On the heels of a quarterly earnings report that, although negative, still enthused more buyers than sellers this week, Williams’ annual shareholder meeting Thursday gave the CEO an opportunity to share the company’s vision for a “new” integrated natural gas company that he promised would be “viable, sustainable and value creating.”

CEO Steve Malcolm, who at last year’s meeting had been asked to resign by several irate shareholders, appeared renewed this week as he presided over what he said was a smaller and more simplified company. However, the once embattled CEO noted that Williams, nearly 100 years old, had transformed itself in the past, and he believes the Tulsa-based company’s gas assets form a solid platform for profitability and cash-flow generation into the future.

“Today, there are many reasons to once again be confident in Williams,” Malcolm said. “We are managing the company differently to fit what is a very different business environment. We’re building liquidity and cutting costs. We’re generating cash by selling assets that don’t fit our new, sharply defined business focus. We’re exercising a new discipline in capital spending. We’re strengthening our balance sheet by reducing debt.” Malcolm added that the company also has taken steps to further formalize its commitment to running the business with “integrity and openness that is at the heart of our core values and beliefs.”

He said that “for shareholders in particular, the past 18 months or so have not been easy. As you know better than anyone, by all measures 2002 was one of the worst years in company history. Our stock price plummeted. Our credit was dropped below investment grade. Liquidity and debt became serious issues. Our company faced a full-blown financial crisis.”

Basically, Malcolm blamed two businesses for Williams’ fall last year: energy marketing and telecommunications, which were “each caught in an unprecedented market collapse.” However, despite the “almost overwhelming series of negative events and circumstances, we persevered. We took ownership of our problems…and more importantly, of the solutions.”

With a new direction set after being besieged with problems, Malcolm said management decided that it wanted to own and manage natural gas assets in “key” growth markets where the company enjoys the competitive advantages of scale, such as its Opal gas processing plant in Wyoming; where it enjoys the advantages of being a low-cost service provider, as it is with its Transco pipeline; or where it is a market leader, as it is in the Rocky Mountains, where it is the largest operator in the Piceance and Powder River basins.

“Our commercial strategy is straightforward. We are in the natural gas business. That’s where the market wants us to be. That’s where our customers want us to be. And that’s where we want to be. We are applying disciplined focus on business segments and markets where we have leadership positions today and growth potential for the future.”

Malcolm said that the company’s core businesses remain strong, adding that they had been performing “well” along, “a fact that simply has been overshadowed by the other financial hits we’ve taken recently.” However, while the core businesses are continuing to add value, Malcolm said that was not enough. “There’s no doubt that on the financial side, we still have some challenges. But I can assure you that we are meeting the challenges and moving well beyond the financial crisis we experienced last July.”

Executing the financial strategy required some tough decisions, he said, including selling assets that had served the company well. Besides selling assets and implementing workforce reductions, Williams also has discontinued its national television advertising, and shut down its energy news web site. It also is renegotiating some sporting event sponsorships.

“These cost-reduction efforts — and many others — have resulted in a significant reduction in our selling, general and administrative costs,” he said. “We’ve gone from spending almost a billion dollars in 2002 to an estimated $600 million this year. We’re making progress. In the first quarter, we reduced these expenses by 16% over a year ago.”

Although it has substantially exited energy marketing and trading, Malcolm admitted it has been more difficult than simply pulling the plug.

“We are selling individual contracts as fair offers come in, such as the sale earlier this year of two significant, long-term contracts and a power facility for approximately $255 million,” he said. “And we will continue our efforts to sell more contracts. But there’s still a perception of uncertainty around this sector, which makes it more difficult to resolve than other asset sales.”

In the next 18 months, Malcolm said a top priority is in meeting debt obligations. “The first significant obligation is the 364-day loan backed by our Rocky Mountain reserves, which is due in July. The other obligation in that league is a $1.4 billion note related to our former telecom subsidiary that is due in March 2004.” However, by the time of the next annual shareholder meeting in a year, “we expect liquidity-related issues to be largely behind us.”

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.