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Bailey Disappointed in Williams 3Q

Bailey Disappointed in Williams 3Q

Along with disappointing 3Q earnings announced by The Williams Cos. came an acknowledgement by management that the company continues to achieve disappointing results in several of its businesses. With results reduced by energy market conditions and by pre-tax charges and write-downs of about $70 million, or 10 cents/share, Williams reported unaudited net income of $32.1 million, or 7 cents/share on a diluted basis, for the third quarter. This compares to unaudited restated net income of $13.7 million, or 3 cents/share, for the same period of 1997, a quarter in which results were reduced by 17 cents/share for the cost of debt restructuring.

"It is never enjoyable to report a quarter that falls short of expectations," said CEO Keith E. Bailey. ".[W]e continue to achieve disappointing financial results in several key areas of our businesses." Bailey noted gas liquids margins continue to languish at historic lows. Refined product margins and prices have weakened as they have tracked the year's decline in oil prices. Low gasoline prices are translating into lower ethanol prices. And, continuing integration issues in Williams' communications solutions business hurt third quarter performance.

Results from Williams' Gas Pipeline group were static while results from Energy Services were off, in part to low commodity prices.

Williams Gas Pipeline group reported third quarter operating profit of $141.7 million, identical to the operating profit reported during the same period of 1997. The quarter benefited from expansions on the Transco system, new services offered on the Transco and Texas Gas systems and lower operating and maintenance expenses within the pipeline group. Quarter-to-quarter operating profit is flat because the third quarter of last year included favorable adjustments to certain accruals. Although disrupted by hurricanes during the quarter, Williams completed the first phase of Mobile Bay, a suite of regulated and unregulated gas projects that provide a strategic platform for growth in the eastern Gulf of Mexico.

Energy Services, which provides traditional and advanced energy products and services, reported third quarter operating profit of $116.6 million, compared with operating profit of $137.3 million in the third quarter of 1997. The benefit of substantially higher electric power marketing and trading, lower operating losses from retail propane operations and increased petroleum pipeline transportation activities was more than offset by lower refining and per-unit gas liquids margins. Also, results from gas trading and ethanol activities were lower. And the quarter includes credit loss accruals of $26.4 million, partially offset by settlement of a long-term transportation contract. On the bright side in energy services, a California electric power marketing arrangement launched this summer already has proven successful.

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