit policy, while service revenues declined slightly as growth from our Northeast JV and pipeline expansion projects and the benefit of certain MVCs was more than offset by decreases in non-cash deferred revenue recognition at Gulfstar One and in the Barnett Shale, as well as the expiration of a Barnett Shale MVC in 2019.

  • The year-over-year change was also significantly impacted by net impairment charges, reflecting 2020 impairments related to equity-method investments, goodwill, and certain assets which resulted in a total $1.54 billion pre-tax charge, of which $65 million was attributable to noncontrolling interests. The 2019 period included similar impairment charges totaling $650 million, of which $209 million was attributable to noncontrolling interests, along with a $122 million gain on the sale of our Jackalope investment. The provision for income taxes changed favorably by $256 million primarily due to the change in pre-tax earnings.

  • Cash flow from operations for the fourth quarter of 2020 increased as compared to the same period of 2019 primarily due to net favorable changes in net working capital. The decrease for the full-year period was primarily due to working capital changes involving $284 million of rate refunds related to the settlement of Transco’s general rate case paid in July, net of approximately $95 million of that amount collected from January through June 2020.

Non-GAAP Measures

  • Adjusted EBITDA for the quarter improved over the prior year as increased service revenues from pipeline expansion projects, higher Northeast G&P JV EBITDA, and lower operating and administrative costs were partially offset by lower non-cash deferred revenue recognition at Gulfstar One and the impact of 2020 hurricane-related shut-ins in the Gulf of Mexico.

  • Full-year Adjusted EBITDA improved driven by lower operating and administrative costs and higher contributions from our Northeast G&P investments, partially offset by the previously described slight decline in service revenues and lower commodity margins.

  • Changes in Adjusted Income for the quarter and full-year periods were similarly driven by the changes in Adjusted EBITDA.

  • The increase in fourth quarter 2020 DCF compared to the prior year is driven by the increase in adjusted EBITDA and an income tax refund received. The increase in full-year DCF is also driven by higher adjusted EBITDA, as well as lower maintenance capital, partially offset by increased distributions to noncontrolling interests driven by our Northeast JV.

Business Segment Results & Form 10-K

Williams' operations are comprised of the following reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West and Other. For more information, see the company's 2020 Form 10-K.

Quarter-To-Date

Full Year

Amounts in millions

Modified EBITDA

Adjusted EBITDA

Modified EBITDA

Adjusted EBITDA

4Q 2020

4Q 2019

Change

4Q 2020

4Q 2019

Change

2020

2019

Change

2020

2019

Change

Transmission & Gulf of Mexico

$486

$284

$202

$644

$643

$1

$2,379

$2,175

$204

$2,552

$2,587

($35

)

Northeast G&P

363

367

(4

)

406

377

29

1,489

1,314

175

1,535

1,341

194

West

283

239

44

277

263

14

998

952

46

990

1,064

(74

)

Other

(23

)

5

(28

)

9

1

8

(15

)

6

(21

)

28

23

5

Totals

$1,109

$895

$214

$1,336

$1,284

$52

$4,851

$4,447

$404

$5,105

$5,015

$90

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

  • Fourth-quarter 2020 Modified and Adjusted EBITDA benefited from lower operating and administrative costs, partially offset by decreased service revenues from lower non-cash deferred revenue amortization at Gulfstar One and the impact of 2020 hurricane-related shut-ins, partially offset by Transco expansion projects placed in service.

  • Full-year Modified and Adjusted EBITDA also benefited from lower operating and administrative costs, partially offset by similar decreases in service revenues.

  • Modified EBITDA for the comparative periods benefited from the absence of both 2019 severance charges and the 2019 impairment of the Constitution Pipeline project, partially offset by the 2020 impairment of the Northeast Supply Enhancement project. Both comparative periods reflect the reversal of previously capitalized costs, while 2020 also benefited from a change in employee benefit policy. These items have been excluded from Adjusted EBITDA.

Northeast G&P

  • Fourth-quarter 2020 Modified and Adjusted EBITDA reflect lower operating and administrative costs and higher contributions from equity-method investments. Full-year 2020 Modified and Adjusted EBITDA also reflect lower operating and administrative costs and higher contributions from equity-method investments, as well as increased service revenues associated with higher volumes. The full-year revenue comparison also benefited from the additional ownership in Utica East Ohio Midstream following the March 2019 acquisition and contribution to our Northeast JV.

  • Modified EBITDA for both periods includes our share of impairments at equity-method investees and the benefit of a 2020 change in employee benefit policy, while the full-year comparison reflects the absence of 2019 severance charges. These items are all excluded from Adjusted EBITDA.

  • Excluding Blue Racer volumes for fourth-quarter 2020 operating stats, Northeast G&P gross gathering volumes for fourth-quarter 2020, including 100% of operated equity-method investments, increased by 7% over the same period in 2019 and gross processing plant inlet volumes for fourth-quarter 2020 increased by 9% over the same period in 2019.

West

  • The changes in fourth-quarter 2020 Modified and Adjusted EBITDA reflect higher service revenues associated with certain MVCs and higher rates partially offset by lower volumes, as well as reduced operating and administrative costs. The changes in full-year 2020 Modified and Adjusted EBITDA reflect decreases in non-cash deferred revenue recognition in the Barnett Shale, as well as the expiration of the Barnett Shale MVC in 2019, partially offset by lower operating and administrative costs. The benefit of higher MVCs was more than offset by the impact of lower volumes.

  • Modified EBITDA for the quarter and full-year period also benefited from the absence of prior year impairment charges, as well as the benefit of a change in employee benefit policy. The full-year comparison also reflects the absence of prior-year severance charges. All of these items are excluded from Adjusted EBITDA.

2021 Financial Guidance

The company expects 2021 Adjusted EBITDA between $5.05 billion and $5.35 billion. The company also expects 2021 growth capex between $1 billion to $1.2 billion and leverage ratio of 4.25x, providing visibility to the company’s 4.20x leverage metric objective. Importantly, Williams also anticipates it will generate positive free cash flow (after capex and dividends), allowing it to retain financial flexibility.

Williams' Fourth-Quarter 2020 Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow

Williams' fourth-quarter 2020 earnings presentation will be posted at www.williams.com. The company’s fourth-quarter 2020 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Feb. 23, 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: http://www.directeventreg.com/registration/event/5346299

A webcast link to the conference call is available at www.williams.com. A replay of the webcast will be available on the website for at least 90 days following the event.

About Williams

Williams (NYSE: WMB) is committed to being the leader in providing infrastructure that safely delivers natural gas products 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 and storage 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. www.williams.com

The Williams Companies, Inc.

Consolidated Statement of Operations

Year Ended December 31,

2020

2019

2018

(Millions, except per-share amounts)

Revenues:

Service revenues

$

5,924

$

5,933

$

5,502

Service revenues – commodity consideration

129

203

400

Product sales

1,666

2,065

2,784

Total revenues

7,719

8,201

8,686

Costs and expenses:

Product costs

1,545

1,961

2,707

Processing commodity expenses

68

105

137

Operating and maintenance expenses

1,326

1,468

1,507

Depreciation and amortization expenses

1,721

1,714

1,725

Selling, general, and administrative expenses

466

558

569

Impairment of certain assets

182

464

1,915

Impairment of goodwill

187

Gain on sale of certain assets and businesses

2

(692

)

Other (income) expense – net

22

8

50

Total costs and expenses

5,517

6,280

7,918

Operating income (loss)

2,202

1,921

768

Equity earnings (losses)

328

375

396

Impairment of equity-method investments

(1,046

)

(186

)

(32

)

Other investing income (loss) – net

8

107

219

Interest incurred

(1,192

)

(1,218

)

(1,160

)

Interest capitalized

20

32

48

Other income (expense) – net

(43

)

33

92

Income (loss) from continuing operations before income taxes

277

1,064

331

Less: Provision (benefit) for income taxes

79

335

138

Income (loss) from continuing operations

198

729

193

Income (loss) from discontinued operations

(15

)

Net income (loss)

198

714

193

Less: Net income (loss) attributable to noncontrolling interests

(13

)

(136

)

348

Net income (loss) attributable to The Williams Companies, Inc

211

850

(155

)

Less: Preferred stock dividends

3

3

1

Net income (loss) available to common stockholders

$

208

$

847

$

(156

)

Amounts attributable to The Williams Companies, Inc. available to common stockholders:

Income (loss) from continuing operations

$

208

$

862

$

(156

)

Income (loss) from discontinued operations

(15

)

Net income (loss)

$

208

$

847

$

(156

)

Basic earnings (loss) per common share:

Income (loss) from continuing operations

$

.17

$

.71

$

(.16

)

Income (loss) from discontinued operations

(.01

)

Net income (loss)

$

.17

$

.70

$

(.16

)

Weighted-average shares (thousands)

1,213,631

1,212,037

973,626

Diluted earnings (loss) per common share:

Income (loss) from continuing operations

$

.17

$

.71

$

(.16

)

Income (loss) from discontinued operations

(.01

)

Net income (loss)

$

.17

$

.70

$

(.16

)

Weighted-average shares (thousands)

1,215,165

1,214,011

973,626

The Williams Companies, Inc.

Consolidated Balance Sheet

December 31,

2020

2019

(Millions, except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents

$

142

$

289

Trade accounts and other receivables

1,000

1,002

Allowance for doubtful accounts

(1

)

(6

)

Trade accounts and other receivables - net

999

996

Inventories

136

125

Other current assets and deferred charges

152

170

Total current assets

1,429

1,580

Investments

5,159

6,235

Property, plant, and equipment – net

28,929

29,200

Intangible assets – net of accumulated amortization

7,444

7,959

Regulatory assets, deferred charges, and other

1,204

1,066

Total assets

$

44,165

$

46,040

LIABILITIES AND EQUITY

...

Current liabilities:

Accounts payable

$

482

$

552

Accrued liabilities

944

1,276

Long-term debt due within one year

893

2,140

Total current liabilities

2,319

3,968

Long-term debt

21,451

20,148

Deferred income tax liabilities

1,923

1,782

Regulatory liabilities, deferred income, and other

3,889

3,778

Contingent liabilities and commitments

Equity:

Stockholders’ equity:

Preferred stock

35

35

Common stock ($1 par value; 1,470 million shares authorized at December 31, 2020 and December 31, 2019; 1,248 million shares issued at December 31, 2020 and 1,247 million shares issued at December 31, 2019)

1,248

1,247

Capital in excess of par value

24,371

24,323

Retained deficit

(12,748

)

(11,002

)

Accumulated other comprehensive income (loss)

(96

)

(199

)

Treasury stock, at cost (35 million shares of common stock)

(1,041

)

(1,041

)

Total stockholders’ equity

11,769

13,363

Noncontrolling interests in consolidated subsidiaries

2,814

3,001

Total equity

14,583

16,364

Total liabilities and equity

$

44,165

$

46,040

The Williams Companies, Inc.

Consolidated Statement of Cash Flows

Year Ended December 31,

2020

2019

2018

(Millions)

OPERATING ACTIVITIES:

Net income (loss)

$

198

$

714

$

193

Adjustments to reconcile to net cash provided (used) by operating activities:

Depreciation and amortization

1,721

1,714

1,725

Provision (benefit) for deferred income taxes

108

376

220

Equity (earnings) losses

(328

)

(375

)

(396

)

Distributions from unconsolidated affiliates

653

657

693

Gain on disposition of equity-method investments

(122

)

(Gain) on sale of certain assets and businesses

2

(692

)

(Gain) loss on deconsolidation of businesses

29

(203

)

Impairment of goodwill

187

Impairment of equity-method investments

1,046

186

32

Impairment of certain assets

182

464

1,915

Amortization of stock-based awards

52

57

55

Cash provided (used) by changes in current assets and liabilities:

Accounts receivable

(2

)

34

(36

)

Inventories

(11

)

5

(16

)

Other current assets and deferred charges

11

21

17

Accounts payable

(7

)

(46

)

(93

)

Accrued liabilities

(309

)

153

23

Other, including changes in noncurrent assets and liabilities

(5

)

(176

)

(144

)

Net cash provided (used) by operating activities

3,496

3,693

3,293

FINANCING ACTIVITIES:

Proceeds from long-term debt

3,899

767

3,926

Payments of long-term debt

(3,841

)

(909

)

(3,204

)

Proceeds from issuance of common stock

9

10

15

Proceeds from sale of partial interest in consolidated subsidiary

1,334

Common dividends paid

(1,941

)

(1,842

)

(1,386

)

Dividends and distributions paid to noncontrolling interests

(185

)

(124

)

(591

)

Contributions from noncontrolling interests

7

36

15

Payments for debt issuance costs

(20

)

(26

)

Other – net

(13

)

(17

)

(48

)

Net cash provided (used) by financing activities

(2,085

)

(745

)

(1,299

)

INVESTING ACTIVITIES:

Property, plant, and equipment:

Capital expenditures (1)

(1,239

)

(2,109

)

(3,256

)

Dispositions – net

(36

)

(40

)

(7

)

Contributions in aid of construction

37

52

411

Proceeds from sale of businesses, net of cash divested

(2

)

1,296

Purchases of businesses, net of cash acquired

(728

)

Proceeds from dispositions of equity-method investments

485

Purchases of and contributions to equity-method investments

(325

)

(453

)

(1,132

)

Other – net

5

(32

)

(37

)

Net cash provided (used) by investing activities

(1,558

)

(2,827

)

(2,725

)

Increase (decrease) in cash and cash equivalents

(147

)

121

(731

)

Cash and cash equivalents at beginning of year

289

168

899

Cash and cash equivalents at end of year

$

142

$

289

$

168

_________

(1) Increases to property, plant, and equipment

$

(1,160

)

$

(2,023

)

$

(3,021

)

Changes in related accounts payable and accrued liabilities

(79

)

(86

)

(235

)

Capital expenditures

$

(1,239

)

$

(2,109

)

$

(3,256

)

Transmission & Gulf of Mexico

(UNAUDITED)

2019

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

Regulated interstate natural gas transportation, storage, and other revenues (1)

$

658

$

650

$

682

$

690

$

2,680

$

692

$

676

$

686

$

702

$

2,756

Gathering, processing, and transportation revenues

128

121

117

113

479

99

78

85

86

348

Other fee revenues (1)

3

5

3

4

15

4

5

3

6

18

Commodity margins

8

7

6

4

25

3

1

4

4

12

Operating and administrative costs (1)

(197

)

(230

)

(209

)

(242

)

(878

)

(184

)

(189

)

(192

)

(192

)

(757

)

Other segment income (expenses) - net

(6

)

(7

)

22

22

31

4

2

(8

)

8

6

Impairment of certain assets (2)

(354

)

(354

)

(170

)

(170

)

Proportional Modified EBITDA of equity-method investments

42

44

44

47

177

44

42

38

42

166

Modified EBITDA

636

590

665

284

2,175

662

615

616

486

2,379

Adjustments

38

15

359

412

7

2

6

158

173

Adjusted EBITDA

$

636

$

628

$

680

$

643

$

2,587

$

669

$

617

$

622

$

644

$

2,552

Statistics for Operated Assets

Natural Gas Transmission

Transcontinental Gas Pipe Line

Avg. daily transportation volumes (Tbtu)

13.2

12.2

13.2

13.3

13.0

13.8

12.0

12.8

13.2

12.9

Avg. daily firm reserved capacity (Tbtu)

17.1

17.0

17.3

17.5

17.2

17.7

17.5

18.0

18.2

17.9

Northwest Pipeline LLC

Avg. daily transportation volumes (Tbtu)

2.7

2.0

1.9

2.7

2.3

2.6

1.9

1.8

2.5

2.2

Avg. daily firm reserved capacity (Tbtu)

3.1

3.0

3.0

3.0

3.0

3.0

3.0

3.0

2.9

3.0

Gulfstream - Non-consolidated

Avg. daily transportation volumes (Tbtu)

1.1

1.3

1.3

1.2

1.2

1.2

1.2

1.3

1.1

1.2

Avg. daily firm reserved capacity (Tbtu)

1.3

1.3

1.3

1.3

1.3

1.3

1.3

1.3

1.3

1.3

Gathering, Processing, and Crude Oil Transportation

Consolidated (3)

Gathering volumes (Bcf/d)

0.25

0.25

0.22

0.29

0.25

0.30

0.23

0.23

0.26

0.25

Plant inlet natural gas volumes (Bcf/d)

0.53

0.55

0.50

0.58

0.54

0.58

0.50

0.40

0.46

0.48

NGL production (Mbbls/d)

36

33

27

31

32

32

25

27

30

29

NGL equity sales (Mbbls/d)

7

9

5

6

7

5

4

5

5

5

Crude oil transportation volumes (Mbbls/d)

146

136

128

135

136

138

92

121

132

121

Non-consolidated (4)

Gathering volumes (Bcf/d)

0.35

0.38

0.36

0.35

0.36

0.35

0.31

0.26

0.30

0.30

Plant inlet natural gas volumes (Bcf/d)

0.35

0.39

0.36

0.35

0.36

0.35

0.31

0.25

0.30

0.30

NGL production (Mbbls/d)

24

27

24

26

25

24

23

17

21

21

NGL equity sales (Mbbls/d)

7

8

6

5

6

5

8

4

6

6

(1) Excludes certain amounts associated with revenues and operating costs for tracked or reimbursable charges.

(2) Our partners' $209 million share of the fourth-quarter 2019 impairment of the Constitution pipeline project is reflected outside of Modified EBITDA within Net income (loss) attributable to noncontrolling interests.

(3) Excludes volumes associated with equity-method investments that are not consolidated in our results.

(4) Includes 100% of the volumes associated with operated equity-method investments.

Northeast G&P

(UNAUDITED)

2019

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

Gathering, processing, transportation, and fractionation revenues

$

239

$

291

$

310

$

331

$

1,171

$

312

$

308

$

332

$

327

$

1,279

Other fee revenues (1)

23

21

23

24

91

25

25

22

24

96

Commodity margins

2

1

(1

)

2

1

1

1

1

4

Operating and administrative costs (1)

(83

)

(112

)

(100

)

(98

)

(393

)

(87

)

(86

)

(85

)

(84

)

(342

)

Other segment income (expenses) - net

(4

)

3

(1

)

(2

)

(4

)

(4

)

1

(9

)

Impairment of certain assets

(10

)

(10

)

(12

)

(12

)

Proportional Modified EBITDA of equity-method investments

122

103

108

121

454

120

126

121

106

473

Modified EBITDA

299

303

345

367

1,314

369

370

387

363

1,489

Adjustments

3

16

(2

)

10

27

1

(7

)

9

43

46

Adjusted EBITDA

$

302

$

319

$

343

$

377

$

1,341

$

370

$

363

$

396

$

406

$

1,535

Statistics for Operated Assets

Gathering and Processing

Consolidated (2)

Gathering volumes (Bcf/d)

4.05

4.16

4.33

4.41

4.24

4.27

4.14

4.47

4.36

4.31

Plant inlet natural gas volumes (Bcf/d)

0.63

1.04

1.16

1.33

1.04

1.24

1.22

1.36

1.45

1.32

NGL production (Mbbls/d)

44

58

92

106

76

92

85

114

111

101

NGL equity sales (Mbbls/d)

4

3

3

2

3

2

2

2

2

2

Non-consolidated (3)

Gathering volumes (Bcf/d)

4.27

4.08

4.35

4.47

4.29

4.40

4.68

4.94

5.11

4.78

(1) Excludes certain amounts associated with revenues and operating costs for reimbursable charges.

(2) Includes volumes associated with Susquehanna Supply Hub, the Northeast JV, and Utica Supply Hub, all of which are consolidated. The Northeast JV includes 100% of volumes handled by UEOM from the date of consolidation on March 18, 2019, but does not include volumes prior to that date as we did not operate UEOM.

(3) Includes 100% of the volumes associated with operated equity-method investments, including the Laurel Mountain Midstream partnership; and the Bradford Supply Hub and a portion of the Marcellus South Supply Hub within the Appalachia Midstream Services partnership. Beginning November 18, 2020, we operate Blue Racer. Blue Racer gathering volumes of 1.38 Bcf/d, plant inlet natural gas volumes of 0.95 Bcf/d, NGL production of 65 Mbbls/d, and NGL equity sales of 6 Mbbls/d have been excluded.

West

(UNAUDITED)

2019

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

Gathering, processing, transportation, storage, and fractionation revenues

$

344

$

355

$

307

$

302

$

1,308

$

299

$

297

$

288

$

320

$

1,204

Other fee revenues (1)

7

6

6

4

23

6

13

16

15

50

Commodity margins

19

18

24

33

94

2

30

28

25

85

Operating and administrative costs (1)

(125

)

(135

)

(116

)

(114

)

(490

)

(115

)

(111

)

(108

)

(105

)

(439

)

Other segment income (expenses) - net

(3

)

4

(5

)

6

2

(5

)

(7

)

(12

)

Impairment of certain assets

(12

)

(64

)

(24

)

(100

)

Proportional Modified EBITDA of equity-method investments

26

28

29

32

115

28

24

30

28

110

Modified EBITDA

256

212

245

239

952

215

253

247

283

998

Adjustments

14

75

(1

)

24

112

1

(1

)

(2

)

(6

)

(8

)

Adjusted EBITDA

$

270

$

287

$

244

$

263

$

1,064

$

216

$

252

$

245

$

277

$

990

Statistics for Operated Assets

Gathering and Processing

Consolidated (2)

Gathering volumes (Bcf/d)

3.42

3.53

3.61

3.51

3.52

3.43

3.40

3.28

3.19

3.33

Plant inlet natural gas volumes (Bcf/d)

1.41

1.52

1.56

1.44

1.48

1.26

1.33

1.31

1.13

1.25

NGL production (Mbbls/d)

62

59

48

46

54

35

51

71

39

49

NGL equity sales (Mbbls/d)

27

28

17

17

22

12

25

34

18

22

Non-consolidated (3)

Gathering volumes (Bcf/d)

0.17

0.15

0.21

0.27

0.20

0.20

0.24

0.28

0.30

0.25

Plant inlet natural gas volumes (Bcf/d)

0.17

0.14

0.21

0.26

0.20

0.20

0.23

0.28

0.29

0.25

NGL production (Mbbls/d)

7

1

18

22

12

17

23

26

26

23

NGL and Crude Oil Transportation volumes (Mbbls/d) (4)

254

269

250

238

253

227

142

156

147

168

(1) Excludes certain amounts associated with revenues and operating costs for reimbursable charges.

(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, including the Jackalope Gas Gathering System (sold in April 2019) and Rocky Mountain Midstream.

(4) Includes 100% of the volumes associated with operated equity-method investments, including the Overland Pass Pipeline Company and Rocky Mountain Midstream.

Capital Expenditures and Investments

(UNAUDITED)

2019

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

Capital expenditures:

Transmission & Gulf of Mexico

$

204

$

255

$

543

$

252

$

1,254

$

185

$

181

$

192

$

190

$

748

Northeast G&P

152

177

131

74

534

46

41

32

38

157

West

58

59

107

76

300

72

80

93

65

310

Other

8

6

5

2

21

3

5

8

8

24

Total (1)

$

422

$

497

$

786

$

404

$

2,109

$

306

$

307

$

325

$

301

$

1,239

Purchases of investments:

Transmission & Gulf of Mexico

$

$

12

$

3

$

1

$

16

$

1

$

1

$

34

$

1

$

37

Northeast G&P

47

61

34

63

205

27

30

47

174

278

West

52

70

82

28

232

2

5

3

10

Total

$

99

$

143

$

119

$

92

$

453

$

30

$

36

$

84

$

175

$

325

Summary:

Transmission & Gulf of Mexico

$

204

$

267

$

546

$

253

$

1,270

$

186

$

182

$

226

$

191

$

785

Northeast G&P

199

238

165

137

739

73

71

79

212

435

West

110

129

189

104

532

74

85

96

65

320

Other

8

6

5

2

21

3

5

8

8

24

Total

$

521

$

640

$

905

$

496

$

2,562

$

336

$

343

$

409

$

476

$

1,564

Capital investments:

Increases to property, plant, and equipment

$

418

$

559

$

730

$

316

$

2,023

$

254

$

327

$

331

$

248

$

1,160

Purchases of businesses, net of cash acquired

727

1

728

Purchases of investments

99

143

119

92

453

30

36

84

175

325

Total

$

1,244

$

702

$

850

$

408

$

3,204

$

284

$

363

$

415

$

423

$

1,485

(1) Increases to property, plant, and equipment

$

418

$

559

$

730

$

316

$

2,023

$

254

$

327

$

331

$

248

$

1,160

Changes in related accounts payable and accrued liabilities

4

(62

)

56

88

86

52

(20

)

(6

)

53

79

Capital expenditures

$

422

$

497

$

786

$

404

$

2,109

$

306

$

307

$

325

$

301

$

1,239

Contributions from noncontrolling interests

$

4

$

28

$

$

4

$

36

$

2

$

2

$

1

$

2

$

7

Contributions in aid of construction

$

10

$

8

$

7

$

27

$

52

$

14

$

5

$

8

$

10

$

37

Proceeds from sale of businesses, net of cash divested

$

(2

)

$

$

$

$

(2

)

$

$

$

$

$

Proceeds from sale of partial interest in consolidated subsidiary

$

$

1,330

$

$

4

$

1,334

$

$

$

$

$

Proceeds from disposition of equity-method investments

$

$

485

$

$

$

485

$

$

$

$

$

Non-GAAP Measures

This news release and accompanying materials may include certain financial measures – Adjusted EBITDA, adjusted income ("earnings"), adjusted earnings per share, distributable cash flow, available funds from operations and dividend coverage ratio – that are non-GAAP financial measures as defined under the rules of the SEC.

Our segment performance measure, Modified EBITDA, is defined as net income (loss) before income (loss) from discontinued operations, income tax expense, net interest expense, equity earnings from equity-method investments, other net investing income, impairments of equity investments and goodwill, depreciation and amortization expense, and accretion expense associated with asset retirement obligations for nonregulated operations. We also add our proportional ownership share (based on ownership interest) of Modified EBITDA of equity-method investments.

Adjusted EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Such items are excluded from net income to determine adjusted income. Management believes these measure provide investors meaningful insight into results from ongoing operations.

Distributable cash flow is defined as Adjusted EBITDA less maintenance capital expenditures, cash portion of net interest expense, income attributable to or dividends/ distributions paid to noncontrolling interests and cash income taxes, and certain other adjustments that management believes affects the comparability of results. Adjustments for maintenance capital expenditures and cash portion of interest expense include our proportionate share of these items of our equity-method investments. We also calculate the ratio of distributable cash flow to the total cash dividends paid (dividend coverage ratio). This measure reflects Williams’ distributable cash flow relative to its actual cash dividends paid.

Available funds from operations is defined as cash flow from operations excluding the effect of changes in working capital and certain other changes in noncurrent assets and liabilities, reduced by preferred dividends and net distributions to noncontrolling interests.

This news release is accompanied by a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures. Management uses these financial measures because they are accepted financial indicators used by investors to compare company performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of assets and the cash that the business is generating.

Neither Adjusted EBITDA, adjusted income, distributable cash flow, nor available funds from operations are intended to represent cash flows for the period, nor are they presented as an alternative to net income or cash flow from operations. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles.

Reconciliation of Income (Loss) from Continuing Operations Attributable to The Williams Companies, Inc. to Non-GAAP Adjusted Income

(UNAUDITED)

2019

2020

(Dollars in millions, except per-share amounts)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

Income (loss) from continuing operations attributable to The Williams Companies, Inc. available to common stockholders

$

194

$

310

$

220

$

138

$

862

$

(518

)

$

303

$

308

$

115

$

208

Income (loss) from continuing operations - diluted earnings (loss) per common share (1)

$

.16

$

.26

$

.18

$

.11

$

.71

$

(.43

)

$

.25

$

.25

$

.09

$

.17

Adjustments:

Transmission & Gulf of Mexico

Constitution pipeline project development costs

$

$

1

$

1

$

1

$

3

$

$

$

$

$

Northeast Supply Enhancement project development costs

3

3

6

Impairment of certain assets (2)

354

354

170

170

Pension plan settlement charge

4

1

5

Adjustment of Transco’s regulatory asset for post-WPZ Merger state deferred income tax change consistent with filed rate case

2

2

Benefit of change in employee benefit policy

(3

)

(6

)

(13

)

(22

)

Reversal of costs capitalized in prior periods

15

1

16

10

1

11

Severance and related costs

22

14

3

39

1

1

(1

)

1

Total Transmission & Gulf of Mexico adjustments

38

15

359

412

7

2

6

158

173

Northeast G&P

Expenses associated with new venture

3

6

1

10

Share of early debt retirement gain at equity-method investment

(5

)

(5

)

Share of impairment of certain assets at equity-method investments

11

36

47

Pension plan settlement charge

1

1

Impairment of certain assets

10

10

12

12

Severance and related costs

10

(3

)

7

Benefit of change in employee benefit policy

(2

)

(2

)

(5

)

(9

)

Total Northeast G&P adjustments

3

16

(2

)

10

27

1

(7

)

9

43

46

West

Impairment of certain assets

12

64

24

100

Pension plan settlement charge

1

1

Benefit of change in employee benefit policy

(1

)

(2

)

(6

)

(9

)

Adjustment of gain on sale of Four Corners assets

2

2

Severance and related costs

11

(1

)

10

Total West adjustments

14

75

(1

)

24

112

1

(1

)

(2

)

(6

)

(8

)

Other

Adjustment of Transco’s regulatory asset for post-WPZ Merger state deferred income tax change consistent with filed rate case

12

12

Regulatory asset reversals from impaired projects

8

7

15

Reversal of costs capitalized in prior periods

3

3

Pension settlement charge

1

1

Accrual for loss contingencies associated with former operations

9

(5

)

4

24

24

Severance and related costs

1

1

Total Other adjustments

12

9

(4

)

17

11

32

43

Adjustments included in Modified EBITDA

29

129

21

389

568

9

(6

)

24

227

254

Adjustments below Modified EBITDA

Impairment of equity-method investments

74

(2

)

114

186

938

108

1,046

Impairment of goodwill (2)