Tulsa’s Williams Cos., buoyed by soaring natural gas prices andbetter news than expected on its rate-refund liabilities andperformance by its communications group, said yesterday that itexpects second-quarter profits to exceed the first quarterperformance of 27 cents a share. It had been expected to earn 16cents, according to analysts polled by First Call/ThomsonFinancial.

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

The second largest U.S. gas pipeline operator, which less than ayear ago predicted lower than expected earnings in its thirdquarter, bounced back this year because of a “strong energyenvironment,” said company officials. The comeback is based onhigher gas prices, improved gas liquids processing margins andrefining margins, combined with a strong performance from marketingand trading.

“We anticipate that energy results in the second quarter willsubstantially exceed segment profit levels we reported in the firstquarter,” said Chairman Keith Bailey. In May, Williams reported firstquarter 2000 earnings of $121.3 million, a 107% increase from the sameperiod in 1999 (see Daily GPI, May4). “As we look at the forward markets, it is certainly wellwithin the realm of possibility that the second half of the year couldmirror the first.”

Along with an above average demand for electricity this spring,Williams got another 2-cent boost to the second quarter bottom linewith a favorable ruling in March by FERC, which allowed raterefunds from its Transco pipeline to be $10 million less thananticipated. The company also earned a record 24 cents fromWilliams Communications’ announcement Monday of an exchange of astake in Concentric Network Corp. for stock in NextlinkCommunications Inc.

Earlier this month, an article in Barron’s suggested that thecompany could become an attractive takeover target for buyers ifits stock failed to move up. The article, published June 19, saidthat “any number of players,” such as those wanting energy assetsor cellular operators needing inexpensive access to landline accessproviders could make a bid for the company.

On Tuesday, Williams Communications’ shares fell 15% after itlowered its forecasts for increasing capacity of its network thatcarries voice and data traffic. However, company officials saidthat it expects to include in its second-quarter results a pretaxinvesting gain of nearly $200 million resulting from an exchange ofits 11.3% stock investment in Concentric Network Corp. for stock ofNextlink Communications. That merger was announced Monday.

Analysts yesterday were touting Williams Cos. as a company withgreat potential for growth. Prudential Securities analyst CarolCoale raised the stock to a “strong buy” from “accumulate.” The12-month target price is $53 per share.

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