Williams Results Short Of Estimates

Williams Companies (WMB: 22.16 -0.23 -1.03%) reported weaker-than-expected fourth-quarter results, primarily because of the company’s reduced drilling activity. Earnings per share, excluding mark-to-market adjustments, came in at 27 cents, 6 cents below the Zacks Consensus Estimate.

Compared to the year-earlier period, Williams’ adjusted earnings per share declined approximately 16%. However, revenue of $2.3 billion was up 11.6% from the fourth quarter 2008 level.

E&P

In the E&P business, total production was up approximately 2.0% year-over-year to 1,232 million cubic feet equivalent per day (MMcfe/d). Domestic volumes increased 1.8% year-over-year to 1,177 MMcfe/d, driven by strong contribution from the Piceance, Powder River and other basins. For the full-year 2009, average daily net production from the Piceance, Powder River, and other basins were up approximately 7%, 7% and 12%, respectively, from the year-ago level.

Strong domestic production growth helped the E&P segment to achieve operating profit of $115 million, compared with a segment loss of $27 million in the year-ago period. Additionally, the company’s domestic average realized natural gas price increased 2.5% to $4.5 per thousand cubic feet equivalent (Mcfe).

However, the primary reason for this turnaround was the absence of impairment charges of $129 million related to properties in the Arkoma Basin that were recorded in the fourth quarter of 2008. These positives were partially offset by higher depletion, depreciation and amortization expenses.

Midstream

Williams’ Midstream segment reported an operating profit of $269 million, more than double from the year-ago level, primarily due to higher natural gas liquid (NGL) and olefin prices and production. New volumes from Discovery’s Tahiti expansion and higher fee-based revenues were the other positive factors.

Total equity NGL sales volumes increased approximately 10.2% year-over-year to 314 million gallons, mainly due to the absence of hurricane-related unfavorable impacts in the Gulf region that hampered results during the fourth quarter of 2008.

Gas Pipeline

Operating profit in the Gas Pipeline segment was $169 million, up 7.6% from the fourth quarter of 2008. This year-over-year increase can be attributed to higher transportation revenues, partially offset by operating costs.

Capital Expenditure & Balance Sheet

During the quarter, Williams spent $558 million on capital expenditure, bringing the full-year total to $2.4 billion. As of Dec. 31, 2009, the company had a long-term debt of $8.3 billion, representing debt-to-capitalization ratio of 49.5%. Williams has a current cash balance of about $1.9 billion.

Company Guidance

Management guided towards full-year 2010 earnings of 80 cents - $1.90 per share, while for 2011, it is likely to be between $1.10 and $2.65. Capital expenditure during 2010 is expected to be around in the range of $2.1 – $2.8 billion. Williams hopes to spend between $1.9 billion and $3.5 billion in 2011.