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Williams Raises Earnings, Spending Forecasts

With its natural gas production 20% higher than at the same time a year ago and commodity prices up, Williams last week raised its 2008 and 2009 earnings and spending forecasts.

Williams produced 1.01 Bcf/d in the first three months of 2008, which was 20% higher than in the same period of 2007. Based on the higher numbers, the Tulsa-based company increased its capital spending for 2008 to a range of $3.13 billion to $3.68 billion, well ahead of the $2.95 billion budget announced May 1.

Some of the increased spending will be directed toward the Piceance Basin of Colorado, Williams' most prolific gas producer. In May Williams added to its basin position in a $285 million cash agreement with SandRidge Energy and other parties (see NGI, May 12). And last week the Bureau of Land Management (BLM) unveiled a master development plan to allow a subsidiary of Williams to drill up to 58 new natural gas wells in the basin, about six miles east of Parachute, CO.

Under the proposed plan, Williams would be allowed to drill up to 58 new wells from three new well pads and one existing well pad located on federal and private land. If approved, eight wells would be completed this year; the remaining wells would be completed by 2012. The wells would be drilled in a 688-acre area, which includes 486 acres of BLM-managed land. The proposal includes construction of 4,200 feet of new roads and 9,163 feet of pipeline.

The well pads all would be fraced remotely from a single centralized frac pad. Each of the four well pads ultimately would be designed and built to a size that would accommodate efficiency drilling rigs to keep surface disturbance to a minimum at each well pad location, according to BLM.

Williams is not banking only on the prospects in the Piceance Basin. It said it has identified $100-300 million "in potential future projects" for 2008, which would require an increase in capital spending. For 2009, $400-800 million of potential projects have been identified.

The increased capital budget also is based on Williams' expectations of commodity prices. It now expects 2008 gas prices to be $9-10.50/Mcf at the Henry Hub, well above its May 1 forecast of $7.35-8.65. Williams also raised its 2008 oil price forecast to $100-120/bbl from a May prediction of $70-90.

Excluding special items, per-share profit is expected to be $2.30-2.80/share in 2008. Williams earned $1.44/share minus special items in 2007. In 2009 earnings are expected to be $2.05-2.90, up from a May 1 forecast of $1.80-2.30.

Public comment is being accepted through July 23 on BLM's proposed Spruce Creek Master Development Plan, which was prepared by the agency's Glenwood Springs Energy Office in Colorado, based on information provided by Williams Production RMT Co. The 22-page proposed action plan is available from BLM.

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