Williams(WMB) - 2023 Q3 - Quarterly Report

FORM 10-Q Information Provides official registration details, securities information, and shares outstanding for The Williams Companies, Inc. Registrant Information Details the company's state of incorporation, principal executive offices, and contact information - The Williams Companies, Inc. is a Delaware corporation with its principal executive offices in Tulsa, Oklahoma[3] - Registrant's telephone number is 800-945-5426 (800-WILLIAMS)[4] Securities and Filing Status Outlines the company's registered securities and its SEC filing status as a large accelerated filer - Common Stock, $1.00 par value, trades on the New York Stock Exchange under the symbol WMB[4] - The registrant is a Large accelerated filer and has filed all required reports during the preceding 12 months and submitted all Interactive Data Files[4] Shares Outstanding Reports the total number of common shares outstanding as of a recent practicable date Shares Outstanding at October 30, 2023 | Class | Shares Outstanding at October 30, 2023 | | :---------------------------- | :----------------------------- | | Common Stock, $1.00 par value | 1,216,498,672 | Table of Contents & Forward-Looking Statements Presents the report's structure and cautions investors about the inherent uncertainties in forward-looking statements Index Provides a comprehensive overview of the report's structure, facilitating navigation - The index lists Part I. Financial Information (Item 1-4) and Part II. Other Information (Item 1-6)[6] Forward-Looking Statements Explains that forward-looking statements are subject to risks and uncertainties, cautioning against undue reliance - Forward-looking statements relate to anticipated financial performance, future operations, business prospects, regulatory outcomes, and market conditions[6] - Key factors that could cause actual results to differ include availability of supplies, market demand, price volatility, regulatory impacts, credit risk, and economic conditions[9][10] - Investors are cautioned not to unduly rely on forward-looking statements, and the company disclaims any obligation to update them[11] Definitions Provides a glossary of abbreviations, acronyms, and industry-specific terminology used in the Form 10-Q Definitions Defines key measurements, entities, and financial terms for clarity within the report - Measurements include Bbl (barrel), Bcf (billion cubic feet), Btu (British Thermal Unit), and Dth (dekatherms)[14] - Consolidated entities include Transco, Northwest Pipeline, and MountainWest, while nonconsolidated entities include Blue Racer and Brazos Permian II[14][15] - Other key terms defined are EBITDA, Fractionation, GAAP, LNG, MVC, and NGLs, along with recent acquisitions like MountainWest Acquisition and Trace Acquisition[16][17] Part I. Financial Information Contains the unaudited consolidated financial statements and management's discussion and analysis Item 1. Financial Statements Presents unaudited consolidated financial statements and detailed notes on accounting policies and transactions Consolidated Statement of Income Reports the company's revenues, operating income, and net income for the specified periods Three Months Ended September 30 | Metric | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :--------------------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Total Revenues | $2,559 | $3,021 | $(462) | -15.3% | | Operating Income (loss) | $994 | $820 | $174 | +21.2% | | Net Income (loss) attributable to The Williams Companies, Inc. | $654 | $600 | $54 | +9.0% | | Basic Earnings (loss) Per Common Share | $0.54 | $0.49 | $0.05 | +10.2% | Nine Months Ended September 30 | Metric | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :--------------------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Total Revenues | $8,123 | $8,035 | $88 | +1.1% | | Operating Income (loss) | $3,224 | $1,946 | $1,278 | +65.7% | | Net Income (loss) attributable to The Williams Companies, Inc. | $2,041 | $1,380 | $661 | +48.0% | | Basic Earnings (loss) Per Common Share | $1.67 | $1.13 | $0.54 | +47.8% | - Net gain (loss) on commodity derivatives significantly improved from $(491) million in 9M 2022 to $645 million in 9M 2023[19] Consolidated Statement of Comprehensive Income (Loss) Details the comprehensive income, including net income and other comprehensive income components Comprehensive Income (Loss) Attributable to The Williams Companies, Inc. | Period | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :----------- | :-------------- | :-------------- | :---------- | :--------- | | Three Months | $690 | $596 | $94 | +15.8% | | Nine Months | $2,113 | $1,386 | $727 | +52.5% | - Net unrealized gain from derivative instruments (net of taxes) for the nine months ended September 30, 2023, was $72 million, a significant improvement from a $(3) million loss in the prior year[21] Consolidated Balance Sheet Presents the company's assets, liabilities, and equity at specific points in time Balance Sheet Highlights | Metric | Sep 30, 2023 (Millions) | Dec 31, 2022 (Millions) | Change ($M) | Change (%) | | :------------------------------------- | :---------------------- | :---------------------- | :---------- | :--------- | | Total Assets | $50,788 | $48,433 | $2,355 | +4.9% | | Cash and Cash Equivalents | $2,074 | $152 | $1,922 | +1264.5% | | Property, Plant, and Equipment – net | $32,628 | $30,889 | $1,739 | +5.6% | | Total Liabilities | $36,445 | $34,498 | $1,947 | +5.6% | | Long-term debt | $22,772 | $21,927 | $845 | +3.9% | | Total Equity | $14,343 | $14,045 | $298 | +2.1% | - Long-term debt due within one year increased significantly to $2,879 million at September 30, 2023, from $627 million at December 31, 2022[23] Consolidated Statement of Changes in Equity Outlines the changes in total equity, including net income, dividends, and share repurchases Changes in Equity (Nine Months Ended September 30, 2023) | Item | Amount (Millions) | | :------------------------------------------------------ | :---------------- | | Net income (loss) | $2,041 | | Other comprehensive income (loss) | $72 | | Cash dividends – common stock ($1.3425 per share) | $(1,635) | | Purchases of treasury stock | $(130) | | Net increase (decrease) in equity | $298 | - Total equity increased by $298 million for the nine months ended September 30, 2023, reaching $14,343 million[27] Consolidated Statement of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities Cash Flow Highlights (Nine Months Ended September 30) | Activity | 2023 (Millions) | 2022 (Millions) | Change ($M) | | :----------------------- | :-------------- | :-------------- | :---------- | | Operating Activities | $4,125 | $3,670 | $455 | | Investing Activities | $(2,631) | $(2,535) | $(96) | | Financing Activities | $428 | $(1,956) | $2,384 | | Increase (decrease) in cash | $1,922 | $(821) | $2,743 | - Net cash provided by operating activities increased by $455 million, while net cash provided by financing activities saw a significant positive swing of $2,384 million[29] - Key investing activities included $1,845 million in capital expenditures and $1,024 million for business purchases, partially offset by $348 million from the sale of a business[29] Notes to Consolidated Financial Statements Provides detailed explanations of accounting policies, significant transactions, and financial disclosures Note 1 – General, Description of Business, and Basis of Presentation Describes Williams' business segments, share repurchase program, and risks to asset carrying values - A $1.5 billion share repurchase program was authorized in September 2021, with $130 million repurchased during the nine months ended September 30, 2023[34] - The company's operations are presented within four reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services[35] - There is a reasonable possibility that future strategic decisions or unfavorable changes in producer activities could lead to impairments of certain property, plant, and equipment and intangible assets[40] Note 2 – Variable Interest Entities Details Williams' involvement with consolidated and nonconsolidated Variable Interest Entities (VIEs) - Williams consolidates Northeast JV (65% interest), Gulfstar One (51% interest), and Cardinal (66% interest) as primary beneficiary VIEs[41][42][44] - Nonconsolidated VIEs include Targa Train 7 (20% interest, $44 million carrying value) and Brazos Permian II (15% interest, $23 million carrying value), with maximum exposure to loss limited to the investment's carrying value[46][47] Consolidated VIE Assets (September 30, 2023) | Asset Category | Amount (Millions) | | :------------------------------------------ | :---------------- | | Property, plant, and equipment – net | $5,090 | | Intangible assets – net of accumulated amortization | $2,077 | Note 3 – Acquisitions and Divestitures Reports on recent sales of assets and significant acquisitions, including MountainWest, Trace, and NorTex - Completed the sale of Gulf Coast liquids pipelines on September 29, 2023, for $348 million, recording a $130 million gain[48] - Acquired MountainWest on February 14, 2023, for $1.08 billion cash (retaining $430 million debt), contributing $156 million in revenues and $78 million in Modified EBITDA from acquisition date to September 30, 2023[49][50] - The Trace Acquisition (April 29, 2022) for $972 million expanded the Haynesville Shale footprint, and the NorTex Asset Purchase (August 31, 2022) for $424 million added natural gas storage and pipelines in north Texas[56][65] Note 4 – Revenue Recognition Provides a detailed breakdown of revenue by service line and segment, and remaining performance obligations Total Revenues (Three Months Ended September 30) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $2,559 | | 2022 | $3,021 | Total Revenues (Nine Months Ended September 30) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $8,123 | | 2022 | $8,035 | Remaining Performance Obligations (September 30, 2023) | Period | Amount (Millions) | | :--------- | :---------------- | | 2023 (3M) | $950 | | 2024 (1Y) | $3,746 | | Thereafter | $15,300 | | Total | $29,093 | Note 5 – Provision (Benefit) for Income Taxes Details the income tax provision and effective tax rates, explaining key influencing factors Provision (Benefit) for Income Taxes (Continuing Operations) | Period | 2023 (Millions) | 2022 (Millions) | | :----------- | :-------------- | :-------------- | | Three Months | $176 | $96 | | Nine Months | $635 | $169 | - The effective income tax rate for the three months ended September 30, 2023, was less than the federal statutory rate primarily due to a decrease in the estimate of the deferred state income tax rate[86] - The effective income tax rate for the nine months ended September 30, 2023, was greater than the federal statutory rate primarily due to the effect of state income taxes[87] Note 6 – Debt and Banking Arrangements Outlines recent debt issuances, retained debt, commercial paper status, and credit facility maturity 2023 Senior Unsecured Public Debt Issuances | Issue Date | Maturity Date | Amount (Millions) | Rate | | :----------- | :------------ | :---------------- | :--- | | March 2, 2023 | March 2, 2026 | $750 | 5.40% | | March 2, 2023 | March 15, 2033 | $750 | 5.65% | | August 10, 2023 | March 2, 2026 | $350 | 5.40% | | August 10, 2023 | August 15, 2028 | $900 | 5.30% | - The company's Consolidated Balance Sheet includes $430 million outstanding principal amount of MountainWest long-term debt as a result of the acquisition[49][93] - No commercial paper was outstanding under the $3.5 billion commercial paper program at September 30, 2023[94] - The maturity date of the credit agreement was extended one year to October 8, 2027, with a stated capacity of $3,750 million[95][96] Note 7 – Fair Value Measurements and Guarantees Presents fair value measurements for financial instruments and disclosures for long-term debt and guarantees Fair Value of Financial Instruments (September 30, 2023) | Instrument | Carrying Amount (Millions) | Fair Value (Millions) | | :------------------------------------ | :----------------------- | :-------------------- | | ARO Trust investments | $247 | $247 | | Commodity derivative assets | $170 | $170 | | Commodity derivative liabilities | $(373) | $(373) | | Interest rate derivatives | $66 | $66 | | Long-term debt, including current portion | $(25,651) | $(23,895) | | Guarantees | $(37) | $(29) | - The maximum potential undiscounted liquidity exposure for the WilTel guarantee is approximately $23 million at September 30, 2023[104] - Interest rate swap agreements totaling $750 million were entered into during 2023 and designated as cash flow hedges to reduce interest rate exposure on future debt issuances[101] Note 8 – Commodity Derivatives Discusses commodity price risk management using derivative contracts and their financial statement impact Notional Volume of Net Long (Short) Positions for Commodity Derivative Contracts (September 30, 2023) | Commodity | Unit of Measure | Net Long (Short) Position | | :-------------------------- | :-------------- | :------------------------ | | Natural Gas (Index Risk) | MMBtu | 848,556,144 | | Natural Gas (Central Hub Risk - Henry Hub) | MMBtu | (68,125,793) | | Natural Gas Liquids (Central Hub Risk - Mont Belvieu) | Barrels | (669,952) | Fair Value of Commodity Derivatives (September 30, 2023) | Derivative Category | Assets (Millions) | Liabilities (Millions) | | :------------------ | :---------------- | :--------------------- | | Current | $457 | $(434) | | Noncurrent | $172 | $(398) | | Total Derivatives | $629 | $(832) | - At September 30, 2023, the contractually required collateral in the event of a credit rating downgrade to non-investment grade status was $9 million[113] Note 9 – Contingencies Outlines significant legal and environmental contingencies, including litigation and remediation liabilities - A pre-tax charge of $115 million was recorded in Q2 2023, with an additional $1 million in Q3 2023, for the Alaska Refinery Contamination Litigation, following an unfavorable Alaska Supreme Court opinion[118][202] - The Delaware Supreme Court affirmed a judgment awarding Williams $602 million plus interest in litigation against Energy Transfer[126][158] Accrued Environmental Liabilities (September 30, 2023) | Category | Amount (Millions) | | :------------------------------------ | :---------------- | | Interstate gas pipelines | $13 | | Natural gas underground storage facilities | $10 | | Former operations | $28 | | Total | $51 | Note 10 – Segment Disclosures Provides financial information by reportable segment, evaluated based on Modified EBITDA Modified EBITDA by Segment (Nine Months Ended September 30) | Segment | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :----------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Transmission & Gulf of Mexico | $2,327 | $1,987 | $340 | +17.1% | | Northeast G&P | $1,439 | $1,332 | $107 | +8.0% | | West | $931 | $885 | $46 | +5.2% | | Gas & NGL Marketing Services | $678 | $(249) | $927 | NM | | Other | $196 | $284 | $(88) | -31.0% | | Total Modified EBITDA | $5,571 | $4,239 | $1,332 | +31.4% | Total Revenues by Segment (Nine Months Ended September 30, 2023) | Segment | Amount (Millions) | | :----------------------------- | :---------------- | | Transmission & Gulf of Mexico | $3,102 | | Northeast G&P | $1,528 | | West | $1,536 | | Gas & NGL Marketing Services | $2,194 | | Other | $338 | | Eliminations | $(575) | | Total Revenues | $8,123 | - Modified EBITDA is the primary performance measure used by the chief operating decision maker for evaluating segment performance and allocating resources[137] Note 11 – Subsequent Events Reports on subsequent events, including agreements to acquire Cureton Front Range and additional RMM interest - In October 2023, Williams agreed to acquire Cureton Front Range, LLC for $560 million and an additional 50% interest in RMM for $714 million[147] - These DJ Basin acquisitions are expected to close in the fourth quarter of 2023 and will expand the company's gathering and processing footprint[147] - The Cureton Front Range acquisition will be funded with short-term liquidity, and the RMM purchase price is not due until Q4 2024[147] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial performance, condition, liquidity, and segment-specific results General Williams is an energy company focused on natural gas infrastructure, aiming to maximize pipeline capacity utilization and provide high-quality, low-cost transportation - The company's strategy is to maximize pipeline capacity utilization and provide high-quality, low-cost transportation of natural gas to growing markets[151] - Midstream operations focus on safely and reliably operating large-scale infrastructure, attracting new business with highly reliable service[152] - Reportable segments include Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services[153][154][155] Recent Developments Highlights recent significant events including a favorable Delaware Supreme Court ruling affirming a $602 million judgment against Energy Transfer, planned DJ Basin acquisitions totaling $1.274 billion, the $348 million sale of Gulf Coast liquids pipelines, and the $1.08 billion MountainWest Acquisition in February 2023 - The Delaware Supreme Court affirmed a $602 million judgment plus interest against Energy Transfer[158] - In October 2023, agreements were made to acquire Cureton Front Range, LLC for $560 million and an additional 50% interest in RMM for $714 million, expanding the DJ Basin footprint[159] - The sale of Gulf Coast liquids pipelines was completed on September 29, 2023, for $348 million, resulting in a $130 million gain[160] - The MountainWest Acquisition closed on February 14, 2023, for $1.08 billion cash, expanding transmission and storage infrastructure[161] Company Outlook Anticipates earnings and cash flow growth in 2023, driven by the MountainWest Acquisition, volume growth in Haynesville and Northeast G&P, rate increases, and contributions from Trace and NorTex assets, despite lower expected commodity prices. Growth capital and investment expenditures are projected between $1.6 billion and $1.9 billion, excluding acquisitions, focusing on Transco expansions and Haynesville basin growth - 2023 operating results are expected to benefit from the MountainWest Acquisition, volume growth in Haynesville and Northeast G&P, annual inflation-based rate increases, and contributions from Trace and NorTex assets[165] - Growth capital and investment expenditures in 2023 are projected to be $1.6 billion to $1.9 billion, excluding acquisitions, primarily for Transco expansions and projects in the Northeast G&P and Haynesville basins[166] - Potential risks include a global recession, opposition to infrastructure projects, counterparty credit risk, unexpected capital expenditure increases or delays, and lower demand for natural gas[167][168][169] Expansion Projects Details ongoing major expansion projects across its segments to increase natural gas and crude oil transportation capacity Transmission & Gulf of Mexico Projects Outlines projects like Deepwater Shenandoah and Regional Energy Access to expand offshore and pipeline capacity - Deepwater Shenandoah Project and Deepwater Whale Project are expected to be in service in Q4 2024, expanding offshore infrastructure and transportation services[170][171] - Regional Energy Access project (partial in-service Oct 2023, remainder Q4 2024) is expected to increase capacity by 829 Mdth/d[172] - Southside Reliability Enhancement (Q4 2024, 423 Mdth/d capacity increase) and Texas to Louisiana Energy Pathway (Q1 2025, 364 Mdth/d capacity) are among several Transco expansions[173][174][175] West Projects Describes projects such as Louisiana Energy Gateway and Haynesville Gathering Expansion to boost natural gas gathering - The Louisiana Energy Gateway project is expected to go into service in Q4 2024, gathering 1.8 Bcf/d of natural gas in the Haynesville Shale basin[179] - A Haynesville Gathering Expansion, a greenfield gathering system, is expected to go into service in H2 2025[180] Northeast G&P Projects Details Susquehanna Supply Hub and Utica Shale Gathering Expansions to support natural gas production growth - Susquehanna Supply Hub Gathering Expansion is expected to go into service in Q4 2023, adding 320 MMcf/d of capacity[181] - Utica Shale Gathering Expansion (Phase 1 in-service Q3 2023, Phase 2 in-service Q4 2023) will add 125 MMcf/d of capacity on the Cardinal gathering system[182] Results of Operations Analyzes financial performance, revenue, and expense drivers, and segment-specific operating results Overall Financial Performance (Three and Nine Months Ended Sep 30, 2023 vs 2022) Compares total revenues, net income, and key drivers for the three and nine months ended September 30 Key Financial Performance (Three Months Ended September 30) | Metric | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :--------------------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Total Revenues | $2,559 | $3,021 | $(462) | -15.3% | | Net Income (loss) attributable to The Williams Companies, Inc. | $654 | $600 | $54 | +9.0% | | Gain on sale of business | $130 | $0 | $130 | NM | Key Financial Performance (Nine Months Ended September 30) | Metric | 2023 (Millions) | 2022 (Millions) | Change ($M) | Change (%) | | :--------------------------------------------- | :-------------- | :-------------- | :---------- | :--------- | | Total Revenues | $8,123 | $8,035 | $88 | +1.1% | | Net Income (loss) attributable to The Williams Companies, Inc. | $2,041 | $1,380 | $661 | +48.0% | | Net gain (loss) on commodity derivatives | $645 | $(491) | $1,136 | NM | | Income (loss) from discontinued operations | $(88) | $0 | $(88) | NM | - Service revenues increased by 8% for the nine months ended September 30, 2023, primarily due to acquisitions (MountainWest, Trace, NorTex) and higher gathering, processing, and transportation volumes[194] Period-Over-Period Operating Results - Segments Analyzes segment operating performance using Modified EBITDA, detailing revenue and expense changes Transmission & Gulf of Mexico Segment Discusses Modified EBITDA changes driven by asset sales, acquisitions, and service revenues Transmission & Gulf of Mexico Modified EBITDA (Nine Months Ended September 30) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $2,327 | | 2022 | $1,987 | | Change | +$340 (+17.1%) | - Modified EBITDA increased primarily due to a $130 million gain on sale of business and higher service revenues, including a $155 million increase from the MountainWest Acquisition and a $39 million increase from the NorTex Asset Purchase[208][210] - Other segment costs and expenses increased due to higher operating, acquisition, and transition costs related to the MountainWest Acquisition and NorTex Asset Purchase, and higher general maintenance activities[209] Northeast G&P Segment Examines Modified EBITDA changes influenced by service revenues, volumes, and equity-method investment performance Northeast G&P Modified EBITDA (Nine Months Ended September 30) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $1,439 | | 2022 | $1,332 | | Change | +$107 (+8.0%) | - Service revenues increased by $90 million at the Northeast JV, $84 million in the Utica Shale region, and $40 million at Susquehanna Supply Hub, driven by higher volumes and rates[215] - Proportional Modified EBITDA of equity-method investments decreased due to a $31 million share of a loss contingency accrual related to Aux Sable Liquid Products LP and lower commodity-based rates, MVC, and volumes at Laurel Mountain[216] West Segment Analyzes Modified EBITDA changes from service revenues, gathering rates, and commodity margins West Modified EBITDA (Nine Months Ended September 30) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $931 | | 2022 | $885 | | Change | +$46 (+5.2%) | - Service revenues decreased by $92 million in the Barnett Shale region due to lower gathering rates, but increased by $70 million in the Haynesville Shale region due to higher gathering volumes, including from the Trace Acquisition[221] - Commodity margins decreased by $44 million from equity NGLs and $16 million from other sales activities, primarily due to lower net realized commodity pricing[222] Gas & NGL Marketing Services Segment Reports significant Modified EBITDA increase due to favorable derivative gains and commodity marketing margins Gas & NGL Marketing Services Modified EBITDA (Nine Months Ended September 30) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $678 | | 2022 | $(249) | | Change | +$927 (NM) | - Modified EBITDA increased significantly due to a favorable change in net unrealized gain (loss) from derivative instruments within Segment revenues and Net processing commodity expenses[228] - Commodity margins increased by $139 million, driven by higher natural gas storage marketing margins and favorable NGL marketing margins[229] Other Segment Details Modified EBITDA decrease primarily from lower upstream operations and derivative changes Other Modified EBITDA (Nine Months Ended September 30) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $196 | | 2022 | $284 | | Change | $(88) (-31.0%) | - Modified EBITDA decreased primarily due to lower results from upstream operations, including a $74 million decrease in Net realized product sales and a $28 million unfavorable change in Net unrealized gain (loss) from derivative instruments[233] - Other segment costs and expenses not associated with upstream operations decreased due to the absence of a $11 million loss contingency charge in 2022 and a $15 million favorable change related to regulatory assets[234] Management's Discussion and Analysis of Financial Condition and Liquidity Discusses the company's financial condition, liquidity, capital expenditures, debt, and dividend policy Outlook Provides projections for capital expenditures, details recent acquisitions, divestitures, and debt issuances - Growth capital and investment expenditures in 2023 are expected to be $1.6 billion to $1.9 billion, excluding acquisitions[237] - Recent acquisitions include Cureton Front Range, LLC ($560 million) and an additional 50% interest in RMM ($714 million), both expected to close in Q4 2023[238] - The company completed the sale of Gulf Coast petrochemical and feedstock pipelines for $348 million and the acquisition of MountainWest for $1.08 billion cash (retaining $430 million debt)[239] - Issued $1.5 billion of long-term debt in Q1 2023 and $1.25 billion in Q3 2023, with approximately $2.88 billion of long-term debt due within one year at September 30, 2023[240] Liquidity Assesses the company's ability to meet short-term and long-term obligations, including available cash and credit - Williams expects to have sufficient liquidity to manage its businesses in 2023, with potential sources including cash from operations, equity-method investee distributions, credit facilities, and asset monetizations[242] Available Liquidity (September 30, 2023) | Component | Amount (Millions) | | :------------------------------------------------------------------------------------------------------------------------------------ | :---------------- | | Cash and cash equivalents | $2,074 | | Capacity available under $3.75 billion credit facility (no commercial paper outstanding) | $3,750 | | Total Available Liquidity | $5,824 | - As of September 30, 2023, the company had a working capital deficit of $1.3 billion and $22.8 billion of long-term debt due after one year[243][244] Dividends Reports on the company's regular quarterly cash dividend to common stockholders - The regular quarterly cash dividend to common stockholders was increased by approximately 5.3% to $0.4475 per share in March, June, and September 2023[247] Distributions from Equity-Method Investees Explains the general policy for periodic cash distributions from equity-method investments - Organizational documents of equity-method investments generally require periodic distributions of available cash, reduced by reserves for operating their respective businesses[248] Credit Ratings Presents the company's credit ratings and outlook from major agencies, noting potential impacts of downgrades Credit Ratings (Senior Unsecured Debt Rating & Outlook) | Rating Agency | Outlook | Rating | | :-------------------------- | :------ | :----- | | S&P Global Ratings | Stable | BBB | | Moody's Investors Service | Stable | Baa2 | | Fitch Ratings | Stable | BBB | - A downgrade of credit ratings could increase borrowing costs and potentially require additional collateral, negatively impacting available liquidity[250] Sources (Uses) of Cash Summarizes the primary sources and uses of cash and cash equivalents for the nine-month period Sources (Uses) of Cash and Cash Equivalents (Nine Months Ended September 30) | Category | 2023 (Millions) | 2022 (Millions) | | :--------------------------------------------------- | :-------------- | :-------------- | | Net cash provided (used) by operating activities | $4,125 | $3,670 | | Proceeds from long-term debt | $2,754 | $1,752 | | Proceeds from sale of business | $348 | $0 | | Capital expenditures | $(1,845) | $(1,447) | | Common dividends paid | $(1,635) | $(1,553) | | Purchases of businesses, net of cash acquired | $(1,024) | $(933) | | Proceeds from (payments of) commercial paper - net | $(352) | $0 | | Purchases of treasury stock | $(130) | $(9) | | Increase (decrease) in cash and cash equivalents | $1,922 | $(821) | - Net cash provided by operating activities increased by $455 million for the nine months ended September 30, 2023, primarily due to higher operating income and favorable changes in operating working capital[254] Item 3. Quantitative and Qualitative Disclosures About Market Risk Describes exposure to interest rate and commodity price risks, and how these are managed using financial instruments Interest Rate Risk Discusses the company's exposure to interest rate fluctuations, primarily from its debt portfolio - The company's interest rate risk exposure is primarily related to its debt portfolio, which is largely comprised of fixed-rate debt[257] - Interest rate derivative instruments may be utilized to hedge interest rate risk associated with future debt issuances[257] Commodity Price Risk Explains exposure to commodity price volatility and the use of derivative contracts for risk management - Williams is exposed to commodity price risk through natural gas and NGL marketing activities, as well as upstream business and certain gathering and processing contracts[258] - This risk is managed using exchange-traded and over-the-counter energy contracts, including forward contracts, futures contracts, and basis swaps[258] Fair Value of Commodity Derivative Contracts (September 30, 2023) | Maturity | Fair Value (Millions) | | :--------- | :-------------------- | | 2023 | $30 | | 2024 | $(41) | | 2025 | $(41) | | 2026 | $(192) | | 2027+ | $(192) | | Total | $(203) | Value at Risk (VaR) Presents the Value at Risk (VaR) for integrated natural gas trading and non-trading derivatives - VaR is determined using parametric models with 95% confidence intervals and one-day holding periods[262] - The VaR associated with integrated natural gas trading operations activity was $4 million at September 30, 2023[264] - The VaR associated with non-trading derivatives (hedging upstream business and certain gathering/processing contracts) was $3 million at September 30, 2023[265] Item 4. Controls and Procedures Addresses the effectiveness of disclosure controls and internal control over financial reporting Evaluation of Disclosure Controls and Procedures Concludes on the effectiveness of disclosure controls, noting the exclusion of a recent acquisition - Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023[268] - Disclosure controls and procedures of MountainWest, acquired on February 14, 2023, were excluded from the scope of management's assessment[269] Changes in Internal Control Over Financial Reporting Reports no material changes to internal control, aside from the ongoing integration of MountainWest - No material changes to internal control over financial reporting occurred during the third quarter of 2023, other than the ongoing integration of MountainWest[271] - MountainWest's internal control over financial reporting will be excluded from the scope of the assessment as of December 31, 2023[271] Part II. Other Information Contains disclosures on legal proceedings, risk factors, equity security sales, and other miscellaneous information Item 1. Legal Proceedings Discloses information about environmental matters and other litigation that could impact financial position Environmental Details notices of noncompliance from the EPA and a consent decree for environmental claims - The company received notices of noncompliance and violation from the EPA regarding Leak Detection and Repair (LDAR) regulations at several facilities[273] - A consent decree has been executed, requiring a civil penalty of $3.75 million and injunctive relief to resolve these claims[273] Other litigation Refers to Note 9 – Contingencies for additional information on other litigation matters - Additional information regarding other litigation matters is provided in Note 9 – Contingencies of the Notes to Consolidated Financial Statements[275] Item 1A. Risk Factors Refers to the company's Annual Report on Form 10-K for a comprehensive discussion of risk factors - Risk factors are detailed in Part I, Item 1A. Risk Factors in the Annual Report on Form 10-K for the year ended December 31, 2022[276] - No material changes to these risk factors have occurred since the filing of the Annual Report[276] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities Reports on equity security transactions, including no issuer purchases in Q3 2023 and remaining repurchase capacity - No shares were purchased by the issuer during July, August, or September 2023[278] - The company has a $1.5 billion share repurchase program authorized in September 2021, with $1,360,938,325 remaining available for purchase[278] Item 5. Other Information Confirms no Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers - No director or officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended September 30, 2023[279] Item 6. Exhibits Provides a comprehensive list of all exhibits filed as part of the Form 10-Q, including various agreements, corporate governance documents, certifications, and XBRL data files - Exhibits include merger agreements, certificates of incorporation, by-laws, and certifications of the Chief Executive Officer and Chief Financial Officer[281] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase are filed herewith[281][283] SIGNATURE Formally concludes the report, indicating it was duly signed by an authorized officer Signature Confirms the report's official signing by the Vice President, Chief Accounting Officer - The report was signed on November 1, 2023, by Mary A. Hausman, Vice President, Chief Accounting Officer and Principal Accounting Officer[285][286]