Williams missed Wall Street earnings estimates of 8 cents/share for the first quarter of 2004, but reported income from continuing operations of 1 cent/share or $5.4 million compared to a restated loss of 9 cents/share or $39.3 million for 1Q2003. It also posted net income of $9.9 million, or 2 cents/share, compared to a net loss of $814.5 million, or $1.59/share a year earlier.

CEO Steve Malcolm noted that Williams is a completely different company from what it was a year ago. After billions in assets sales, it has a stronger balance sheet, adequate liquidity, lower debt and positive cash flow.

“With the exception of resolving our power business situation, we’ve been successful in tightly honing our focus on a portfolio of integrated natural gas assets that have significant value generating growth potential we expect to seize in the future,” said Malcolm.

“Even after reducing our debt by more than $700 million in the first quarter, we have a strong cash position in excess of $2 billion. Plus we’re on track to generate more than $1 billion in cash flow from operations this year.

“The disciplined investments we’re making in our natural gas businesses are creating value in the near-term and setting the stage for opportunities to deliver sustainable shareholder value over the long term,” he said.

However, Williams may also end up retaining its power business, which posted a loss of $32.7 million in the first quarter compared to a $136.4 million loss a year earlier. While the company said it plans to continue efforts to exit the power business through a sale, the “number of viable parties expressing interest has been limited.” As a result it may decide to keep its 7,500 MW power portfolio. “Williams is evaluating whether the benefits of realizing the positive cash flows expected to be generated by this business through continued ownership exceed the benefits of a sale at a depressed price,” the company said.

“If this alternative is pursued, Williams expects to continue the current program of managing this business to minimize financial risk, generate cash and manage existing contractual commitments.” For the full year the company said results from the power business could range from break-even to $150 million in segment profit.

Williams’ natural gas businesses, which includes exploration and production (E&P), midstream and pipelines, reported a 17% profit decline to $317.7 million compared to $381.2 million in 1Q2003. Profit from the E&P business fell 55% mainly because of assets sales, lower realized gas prices due to hedges and an 8% drop in gas production to 501 MMcf/d. Williams said average daily gas production from retained basins grew 3.4% compared to the fourth quarter of last year.

Williams is increasing the total number of active rigs in the Piceance Basin of Colorado from eight to 12. Average daily production in the Piceance Basin increased 12% during the first quarter versus the fourth quarter 2003. For the full year, Williams expects $275 million to $300 million in segment profit from E&P.

Midstream segment profit rose slightly to $117.7 million from $116.2 million in 1Q2003 on lower operations and maintenance expenses, higher olefins margins, stronger performance from Canadian straddle plants and the absence of asset impairments.

The gas pipeline business, which, among other assets, includes Northwest Pipeline and Transcontinental Gas Pipe Line, reported first-quarter 2004 segment profit of $148.5 million compared to $151.2 million a year earlier. Operating activities for the first quarter of 2004 included the completion of phase two of the Momentum expansion in the Southeast, increasing capacity on the Transco system by 54,000 Dth/d. Customers also fully subscribed Transco’s $13 million Central New Jersey expansion, which is scheduled to increase capacity by 105,000 Dth/d in November 2005. For the full year, Williams continues to expect $525-575 million in segment profit from the pipeline business.

For the full year, Williams continues to expect recurring earnings of $0.17 to $0.40 per share. Williams also continues to expect consolidated segment profit of $1.1 billion to $1.4 billion for the year.

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