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Williams Predicts 2Q Profits to Soar

Williams Predicts 2Q Profits to Soar

Tulsa's Williams Cos., buoyed by soaring natural gas prices and better news than expected on its rate-refund liabilities and performance by its communications group, said last week that it expects second-quarter profits to exceed the first quarter performance of 27 cents a share. It had been expected to earn 16 cents, according to analysts polled by First Call/Thomson Financial.

Williams plans to release second-quarter earnings July 28, but gave a preview to investors of its gains this quarter. Among other things, the company revealed that it expects a reduction of up to $60 million in rate-refund liabilities related to its Transco gas pipeline system. It also expects an after-tax gain of nearly 24 cents a share related to an investment transaction by Williams Communications, of which it owns 85%.

The second largest U.S. gas pipeline operator, which less than a year ago predicted lower than expected earnings in its third quarter, bounced back this year because of a "strong energy environment," said company officials. The comeback is based on higher gas prices, improved gas liquids processing margins and refining margins, combined with a strong performance from marketing and trading.

"We anticipate that energy results in the second quarter will substantially exceed segment profit levels we reported in the first quarter," said Chairman Keith Bailey. In May, Williams reported first quarter 2000 earnings of $121.3 million, a 107% increase from the same period in 1999. "As we look at the forward markets, it is certainly well within the realm of possibility that the second half of the year could mirror the first."

Along with an above average demand for electricity this spring, Williams got another 2-cent boost to the second quarter bottom line with a favorable ruling in March by FERC, which allowed rate refunds from its Transco pipeline to be $10 million less than anticipated. The company also earned a record 24 cents from Williams Communications' announcement Monday of an exchange of a stake in Concentric Network Corp. for stock in Nextlink Communications Inc.

Last month, an article in Barron's suggested that the company could become an attractive takeover target for buyers if its stock failed to move up. The article, published June 19, said that "any number of players," such as those wanting energy assets or cellular operators needing inexpensive access to landline access providers could make a bid for the company.

Last Tuesday (June 27), Williams Communications' shares fell 15% after it lowered its forecasts for increasing capacity of its network that carries voice and data traffic. However, company officials said that it expects to include in its second-quarter results a pretax investing gain of nearly $200 million resulting from an exchange of its 11.3% stock investment in Concentric Network Corp. for stock of Nextlink Communications. That merger was announced last Monday (June 26).

Analysts were touting Williams Cos. last week as a company with great potential for growth. Prudential Securities analyst Carol Coale raised the stock to a "strong buy" from "accumulate." The 12-month target price is $53 per share.

Carolyn Davis, Houston

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