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S&P Revises Outlook on Williams to Positive, Affirms Ratings

The $6 billion debt reduction achieved by The Williams Companies over the last two years led Standard & Poor's Ratings Services to affirm the company's B+ corporate credit rating and that of its subsidiaries, Northwest Pipeline Corp., Transcontinental Gas Pipe Line Corp., and Williams Production RMT Co. and to revise its outlook on the companies to positive from stable.

"The positive outlook reflects the expectation that Williams' financial ratios will improve as a result of the significant debt reduction," said Standard & Poor's credit analyst Jeffrey Wolinsky. The Tulsa-based energy company had $7.7 billion of debt outstanding at the end of June.

S&P said it may raise its rating on Williams by one notch within the next one to two years if its forecast financial targets are achieved. It said Williams appears to be on the right track. However, the company's financial position remains highly leveraged and the financial performance of its power subsidiary remains uncertain.

Nevertheless, S&P cited an improving liquidity profile and the stability of William's FERC-regulated natural gas pipeline business as positives.

The company posted a solid second quarter with unaudited net income of $41.3 million, or 7 cents per share on a diluted basis, compared with a net loss of $18.2 million, or a loss of 3 cents per share, for second-quarter 2004. Year-to-date through June 30, Williams reported net income of $242.4 million, or 41 cents per share on a diluted basis, compared with a loss of $8.3 million, or a loss of 2 cents per share, for the first half of 2004. The improved results were mainly due to increased levels of natural gas production, higher net realized average prices, the continuation of favorable natural gas processing margins, higher gathering volumes, and lower interest expense and debt-retirement costs.

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