Williams Reports Third-Quarter 2020 Financial Results

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Williams (NYSE: WMB) today announced its unaudited financial results for the three and nine months ended September 30, 2020.

Strong 3Q 2020 results demonstrate stability and predictability of business; on track to meet 2020 guidance expectations

  • Net income of $308 million ($0.25 per diluted share), up $88 million over 3Q 19

  • Adjusted EPS of $0.27 per diluted share

  • Adjusted EBITDA of $1.267 billion

  • Year-to-date Adjusted EBITDA of $3.769 billion, continues to exceed year-to-date 2019

  • Debt-to-Adjusted EBITDA leverage ratio of 4.42x, on track to be below 2020 guidance of 4.4x by year end

Natural gas focused strategy delivers strong, predictable results; Northeast G&P segment hits record volumes

  • Record gathering and processing volumes drive Northeast G&P segment up 19% in Modified EBITDA and 17% in Adjusted EBITDA year-to-date 2020 vs. year-to-date 2019

  • Transmission & Gulf of Mexico segment Modified EBITDA and Adjusted EBITDA consistent year-to-date 2020 vs. year-to-date 2019 with Transco growth overcoming hurricane impacts

  • Stable and reliable customer base of utilities, power plants, LNG facilities and industrial plants supports firm-committed capacity on demand-pull regulated pipelines

  • Continued strong project execution on Bluestem Pipeline, Southeastern Trail and Leidy South

  • Year-to-date 2020 earnings boosted by structurally lower operating and administrative costs

  • Issued climate commitment to reduce emissions by 56% from 2005 levels by 2030, grow renewables and embrace emerging opportunities such as hydrogen

CEO Perspective

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

"The ongoing stability of our financial performance continues to distinguish Williams during a year marked by disruption and uncertainty. We captured tailwinds in the markets we serve – particularly in the Northeast with record volumes – and have delivered consistently strong quarterly results and cash flow throughout the year. Williams is well positioned to meet our pre-COVID 2020 guidance ranges for earnings, adjusted EBITDA and cash flow set in December 2019. We attribute the durability of Williams today to the premier positions of our natural gas infrastructure as well as the proactive measures we have taken in recent years to reduce leverage, increase stability and lower costs.

"I am proud of our employees for their extraordinary commitment during this most unusual year and hurricane season to safely run our operations while also successfully executing on projects like Bluestem Pipeline, and Transco’s Southeastern Trail and Leidy South expansion projects. Williams’ large-scale and irreplaceable natural gas transmission pipelines are supported by steady demand from a diverse base of utility, industrial and residential/commercial distribution customers that are fully contracted for years to come. Our gathering and processing business continues to benefit from our basin diversity, specifically in gas-directed areas where drilling remains active. In addition, we continue to grow services to key producers in the Gulf of Mexico deepwater where we have major dedications.

"From an ESG perspective, we took a major step in the third quarter by becoming the first U.S. midstream company to announce a climate commitment and set a near-term goal of 56% absolute reduction from 2005 levels in company-wide greenhouse gas emissions by 2030 by focusing on immediate, practical and affordable solutions that we can accomplish right here, right now. This puts Williams on a positive trajectory to achieve net zero carbon emissions by 2050. As the world moves to a low-carbon future, we believe natural gas is key to reducing emissions on a global scale while supporting the growth of renewables and helping our customers and stakeholders meet their energy needs and climate goals."

Williams Summary Financial Information

3Q

YTD

Amounts in millions, except ratios and per-share amounts. Per share

amounts are reported on a diluted basis. Net income amounts are

attributable to The Williams Companies, Inc. available to common

stockholders.

2020

2019

2020

2019

GAAP Measures

Net Income

$308

$220

$93

$724

Net Income Per Share

$0.25

$0.18

$0.08

$0.60

Cash Flow From Operations (1)

$452

$858

$2,382

$2,702

Non-GAAP Measures (2)

Adjusted EBITDA

$1,267

$1,274

$3,769

$3,731

Adjusted Income

$333

$321

$951

$907

Adjusted Income Per Share

$0.27

$0.26

$0.78

$0.75

Distributable Cash Flow

$772

$822

$2,430

$2,469

Dividend Coverage Ratio

1.59

x

1.78

x

1.67

x

1.79

x

Other

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

4.42

x

4.47

x

Capital Investments (4) (5)

$415

$849

$1,062

$2,068

(1) Decline due primarily to net working capital changes including payment in July 2020 of approximately $284 million of rate refunds

related to settlement of Transco's general rate case.

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

  • Third-quarter 2020 net income improved compared to the prior year reflecting the benefit of significantly lower operating and administrative costs from cost-savings initiatives, the absence of prior year severance charges, and a change in an employee benefit policy, as well as the absence of prior year impairments of equity-method investments.

  • These improvements were partially offset by slightly lower service revenue reflecting lower non-cash deferred revenue recognition at Gulfstar One and the impact of 2020 hurricane-related shut-ins in the Gulf of Mexico, partially offset by growth in our Northeast JV and Transco expansion projects, as well as the absence of a favorable cumulative adjustment in third quarter 2019 associated with Transco's rate case settlement and unfavorable changes in other expenses including the reversal of both costs capitalized in prior periods and certain regulatory assets.

  • Year-to-date 2020 net income similarly benefited from significantly lower operating and administrative costs, while service revenues declined slightly as growth from our Northeast JV and Transco expansion projects 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 minimum volume commitment ("MVC") in 2019.

  • The year-to-date change was also significantly impacted by first-quarter 2020 impairments of equity-method investments and goodwill, which resulted in a total $1.2 billion pre-tax charge, of which $65 million was attributable to noncontrolling interests. The 2019 year-to-date period included impairments of assets and equity-method investments totaling $262 million and a $122 million gain on the sale of our Jackalope investment. The provision for income taxes changed favorably by $220 million primarily due to the change in pre-tax earnings.

  • Cash flow from operations for the third quarter of 2020 decreased as compared to the same period of 2019 primarily due to the July 1, 2020, payment of rate refunds by Transco related to increased rates collected since March 2019 in its recently completed rate case and other changes in net working capital.

Non-GAAP Measures

  • Adjusted EBITDA for the quarter was consistent with the prior year as increased service revenues from growth in our Northeast JV and Transco expansion projects, lower operating and administrative costs and higher contributions from our Northeast G&P investments, were 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, as well as the absence of the favorable cumulative rate case adjustment in 2019.

  • Year-to-date 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.

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

  • The decrease in third quarter 2020 DCF compared to the prior year is driven by an increase in distributions to noncontrolling interests primarily due to growth in our Northeast JV and higher maintenance capital. Year-to-date DCF is lower, reflecting the absence of a prior year income tax refund and increased distributions to noncontrolling interests, partially offset by increased Adjusted EBITDA and lower maintenance capital.

Business Segment Results & Form 10-Q

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 third-quarter 2020 Form 10-Q.

Quarter-To-Date

Year-To-Date

Amounts in millions

Modified EBITDA

Adjusted EBITDA

Modified EBITDA

Adjusted EBITDA

3Q 2020

3Q 2019

Change

3Q 2020

3Q 2019

Change

2020

2019

Change

2020

2019

Change

Transmission & Gulf of Mexico

$616

$665

($49)

$622

$680

($58)

$1,893

$1,891

$2

$1,908

$1,944

($36)

Northeast G&P

387

345

42

396

343

53

1,126

947

179

1,129

964

165

West

247

245

2

245

244

1

715

713

2

713

801

(88)

Other

(7)

(2)

(5)

4

7

(3)

8

1

7

19

22

(3)

Totals

$1,243

$1,253

($10)

$1,267

$1,274

($7)

$3,742

$3,552

$190

$3,769

$3,731

$38

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

  • Third-quarter 2020 Modified and Adjusted EBITDA reflect the absence of the favorable cumulative rate case adjustment in 2019. In addition to these rate case impacts, service revenues for the quarter were down as lower non-cash deferred revenue amortization at Gulfstar One and the impact of 2020 hurricane-related shut-ins were partially offset by Transco expansion projects placed in service.

  • Year-to-date Modified and Adjusted EBITDA also saw decreased service revenues as lower non-cash deferred revenue amortization at Gulfstar One and the impact of 2020 shut-ins were partially offset by Transco expansion projects placed in service and new production in the Eastern Gulf. Year-to-date 2020 also benefited from lower operating and administrative costs.

  • Modified EBITDA for the comparative periods benefited from the absence of 2019 severance charges, while both comparative periods reflect the reversal of previously capitalized costs. These items have been excluded from Adjusted EBITDA.

Northeast G&P

  • Third-quarter and year-to-date 2020 Modified and Adjusted EBITDA reflect increased service revenues due to record gathering, processing and NGL production volumes. The year-to-date revenue comparison also benefited from the additional ownership in Utica East Ohio Midstream following the March 2019 acquisition and contribution to our Northeast JV.

  • Both comparative periods also reflect the benefit of cost reduction efforts and higher contributions from several equity-method investments including the Marcellus South system, Bradford system and Caiman II.

  • Gross gathering volumes for third-quarter 2020, including 100% of operated equity-method investments, increased by 8% over the same period in 2019. Gross processing plant inlet volumes for third-quarter 2020 increased by 17% over the same period in 2019.

West

  • The changes in third-quarter 2020 Modified and Adjusted EBITDA reflect slightly lower service revenues offset by reduced operating and administrative costs. The changes in year-to-date 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.

  • Modified EBITDA for the year-to-date period also benefited from the absence of prior year impairment and severance charges, which are excluded from Adjusted EBITDA.

2020 Financial Guidance

The company continues to expect 2020 Adjusted EBITDA in the lower half of its guidance range of between $4.95 billion and $5.25 billion. The company also continues to expect 2020 growth capex of $1 billion to $1.2 billion, down from the original guidance range of $1.1 billion to $1.3 billion, and 2020 Distributable Cash Flow toward the midpoint of the guidance range.

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

Williams' third-quarter 2020 earnings presentation will be posted at www.williams.com. The company’s third-quarter 2020 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Nov. 3, at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). A limited number of phone lines will be available at (833) 350-1330. International callers should dial (778) 560-2598. The conference ID is 5398490. 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 Income

(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2020

2019

2020

2019

(Millions, except per-share amounts)

Revenues:

Service revenues.......................................................................................

$

1,479

$

1,495

$

4,399

$

4,424

Service revenues – commodity consideration.......................................................................................

40

38

93

158

Product sales.......................................................................................

414

466

1,135

1,512

Total revenues.....................................................................................

1,933

1,999

5,627

6,094

Costs and expenses:

Product costs.......................................................................................

380

434

1,047

1,442

Processing commodity expenses.......................................................................................

21

19

49

83

Operating and maintenance expenses.......................................................................................

336

364

993

1,091

Depreciation and amortization expenses.......................................................................................

426

435

1,285

1,275

Selling, general, and administrative expenses.......................................................................................

114

130

354

410

Impairment of certain assets.......................................................................................

76

Impairment of goodwill.......................................................................................

187

Other (income) expense – net.......................................................................................

15

(11)

28

30

Total costs and expenses.....................................................................................

1,292

1,371

3,943

4,407

Operating income (loss)..........................................................................................

641

628

1,684

1,687

Equity earnings (losses)..........................................................................................

106

93

236

260

Impairment of equity-method investments..........................................................................................

(114)

(938)

(186)

Other investing income (loss) – net..........................................................................................

2

7

6

132

Interest incurred..........................................................................................

(298)

(303)

(898)

(915)

Interest capitalized..........................................................................................

6

7

16

27

Other income (expense) – net..........................................................................................

(23)

1

(14)

19

Income (loss) before income taxes..........................................................................................

434

319

92

1,024

Provision (benefit) for income taxes..........................................................................................

111

77

24

244

Net income (loss).......................................................................................

323

242

68

780

Less: Net income (loss) attributable to noncontrolling interests..................................................................................

14

21

(27)

54

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

309

221

95

726

Preferred stock dividends..........................................................................................

1

1

2

2

Net income (loss) available to common stockholders..........................................................................................

$

308

$

220

$

93

$

724

Basic earnings (loss) per common share:

Net income (loss)...................................................................................

$

.25

$

.18

$

.08

$

.60

Weighted-average shares (thousands)...................................................................................

1,213,912

1,212,270

1,213,512

1,211,938

Diluted earnings (loss) per common share:

Net income (loss)...................................................................................

$

.25

$

.18

$

.08

$

.60

Weighted-average shares (thousands)...................................................................................

1,215,335

1,214,165

1,214,757

1,213,943

The Williams Companies, Inc.

Consolidated Balance Sheet

(Unaudited)

September 30,
2020

December 31,
2019

(Millions, except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents.....................................................................................................................................

$

70

$

289

Trade accounts and other receivables.................................................................................................................................

1,021

1,002

Alowance for doubtful accounts.....................................................................................................................................

(10)

(6)

Trade accounts and other receivables – net................................................................................................................................

1,011

996

Inventories.....................................................................................................................................

157

125

Other current assets and deferred charges.....................................................................................................................................

165

170

Total current assets................................................................................................................................

1,403

1,580

Investments.......................................................................................................................................

5,176

6,235

Property, plant, and equipment.......................................................................................................................................

42,384

41,510

Accumulated depreciation and amortization.......................................................................................................................................

(13,277)

(12,310)

Property, plant, and equipment – net...................................................................................................................................

29,107

29,200

Intangible assets – net of accumulated amortization.......................................................................................................................................

7,531

7,959

Regulatory assets, deferred charges, and other.......................................................................................................................................

1,103

1,066

Total assets................................................................................................................................

$

44,320

$

46,040

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable.....................................................................................................................................

$

464

$

552

Accrued liabilities.....................................................................................................................................

965

1,276

Commercial paper.....................................................................................................................................

40

Long-term debt due within one year.....................................................................................................................................

392

2,140

Total current liabilities................................................................................................................................

1,861

3,968

Long-term debt.......................................................................................................................................

21,951

20,148

Deferred income tax liabilities.......................................................................................................................................

1,846

1,782

Regulatory liabilities, deferred income, and other.......................................................................................................................................

3,764

3,778

Contingent liabilities

Equity:

Stockholders’ equity:

Preferred stock.............................................................................................................................

35

35

Common stock ($1 par value; 1,470 million shares authorized at September 30,

2020 and December 31, 2019; 1,248 million shares issued at September 30,

2020 and 1,247 million shares issued at December 31, 2019).............................................................................................................................

1,248

1,247

Capital in excess of par value................................................................................................................................

24,359

24,323

Retained deficit................................................................................................................................

(12,376)

(11,002)

Accumulated other comprehensive income (loss)................................................................................................................................

(160)

(199)

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

(1,041)

(1,041)

Total stockholders’ equity............................................................................................................................

12,065

13,363

Noncontrolling interests in consolidated subsidiaries.....................................................................................................................................

2,833

3,001

Total equity................................................................................................................................

14,898

16,364

Total liabilities and equity............................................................................................................................

$

44,320

$

46,040

The Williams Companies, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

Nine Months Ended
September 30,

2020

2019

(Millions)

OPERATING ACTIVITIES:

Net income (loss).................................................................................................................

$

68

$

780

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

Depreciation and amortization........................................................................................

1,285

1,275

Provision (benefit) for deferred income taxes.................................................................

52

268

Equity (earnings) losses...................................................................................................

(236)

(260)

Distributions from unconsolidated affiliates...................................................................

466

458

Gain on disposition of equity-method investments.........................................................

(122)

Impairment of goodwill...................................................................................................

187

Impairment of equity-method investments.....................................................................

938

186

Impairment of certain assets............................................................................................

76

Amortization of stock-based awards...............................................................................

39

44

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

Accounts receivable....................................................................................................

(18)

159

Inventories...................................................................................................................

(33)

7

Other current assets and deferred charges..................................................................

(15)

(10)

Accounts payable........................................................................................................

(77)

(76)

Accrued liabilities.......................................................................................................

(286)

76

Other, including changes in noncurrent assets and liabilities.........................................

12

(159)

Net cash provided (used) by operating activities........................................................

2,382

2,702

FINANCING ACTIVITIES:

Proceeds from (payments of) commercial paper – net........................................................

40

(4)

Proceeds from long-term debt..............................................................................................

3,898

736

Payments of long-term debt.................................................................................................

(3,836)

(904)

Proceeds from issuance of common stock...........................................................................

9

10

Proceeds from sale of partial interest in consolidated subsidiary........................................

1,330

Common dividends paid......................................................................................................

(1,456)

(1,382)

Dividends and distributions paid to noncontrolling interests..............................................

(147)

(86)

Contributions from noncontrolling interests........................................................................

5

32

Payments for debt issuance costs.........................................................................................

(20)

Other – net............................................................................................................................

(12)

(11)

Net cash provided (used) by financing activities........................................................

(1,519)

(279)

INVESTING ACTIVITIES:

Property, plant, and equipment:

Capital expenditures (1)...................................................................................................

(938)

(1,705)

Dispositions – net............................................................................................................

(30)

(32)

Contributions in aid of construction....................................................................................

27

25

Purchases of businesses, net of cash acquired.....................................................................

(728)

Proceeds from dispositions of equity-method investments.................................................

485

Purchases of and contributions to equity-method investments...........................................

(150)

(361)

Other – net............................................................................................................................

9

(28)

Net cash provided (used) by investing activities........................................................

(1,082)

(2,344)

Increase (decrease) in cash and cash equivalents...................................................................

(219)

79

Cash and cash equivalents at beginning of year.....................................................................

289

168

Cash and cash equivalents at end of period............................................................................

$

70

$

247

_____________

(1) Increases to property, plant, and equipment.....................................................................

$

(912)

$

(1,707)

Changes in related accounts payable and accrued liabilities.............................................

(26)

2

Capital expenditures...........................................................................................................

$

(938)

$

(1,705)

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

Year

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

$

658

$

650

$

682

$

690

$

2,680

$

692

$

676

$

686

$

2,054

Gathering, processing, and transportation revenues

128

121

117

113

479

99

78

85

262

Other fee revenues (1)

3

5

3

4

15

4

5

3

12

Commodity margins

8

7

6

4

25

3

1

4

8

Operating and administrative costs (1)

(197)

(230)

(209)

(242)

(878)

(184)

(189)

(192)

(565)

Other segment income (expenses) - net

(6)

(7)

22

22

31

4

2

(8)

(2)

Impairment of certain assets (2)

(354)

(354)

Proportional Modified EBITDA of equity-method investments

42

44

44

47

177

44

42

38

124

Modified EBITDA

636

590

665

284

2,175

662

615

616

1,893

Adjustments

38

15

359

412

7

2

6

15

Adjusted EBITDA

$

636

$

628

$

680

$

643

$

2,587

$

669

$

617

$

622

$

1,908

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

12.9

Avg. daily firm reserved capacity (Tbtu)

17.1

17.0

17.3

17.5

17.2

17.7

17.5

18.0

17.7

Northwest Pipeline LLC

Avg. daily transportation volumes (Tbtu)

2.7

2.0

1.9

2.7

2.3

2.6

1.9

1.8

2.1

Avg. daily firm reserved capacity (Tbtu)

3.1

3.0

3.0

3.0

3.0

3.0

3.0

3.0

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

1.2

Avg. daily firm reserved capacity (Tbtu)

1.3

1.3

1.3

1.3

1.3

1.3

1.3

1.3

1.3

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

0.25

Plant inlet natural gas volumes (Bcf/d)

0.53

0.55

0.50

0.58

0.54

0.58

0.50

0.40

0.49

NGL production (Mbbls/d)

36

33

27

31

32

32

25

27

28

NGL equity sales (Mbbls/d)

7

9

5

6

7

5

4

5

5

Crude oil transportation volumes (Mbbls/d)

146

136

128

135

136

138

92

121

117

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

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

NGL production (Mbbls/d)

24

27

24

26

25

24

23

17

21

NGL equity sales (Mbbls/d)

7

8

6

5

6

5

8

4

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

Year

Gathering, processing, transportation, and fractionation revenues

$

239

$

291

$

310

$

331

$

1,171

$

312

$

308

$

332

$

952

Other fee revenues (1)

23

21

23

24

91

25

25

22

72

Commodity margins

2

1

(1)

2

1

1

1

3

Operating and administrative costs (1)

(83)

(112)

(100)

(98)

(393)

(87)

(86)

(85)

(258)

Other segment income (expenses) - net

(4)

3

(1)

(2)

(4)

(4)

(10)

Impairment of certain assets

(10)

(10)

Proportional Modified EBITDA of equity-method investments

122

103

108

121

454

120

126

121

367

Modified EBITDA

299

303

345

367

1,314

369

370

387

1,126

Adjustments

3

16

(2)

10

27

1

(7)

9

3

Adjusted EBITDA

$

302

$

319

$

343

$

377

$

1,341

$

370

$

363

$

396

$

1,129

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

4.29

Plant inlet natural gas volumes (Bcf/d)

0.63

1.04

1.16

1.33

1.04

1.24

1.22

1.36

1.27

NGL production (Mbbls/d)

44

58

92

106

76

92

85

114

97

NGL equity sales (Mbbls/d)

4

3

3

2

3

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

4.67

(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. Volumes handled by Blue Racer Midstream (gathering and processing), which we do not operate, are not included.

West

(UNAUDITED)

2019

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

2nd Qtr

3rd Qtr

Year

Gathering, processing, transportation, storage, and fractionation revenues

$

344

$

355

$

307

$

302

$

1,308

$

299

$

297

$

288

$

884

Other fee revenues (1)

7

6

6

4

23

6

13

16

35

Commodity margins

19

18

24

33

94

2

30

28

60

Operating and administrative costs (1)

(125)

(135)

(116)

(114)

(490)

(115)

(111)

(108)

(334)

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

82

Modified EBITDA

256

212

245

239

952

215

253

247

715

Adjustments

14

75

(1)

24

112

1

(1)

(2)

(2)

Adjusted EBITDA

$

270

$

287

$

244

$

263

$

1,064

$

216

$

252

$

245

$

713

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

3.37

Plant inlet natural gas volumes (Bcf/d)

1.41

1.52

1.56

1.44

1.48

1.26

1.33

1.31

1.30

NGL production (Mbbls/d)

62

59

48

46

54

35

51

71

53

NGL equity sales (Mbbls/d)

27

28

17

17

22

12

25

34

23

Non-consolidated (3)

Gathering volumes (Bcf/d)

0.17

0.15

0.21

0.27

0.20

0.20

0.24

0.28

0.24

Plant inlet natural gas volumes (Bcf/d)

0.17

0.14

0.21

0.26

0.20

0.20

0.23

0.28

0.24

NGL production (Mbbls/d)

7

1

18

22

12

17

23

26

22

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

254

269

250

238

253

227

142

156

175

(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

Year

Capital expenditures:

Transmission & Gulf of Mexico

$

204

$

255

$

543

$

252

$

1,254

$

185

$

181

$

192

$

558

Northeast G&P

152

177

131

74

534

46

41

32

119

West

58

59

107

76

300

72

80

93

245

Other

8

6

5

2

21

3

5

8

16

Total (1)

$

422

$

497

$

786

$

404

$

2,109

$

306

$

307

$

325

$

938

Purchases of investments:

Transmission & Gulf of Mexico

$

$

12

$

3

$

1

$

16

$

1

$

1

$

34

$

36

Northeast G&P

47

61

34

63

205

27

30

47

104

West

52

70

82

28

232

2

5

3

10

Total

$

99

$

143

$

119

$

92

$

453

$

30

$

36

$

84

$

150

Summary:

Transmission & Gulf of Mexico

$

204

$

267

$

546

$

253

$

1,270

$

186

$

182

$

226

$

594

Northeast G&P

199

238

165

137

739

73

71

79

223

West

110

129

189

104

532

74

85

96

255

Other

8

6

5

2

21

3

5

8

16

Total

$

521

$

640

$

905

$

496

$

2,562

$

336

$

343

$

409

$

1,088

Capital investments:

Increases to property, plant, and equipment

$

418

$

559

$

730

$

316

$

2,023

$

254

$

327

$

331

$

912

Purchases of businesses, net of cash acquired

727

1

728

Purchases of investments

99

143

119

92

453

30

36

84

150

Total

$

1,244

$

702

$

850

$

408

$

3,204

$

284

$

363

$

415

$

1,062

(1) Increases to property, plant, and equipment

$

418

$

559

$

730

$

316

$

2,023

$

254

$

327

$

331

$

912

Changes in related accounts payable and accrued liabilities

4

(62)

56

88

86

52

(20)

(6)

26

Capital expenditures

$

422

$

497

$

786

$

404

$

2,109

$

306

$

307

$

325

$

938

Contributions from noncontrolling interests

$

4

$

28

$

$

4

$

36

$

2

$

2

$

1

$

5

Contributions in aid of construction

$

10

$

8

$

7

$

27

$

52

$

14

$

5

$

8

$

27

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 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. Management believes this measure provides 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.

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, nor distributable cash flow 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 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

Year

Income (loss) from continuing operations attributable to The

Williams Companies, Inc. available to common stockholders

$

194

$

310

$

220

$

138

$

862

$

(518)

$

303

$

308

$

93

Income (loss) from continuing operations - diluted earnings

(loss) per common share (1)

$

.16

$

.26

$

.18

$

.11

$

.71

$

(.43)

$

.25

$

.25

$

.08

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

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)

(9)

Reversal of costs capitalized in prior periods

15

1

16

10

10

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

15

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 investment

11

11

Pension plan settlement charge

1

1

Impairment of certain assets

10

10

Severance and related costs

10

(3)

7

Benefit of change in employee benefit policy

(2)

(2)

(4)

Total Northeast G&P adjustments

3

16

(2)

10

27

1

(7)

9

3

West

Impairment of certain assets

12

64

24

100

Pension plan settlement charge

1

1

Benefit of change in employee benefit policy

(1)

(2)

(3)

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)

(2)

Other

Adjustment of Transco’s regulatory asset for post-WPZ Merger

state deferred income tax change consistent with filed rate case

12

12

Constitution pipeline project regulatory asset reversal

8

8

Reversal of costs capitalized in prior periods

3

3

Accrual for loss contingencies associated with former operations

9

(5)

4

Severance and related costs

1

1

Total Other adjustments

12

9

(4)

17

11

11

Adjustments included in Modified EBITDA

29

129

21

389

568

9

(6)

24

27

Adjustments below Modified EBITDA

Impairment of equity-method investments

74

(2)

114

186

938

938

Impairment of goodwill (2)

187

187

Share of impairment of goodwill at equity-method investment

78

78

Adjustment of gain on deconsolidation of certain Permian assets

2

2

Loss on deconsolidation of Constitution

27

27

Gain on sale of equity-method investments

(122)

(122)

Allocation of adjustments to noncontrolling interests

(1)

(210)

(211)

(65)

(65)

76

(125)

114

(183)

(118)

1,138

1,138

Total adjustments

105

4

135

206

450

1,147

(6)

24

1,165

Less tax effect for above items

(26)

(1)

(34)

(51)

(112)

(316)

8

1

(307)

Adjusted income from continuing operations available to

common stockholders

$

273

$

313

$

321

$

293

$

1,200

$

313

$

305

$

333

$

951

Adjusted income from continuing operations - diluted

earnings per common share (1)

$

.22

$

.26

$

.26

$

.24

$

.99

$

.26

$

.25

$

.27

$

.78

Weighted-average shares - diluted (thousands)

1,213,592

1,214,065

1,214,165

1,214,212

1,214,011

1,214,348

1,214,581

1,215,335

1,214,757

(1) The sum of earnings per share for the quarters may not equal the total earnings per share for the year due to changes in the weighted-average number of common shares outstanding.

(2) Our partners' $209 million share of the fourth-quarter 2019 impairment of the Constitution pipeline project and $65 million share of the first-quarter 2020 impairment of goodwill are reflected below in Allocation of adjustments to noncontrolling interests.

Reconciliation of Distributable Cash Flow (DCF)

(UNAUDITED)

2019

2020

(Dollars in millions, except coverage ratios)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

2nd Qtr

3rd Qtr

Year

The Williams Companies, Inc.

Reconciliation of GAAP "Net Income (Loss)" to Non-GAAP "Modified EBITDA", "Adjusted EBITDA" and "Distributable cash flow"

Net income (loss)

$

214

$

324

$

242

$

(66)

$

714

$

(570)

$

315

$

323

$

68

Provision (benefit) for income taxes

69

98

77

91

335

(204)

117

111

24

Interest expense

296

296

296

298

1,186

296

294

292

882

Equity (earnings) losses

(80)

(87)

(93)

(115)

(375)

(22)

(108)

(106)

(236)

Impairment of goodwill

187

187

Impairment of equity-method investments

74

(2)

114

186

938

938

Other investing (income) loss - net

(1)

(124)

(7)

25

(107)

(3)

(1)

(2)

(6)

Proportional Modified EBITDA of equity-method investments

190

175

181

200

746

192

192

189

573

Depreciation and amortization expenses

416

424

435

439

1,714

429

430

426

1,285

Accretion expense associated with asset retirement obligations for

nonregulated operations

9

8

8

8

33

10

7

10

27

(Income) loss from discontinued operations, net of tax

15

15

Modified EBITDA

1,187

1,112

1,253

895

4,447

1,253

1,246

1,243

3,742

EBITDA adjustments

29

129

21

389

568

9

(6)

24

27

Adjusted EBITDA

1,216

1,241

1,274

1,284

5,015

1,262

1,240

1,267

3,769

Maintenance capital expenditures (1)

(93)

(130)

(128)

(113)

(464)

(52)

(83)

(144)

(279)

Preferred dividends

(1)

(1)

(1)

(3)

(1)

(1)

(2)

Net interest expense - cash portion (2)

(304)

(302)

(301)

(306)

(1,213)

(304)

(304)

(301)

(909)

Cash taxes

3

85

(2)

86

(2)

(2)

Dividends and distributions paid to noncontrolling interests

(41)

(27)

(20)

(36)

(124)

(44)

(54)

(49)

(147)

Distributable cash flow

$

780

$

867

$

822

$

828

$

3,297

$

861

$

797

$

772

$

2,430

Common dividends paid

$

460

$

461

$

461

$

460

$

1,842

$

485

$

486

$

485

$

1,456

Coverage ratios:

Distributable cash flow divided by Common dividends paid

1.70

1.88

1.78

1.80

1.79

1.78

1.64

1.59

1.67

Net income (loss) divided by Common dividends paid

0.47

0.70

0.52

(0.14)

0.39

(1.18)

0.65

0.67

0.05

(1) Includes proportionate share of maintenance capital expenditures of equity-method investments.

(2) Includes proportionate share of interest expense of equity-method investments.

Reconciliation of "Net Income (Loss)" to "Modified EBITDA" and Non-GAAP "Adjusted EBITDA"

(UNAUDITED)

2019

2020

(Dollars in millions)

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

Year

1st Qtr

2nd Qtr

3rd Qtr

Year

Net income (loss)

$

214

$

324

$

242

$

(66)

$

714

$

(570)

$

315

$

323

$

68

Provision (benefit) for income taxes

69

98

77

91

335

(204)

117

111

24

Interest expense

296

296

296

298

1,186

296

294

292

882

Equity (earnings) losses

(80)

(87)

(93)

(115)

(375)

(22)

(108)

(106)

(236)

Impairment of goodwill

187

187

Impairment of equity-method investments

74

(2)

114

186

938

938

Other investing (income) loss - net

(1)

(124)

(7)

25

(107)

(3)

(1)

(2)

(6)

Proportional Modified EBITDA of equity-method

investments

190

175

181

200

746

192

192

189

573

Depreciation and amortization expenses

416