It was a busy week for Williams which announced it was delaying reporting earnings until mid-November to complete negotiations on asset sales, then was socked with a lawsuit involving the former Barret Resources, one of the prize assets it is not planning to sell. At the end of the week the company announced it has learned that a few traders in its natural gas trading business have provided inaccurate pricing information to an energy industry publication that compiles and reports index prices.

Citing negotiations regarding some planned asset sales, Williams rescheduled its third-quarter earnings report for November to coincide with its Nov. 14 deadline to file its 10-Q with the Securities and Exchange Commission. The company has been selling properties since early this year as it works to pay down debt and improve liquidity. Late Wednesday, it reported that “developments between now and Nov. 14 could have a material impact” on third-quarter earnings. It had previously announced its intent to release earnings for the quarter on Oct. 29.

“We are in active discussions involving transactions for portions of our petroleum services and energy marketing and risk management businesses,” said CEO Steve Malcolm. “At this point, we believe it would be premature to release earnings until we can ascertain the definitive terms of these potential sales.”

The assets involved could be those Williams announced were for sale in August, when it said it might sell its ownership interest in an olefins production plant in Geismar, LA, and an associated ethylene pipeline system in Louisiana, as well as a Baltic refinery (see NGI, Sept. 2). Williams owns 42% of the facilities. Other owners include BASF Corp. and GE Petrochemicals.

By the end of this year, Williams had projected asset sales totaling around $5 billion. Nearly $3 billion in sales had been completed in early August, and several sales have since been announced.

In September, Williams sold several pipelines, including its Central natural gas pipeline for $555 million. It also sold its interest in the Alliance Pipeline to Enbridge for C$270 million, and sold its Williams Gas Pipelines Central Inc. and Western Frontier Pipeline Co. LLC for $380 million plus the assumption of $175 million in debt (see NGI, Sept. 23; Sept. 30).

Other large asset sales by Williams this year include its stake in Northern Border Partners, which owns the Northern Border pipeline system, to TransCanada PipeLines Ltd. in August for $12 million. And in March, the company sold its Kern River Gas Transmission system for $960 million in cash and debt to a subsidiary of Des Moines-based MidAmerican Energy Holdings (see NGI, April 1).

One asset that Williams has not put up for sale is Barrett Resources, the exploration and production company it purchased last year (see NGI, May 14, 2001). However, last week Western Gas Resources Inc. filed a lawsuit against Williams concerning the control and ownership of their jointly owned properties in the Powder River Basin of Wyoming. The lawsuit concerns a 1997 development and operating agreement between Western Gas and former venture partner Barrett.

According to a Securities and Exchange Commission filing, Western Gas claims in a lawsuit that it had a preferential right to purchase the Powder River properties that were acquired by Williams. It also claims that consent was required before Barrett could transfer the assets. Williams also should no longer operate the properties because of the transaction, Western Gas asserts.

Barrett and Western Gas had considerable success in their exploration and production efforts in the Powder River Basin, and together, were two of the largest coalbed methane producers in Powder River, controlling more than 800,000 gross acres (531,000 net) in the play. The 2001 drilling program, in which Williams participated once its transaction with Barrett was completed that year, consisted of 921 wells. Williams and Western Gas operate most of the wells. At year-end 2001, the Powder River assets were producing 115 MMcf/d.

Western Gas, headquartered in Denver, may also be concerned about Williams’ many asset sales in recent months, which have included some leaseholds. In an August transaction by Williams that was put together by Berkshire Hathaway Inc., Williams was required to back a $900 million secured credit agreement with “substantially all” of the Barrett assets (see NGI, Aug. 5). In the event of a default, Williams would have to give up the Powder River assets, as well as others held by Barrett throughout the region.

Regarding the false price information, Williams said the inaccuracies came to light during an independent, internal review of its trading activities, which is being conducted in conjunction with the Commodity Futures Trading Commission’s ongoing industry-wide investigation. Two other companies, Dynegy and AEP, have previously disclosed that some of their traders had provided false information to the trade publication price surveys and have fired 5-6 traders each.

Williams said it is continuing its internal review to determine the extent of the inaccurate reporting, its impact on the price index, and appropriate disciplinary action. It declined to disclose any further details at this time. Williams spokesman Kelly Swan said they hoped to have the investigation completed within a month. “We have filed comments with FERC in support of the price indexes. We still believe they are very indicative of market prices.”

The company no longer provides data about its natural gas trades to industry publications as a result of significantly reduced activity in its marketing and risk management business, the Williams announcement said, pointing out that individuals in this portion of its business were among many energy industry participants who routinely provided data about trades to publications.

The publishers of natural gas price surveys (including NGI), have been working with industry trade groups recently to improve the quality of transaction reports they receive from companies. One suggestion has been that the pricing information come from the back office of the trading companies where all transactions are recorded, rather than from traders. Several companies already have begun supplying information from their back offices in a comma delimited format, which can be readily loaded into a database. Also, several companies have begun having their chief risk officer sign their data submissions.

As to whether false data could significantly skew the averages, NGI and Platts both have methodologies for compiling the data that exclude outliers which would affect the range and could potentially skew the average. Typically, NGI’s excluded outliers fall more than two (2) standard deviations outside the sample mean. Also, since the publications typically receive a large number of quotes, especially for the major points that serve as an anchor and indicator of surrounding points, it would be difficult for any one trader or company to significantly skew the averages.

©Copyright 2002 Intelligence Press Inc. Allrights reserved. The preceding news report may not be republishedor redistributed, in whole or in part, in any form, without priorwritten consent of Intelligence Press, Inc.