Williams enjoyed vastly better results in the first quarter compared to a year ago, thanks in large part to the performance of its exploration and production business unit — which surpassed 1 Bcfe in average daily production for the first time — and its pipeline business.
The company had first-quarter net income of $500 million (84 cents/share), compared with $134 million (22 cents/share) for first-quarter 2007. Key factors were higher net realized average gas prices and strong production growth, natural gas liquid (NGL) margins remaining at historically high levels, and higher gas pipeline revenue.
“Williams delivered a strong start to 2008, highlighted by an 84% increase in our recurring adjusted earnings per share,” said CEO Steve Malcolm. “In the first quarter this year, we increased production 27% in each of our two largest production areas — the Piceance and Powder River basins. Our focus on quickly and responsibly developing our long-lived natural gas reserves continues to generate value.”
Exploration and production reported segment profit of $430 million for first-quarter 2008, compared with first-quarter 2007 segment profit of $188 million. Higher net realized average prices and strong growth in domestic volumes were the primary drivers. Williams’ average domestic production for the quarter surpassed 1 Bcfe/d for the first time. For first-quarter 2008, average domestic production was 1.01 Bcfe/d, an increase of 20% over the same period last year. Increased development within the Piceance, Powder River and Fort Worth basins drove the growth.
Williams also has increased total proved, probable and possible reserves to an estimated 11.4 Tcfe from the previous estimate of 10.8 Tcfe, after producing 0.334 Tcfe in 2007.
During first-quarter 2008, Williams’ net realized average price for U.S. production was $6.58/Mcfe, which was 24% more than the $5.32/Mcfe realized in first-quarter 2007. For 2008 Williams expects unhedged gas prices ranging from $7.35 to $8.65/Mcfe (Henry Hub), adjusted for basis differentials. For 2009 the company expects unhedged gas prices ranging from $7.35 to $8.65/Mcfe (Henry Hub), adjusted for basis differentials.
Williams ranks itself No. 12 among U.S. gas producers by 2007 production and fourth among the same group by production growth 2006 to 2007. “Almost all of our growth is what we call organic growth, through the drillbit,” said CFO Don Chappel during a conference call with analysts last week. He noted that many of the company’s peers have grown through acquisitions.
The gas pipeline segment reported first-quarter 2008 profit of $180 million, compared with $150 million for first-quarter 2007, an increase of 20%. Phillip Wright, president of the gas pipeline business, said the company has many promising projects across its pipeline network.
“In all my 32 years in the energy business, I’ve not seen the level of activity we’re experiencing now in the interstate gas transmission space,” he said. “With the massive shifts we’re seeing in supply sources, the industry is in a manner of speaking re-piping America, and I can assure you we at Williams are capturing our share.”
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