Williams Companies (WMB) reported marginally weaker-than-expected first-quarter 2010 results, as the company’s decision to curtail drilling activity led to lower volumes. Earnings per share, excluding special items, came in at 36 cents, a penny below the Zacks Consensus Estimate.
However, comparisons (for the reported quarter) with the year-earlier period were favorable, reflecting significant improvement in both Williams Partners and Exploration & Production (E&P) results. Williams’ adjusted earnings per share jumped approximately 63.6% (from 22 cents to 36 cents), while revenues increased 35.1% (from $1.9 billion to $2.6 billion).
E&P
In the E&P business, total production was down approximately 9.6% year-over-year to 1,156 million cubic feet equivalent per day (MMcfe/d). Domestic volumes decreased 10.0% year-over-year to 1,102 MMcfe/d, reflecting the company’s decision to curtail drilling in 2009. For the first quarter of 2010, average daily net production from the Piceance, Powder River, and other basins were down approximately 11%, 10% and 7%, respectively, from the year-ago level.
However, a 19.1% increase in Williams’ domestic average realized natural gas price, from $4.2 per thousand cubic feet equivalent (Mcfe) to $5.0 per Mcfe, helped the company to more than offset the lower production volumes. As a result, segment operating profit more than doubled to $162 million in the first quarter of 2010.
Williams Partners
This segment reported an operating profit of $414 million, up significantly from the year-ago level of $252 million, primarily due to higher natural gas liquid (NGL) margins. NGL prices were considerably higher in the quarter under review, as against unusually low first quarter 2009 prices, thereby driving the profitability. This benefit was somewhat offset by an increase in costs due to higher average natural gas prices.
Other
Segment operating profit was $27 million, as against a loss of $60 million in the year-ago period. This year-over-year improvement can be attributed to higher production margins from the Canadian midstream and domestic olefins businesses.
Capital Expenditure & Balance Sheet
During the quarter, Williams spent $428 million on capital expenditure, down from $612 million in the corresponding period last year. As of Mar 31, 2010, the company had a long-term debt of $8.6 billion, representing debt-to-capitalization ratio of 53.2%. Williams has a current cash balance of about $1.6 billion.
Guidance
Management guided towards full-year 2010 earnings of $1.00 – $1.55 per share, while for 2011, it is likely to be between $1.15 and $2.50. Capital expenditure during 2010 is expected to be around $2.3 – $2.9 billion. Williams hopes to spend between $2.3 billion and $3.6 billion in 2011.
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