Low Natural Gas Prices Cause Williams' Profits to Tumble

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Researched by Industrial Info Resources (Sugar Land, Texas)--Natural gas producer and transporter Williams Companies Incorporated (NYSE:WMB) recently released earnings for the first quarter of the 2009 fiscal year. Lower prices of natural gas and natural gas liquids (NGL) helped dramatically reduce the company's net income, which fell from a $500 million profit in 1Q08 to a loss of $172 million in 1Q09.

"The average net realized price for U.S. production was 36% lower, and per-unit NGL margins dropped 69% from a year ago," said Chairman, President and CEO Steve Malcolm in a conference call regarding the earnings. Williams Companies is divided into three operating segments: Exploration & Production, Midstream Gas & Liquids, and Gas Pipeline. Although earnings from the Gas Pipeline segment remained relatively flat from last year, earnings in the other segments fell dramatically.

• Exploration & Production - earnings of $78 million, down 81% from 1Q08's $430 million
• Midstream Gas & Liquids - loss of $291 million, down 211% from 1Q08
• Gas Pipeline - earnings of $179 million, compared with earnings of $180 million in the same quarter of the previous year

These lower segment profits come in spite of increased production. Williams Companies' domestic and international production was up 19% year over year. In the first quarter of 2008, the company produced 96.7 billion cubic feet of natural gas, or 1.06 billion cubic feet per day. In 1Q09, this figure rose to 115.0 billion cubic feet, or 1.28 billion cubic feet per day.

Despite the current low price of natural gas, Williams Companies continues to implement large projects to expand the company's production, processing and transmission operations. Williams' capital expenditure for the whole of 2008 was $3.48 billion, and $484 million in 1Q09. Industrial Info is currently monitoring more than $2.9 billion of Williams Companies projects in the U.S. In March of this year, Williams kicked off construction of an NGL production train addition at the Echo Springs gas processing plant in Wamsutter, Wyoming. The expansion will add approximately 30,000 barrels per day of NGL production, roughly doubling the plant's current capacity. The project has an estimated total investment value of $375 million. Detailed information on this and more than $2.5 billion of other Williams Companies projects can be found in Industrial Info's North American Industrial Database.

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