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Williams Lifts '09 Guidance, Sees 'Sharply Higher' Gas Prices

Williams on Thursday lifted its full-year 2009 profit guidance and said it plans to increase spending in 2010 and 2011 as natural gas prices move "sharply higher."

Full-year 2009 adjusted earnings are forecast to be 75-90 cents/share, compared with an earlier forecast of 70-90 cents. In addition, Williams added $275 million to its 2009 capital expenditures (capex) through the rest of the year to expand exploration in Colorado's Piceance Basin.

The revised assumptions and spending are partly based on Williams' outlook for gas prices through 2011. Williams said its New York Mercantile Exchange gas prices should average $3.80-4.65/Mcf in 2009; $4.50-7.00 in 2010 and $5-8 in 2011. Rockies gas prices are seen averaging $2.75-3.45/Mcf this year, $3.90-6.10 in 2010, and $4.34-6.95 in 2011. In its San Juan Basin/Midcontinent operations, Williams is forecasting gas prices will average $3-3.70/Mcf in 2009, $4.05-6.35 in 2010 and $4.55-7.30 in 2011.

"Our outlook for 2010-2011 demonstrates the earnings power of our natural gas businesses," said CEO Steve Malcolm. "We are forecasting sharply higher profitability over the next two years based on our expectations for energy commodity prices, which are consistent with recent forward market prices.

"By 2011 we expect to be approaching the record-level earnings and value creation we achieved during 2008, even though price assumptions are well below 2008 levels."

Narrowing this year's earnings guidance "reflects improvements" in the exploration and production (E&P) and midstream businesses, the Tulsa-based company said. For 2009 capex is to be between $2.5 billion and $2.75 billion, which factors in the additional spending in the Piceance Basin.

Williams last month said it would incrementally add drilling rigs to its Piceance Basin operations after buying almost 22,000 net acres from a private company (see NGI, Aug. 17). One drilling rig is to be added in the last three months of this year, followed by one more rig in 2010 and two more in 2011. Williams had been running eight gas rigs in the basin.

Looking ahead, 2010 earnings are forecast to range between 80 cents/share and $1.90/share, Williams said. For 2011 the company is forecasting earnings of between $1.10/share and $2.65.

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