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Williams Earnings Cut Nearly in Half From 2Q97

Williams Earnings Cut Nearly in Half From 2Q97

The Williams Companies was hit hard in the second-quarter like many other energy trading companies, posting a $58 million drop in net income from 2Q97. The company reported net income of $60.7 million, or 14 cents/share compared with $118.5 million, or 28 cents/share, for 2Q97. But a large portion of its trouble stemmed from a FERC ruling that challenged the rate-making methodology in some markets served by the company's petroleum products pipeline.

Williams took a $15.5 million charge to cover customer refunds ordered by FERC, but said it plans to appeal the July 15 ruling. Williams also still is suffering from merger-related charges. It took a $6.1 million MAPCO merger-related charge and recorded another $3.4 million in costs as general corporate expenses related to the merger.

Natural gas trading profits and per-unit natural gas liquids margins also were significantly less than the same period a year ago. The energy services group reported $106.3 million in operating profit compared with $115.2 million in the second quarter of 1997. For the first six months of 1998, energy services reported operating profit of $199.1 million compared with operating profit of $275.9 million during the same period last year.

With the exception of market volatility, the second quarter of this year saw many of the same energy market conditions that negatively impacted the first quarter, such as low natural gas liquids prices and relatively high natural gas prices, Williams said.

"While there are bright spots due to our growth in scale from the acquisition of MAPCO, conditions in segments of the unregulated energy market remain difficult," said CEO Keith E. Bailey. "Our gas pipeline business continues to perform very well, which is testimony to our aggressive attention to fully service existing customers while attacking new markets in the most cost efficient manner possible."

The gas pipeline segment reported operating profit of $153 million compared with $131.2 million in 2Q97. Williams attributed the increase to the impact of expansion projects on Transco, increased short-term firm transportation at Northwest and adjustments relating to new rates placed into effect at Transco last year.

Williams communications business reported a second quarter operating loss of $10.5 million, compared with an operating profit of $3.3 million in the same quarter of 1997.

Rocco Canonica

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