We are downgrading our investment thesis on Williams Companies to
Underperform from Neutral. Our concern stems from the company's
extensive exposure to debt as reflected in its
debt-to-capitalization ratio of 67.4%. Moreover, Williams is highly
exposed to volatile
, as the company's midstream assets are involved in the gathering,
processing and transportation of the commodity. This translates
into an uncertain near- to medium-term outlook on the company.
Considering these headwinds, we expect Williams to underperform the
industry, giving investors little reason to hold the stock.
Tulsa, Oklahoma-based Williams Companies, Inc. (WMB) is a
premier energy infrastructure provider in North America. The
company's core operations include finding, producing, gathering,
processing, and transportation of natural gas. Boasting of a
widespread pipeline system, Williams is one of the largest domestic
transporters of natural gas by volume. Its facilities gas wells,
pipelines, and midstream services are concentrated in the
Northwest, Rocky Mountains, Gulf Coast, and Eastern Seaboard.
Williams owns/holds operating interests in 15,000 miles of
interstate gas pipelines, 1,000 miles of natural gas liquids (NGL)
transportation pipelines, and more than 10,000 miles of oil and gas
gathering pipelines. The company has a combined processing capacity
of 6.6 billion cubic feet of natural gas per day, and more than
200,000 barrels of NGL per day.
Williams divides its business into four segments: Williams
Partners (contributed more than 90% of the company's 2013 total
profit), Williams NGL & Petchem Services, Access Midstream
Partners, and Other.
Williams Partners: Williams Partners segment includes the
company's 72%-owned (including the general-partner interest) master
limited partnership Williams Partners L.P. (WPZ), consisting of
most of the company's interstate gas pipeline and midstream assets.
Williams Partners L.P. owns interests in three major interstate
natural gas pipelines, which together transport 14% of the natural
gas consumed in the U.S. The partnership's gathering and processing
assets comprise large-scale operations in the U.S. Rocky Mountains
and both onshore and offshore along the Gulf of Mexico.
Williams NGL & Petchem Services: This unit consists of
Williams' oil sands off-gas processing plant near Fort McMurray,
Alberta, its NGL/olefin fractionation facility and butylene/butane
splitter plant at Redwater, Alberta, its light-feed olefins cracker
in Geismar, Louisiana together with related ethane and propane
pipelines, and the company's refinery grade splitter in
Access Midstream Partners: The segment includes the company's
earnings from its 50% stake in natural gas partnership Access
Midstream Partners L.P. and a 100% interest in its general partner
Access Midstream Partners GP LLC.
Other: Williams' Other' segment includes the company's business
activities that are not operating segments, primarily a 25.5%
interest in Gulfstream, as well as corporate operations.
In Dec 2011, Williams completed the spin-off of its exploration
and production business into a separate, independent and publicly
traded company WPX Energy Inc. (WPX).
Williams Companies, Inc. (WMB): Read the Full
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