Williams Companies, Inc. (WMB): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report

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Summary:
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 natural gas prices , 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.

Overview:

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 Louisiana.

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).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: NGL , WMB , WPX , WPZ

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