Williams Companies 10-Q 2022-03-31

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

or

☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number 1-4174

THE WILLIAMS COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware						73-0569878
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
One Williams Center
Tulsa, Oklahoma						74172-0172
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (918) 573-2000

NO CHANGE

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, $1.00 par value			WMB			New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			☑						Accelerated filer			☐						Non-accelerated filer			☐						Smaller reporting company			☐						Emerging growth company			☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class						Shares Outstanding at April 28, 2022
Common Stock, $1.00 par value						1,218,011,601

The Williams Companies, Inc.

Index

						Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Income – Three Months Ended March 31, 2022 and 2021						6
Consolidated Statement of Comprehensive Income (Loss) – Three Months Ended March 31, 2022 and 2021						7
Consolidated Balance Sheet – March 31, 2022 and December 31, 2021						8
Consolidated Statement of Changes in Equity – Three Months Ended March 31, 2022 and 2021						9
Consolidated Statement of Cash Flows – Three Months Ended March 31, 2022 and 2021						10
Notes to Consolidated Financial Statements						11
Note 1 - General, Description of Business, and Basis of Presentation						11
Note 2 - Variable Interest Entities						12
Note 3 - Acquisitions						13
Note 4 - Revenue Recognition						16
Note 5 - Provision (Benefit) for Income Taxes						18
Note 6 - Earnings (Loss) Per Common Share						19
Note 7 - Employee Benefit Plans						19
Note 8 - Debt and Banking Arrangements						20
Note 9 - Stockholders’ Equity						20
Note 10 - Fair Value Measurements and Guarantees						21
Note 11 - Derivatives						22
Note 12 - Contingent Liabilities						24
Note 13 - Segment Disclosures						28
Note 14 - Subsequent Event						31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						32
Item 3. Quantitative and Qualitative Disclosures About Market Risk						44
Item 4. Controls and Procedures						45
Part II. Other Information						45
Item 1. Legal Proceedings						45
Item 1A. Risk Factors						46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						48
Item 6. Exhibits						49

The reports, filings, and other public announcements of The Williams Companies, Inc. (Williams) may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for

future operations, business prospects, outcomes of regulatory proceedings, market conditions, and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.

All statements, other than statements of historical facts, included in this report that address activities, events, or developments that we expect, believe, or anticipate will exist or may occur in the future are forward-looking statements. Forward-looking statements can be identified by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “assumes,” “guidance,” “outlook,” “in-service date,” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

• Levels of dividends to Williams stockholders;

• Future credit ratings of Williams and its affiliates;

• Amounts and nature of future capital expenditures;

• Expansion and growth of our business and operations;

• Expected in-service dates for capital projects;

• Financial condition and liquidity;

• Business strategy;

• Cash flow from operations or results of operations;

• Seasonality of certain business components;

• Natural gas, natural gas liquids, and crude oil prices, supply, and demand;

• Demand for our services;

• The impact of the coronavirus (COVID-19) pandemic.

Forward-looking statements are based on numerous assumptions, uncertainties, and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:

• Availability of supplies, market demand, and volatility of prices;

• Development and rate of adoption of alternative energy sources;

• The impact of existing and future laws and regulations, the regulatory environment, environmental matters, and litigation, as well as our ability to obtain necessary permits and approvals, and achieve favorable rate proceeding outcomes;

• Our exposure to the credit risk of our customers and counterparties;

• Our ability to acquire new businesses and assets and successfully integrate those operations and assets into existing businesses as well as successfully expand our facilities, and to consummate asset sales on acceptable terms;

• Whether we are able to successfully identify, evaluate, and timely execute our capital projects and investment opportunities;

• The strength and financial resources of our competitors and the effects of competition;

• The amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate;

• Whether we will be able to effectively execute our financing plan;

• Increasing scrutiny and changing expectations from stakeholders with respect to our environmental, social, and governance practices;

• The physical and financial risks associated with climate change;

• The impacts of operational and developmental hazards and unforeseen interruptions;

• The risks resulting from outbreaks or other public health crises, including COVID-19;

• Risks associated with weather and natural phenomena, including climate conditions and physical damage to our facilities;

• Acts of terrorism, cybersecurity incidents, and related disruptions;

• Our costs and funding obligations for defined benefit pension plans and other postretirement benefit plans;

• Changes in maintenance and construction costs, as well as our ability to obtain sufficient construction-related inputs, including skilled labor;

• Inflation, interest rates, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on customers and suppliers);

• Risks related to financing, including restrictions stemming from debt agreements, future changes in credit ratings as determined by nationally recognized credit rating agencies, and the availability and cost of capital;

• The ability of the members of the Organization of Petroleum Exporting Countries (OPEC) and other oil exporting nations to agree to and maintain oil price and production controls and the impact on domestic production;

• Changes in the current geopolitical situation, including the Russian invasion of Ukraine;

• Changes in U.S. governmental administration and policies;

• Whether we are able to pay current and expected levels of dividends;

• Additional risks described in our filings with the Securities and Exchange Commission (SEC).

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.

Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021, as supplemented by the disclosure in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.

DEFINITIONS

The following is a listing of certain abbreviations, acronyms, and other industry terminology that may be used throughout this Form 10-Q.

Measurements:

Barrel: One barrel of petroleum products that equals 42 U.S. gallons

Mbbls/d: One thousand barrels per day

Bcf: One billion cubic feet of natural gas

Bcf/d: One billion cubic feet of natural gas per day

MMcf/d: One million cubic feet per day

British Thermal Unit (Btu): A unit of energy needed to raise the temperature of one pound of water by one degree Fahrenheit

MMbtu: One million British thermal units

Tbtu: One trillion British thermal units

Dekatherms (Dth): A unit of energy equal to one million British thermal units

Mdth/d: One thousand dekatherms per day

MMdth: One million dekatherms or approximately one trillion British thermal units

MMdth/d: One million dekatherms per day

Consolidated Entities:

BRMH: Blue Racer Midstream Holdings, LLC

Cardinal: Cardinal Gas Services, L.L.C.

Gulfstar One: Gulfstar One LLC

Northeast JV: Ohio Valley Midstream LLC

Northwest Pipeline: Northwest Pipeline LLC

Transco: Transcontinental Gas Pipe Line Company, LLC

Partially Owned Entities: Entities in which we do not own a 100 percent ownership interest and which, as of March 31, 2022, we account for as equity-method investments, including principally the following:

Aux Sable: Aux Sable Liquid Products LP

Blue Racer: Blue Racer Midstream LLC

Discovery: Discovery Producer Services LLC

Gulfstream: Gulfstream Natural Gas System, L.L.C.

Laurel Mountain: Laurel Mountain Midstream, LLC

OPPL: Overland Pass Pipeline Company LLC

RMM: Rocky Mountain Midstream Holdings LLC

Targa Train 7: Targa Train 7 LLC

Government and Regulatory:

EPA: Environmental Protection Agency

Exchange Act, the: Securities and Exchange Act of 1934, as amended

FERC: Federal Energy Regulatory Commission

IRS: Internal Revenue Service

SEC: Securities and Exchange Commission

Other:

EBITDA: Earnings before interest, taxes, depreciation, and amortization

Fractionation: The process by which a mixed stream of natural gas liquids is separated into constituent products, such as ethane, propane, and butane

GAAP: U.S. generally accepted accounting principles

LNG: Liquefied natural gas; natural gas which has been liquefied at cryogenic temperatures

MVC: Minimum volume commitments

NGLs: Natural gas liquids; natural gas liquids result from natural gas processing and crude oil refining and are used as petrochemical feedstocks, heating fuels, and gasoline additives, among other applications

NGL margins: NGL revenues less any applicable Btu replacement cost, plant fuel, transportation, and fractionation

Sequent Acquisition: The July 1, 2021, acquisition of 100 percent of Sequent Energy Management, L.P. and Sequent Energy Canada, Corp.

PART I – FINANCIAL INFORMATION

The Williams Companies, Inc.

Consolidated Statement of Income

(Unaudited)

									Three Months Ended March 31,
															2022						2021
															(Millions, except per-share amounts)
Revenues:
Service revenues															$	1,537					$	1,452
Service revenues – commodity consideration															77						49
Product sales															1,104						1,147
Net gain (loss) on commodity derivatives															(194)						(36)
Total revenues															2,524						2,612
Costs and expenses:
Product costs															803						932
Processing commodity expenses															30						21
Operating and maintenance expenses															394						360
Depreciation and amortization expenses															498						438
Selling, general, and administrative expenses															154						123
Other (income) expense – net															(9)						(1)
Total costs and expenses															1,870						1,873
Operating income (loss)															654						739
Equity earnings (losses)															136						131
Other investing income (loss) – net															1						2
Interest incurred															(289)						(296)
Interest capitalized															3						2
Other income (expense) – net															5						(2)
Income (loss) before income taxes															510						576
Less: Provision (benefit) for income taxes															118						141
Net income (loss)															392						435
Less: Net income (loss) attributable to noncontrolling interests															12						9
Net income (loss) attributable to The Williams Companies, Inc.															380						426
Less: Preferred stock dividends															1						1
Net income (loss) available to common stockholders															$	379					$	425
Basic earnings (loss) per common share:
Net income (loss)															$	.31					$	.35
Weighted-average shares (thousands)															1,216,940						1,214,646
Diluted earnings (loss) per common share:
Net income (loss)															$	.31					$	.35
Weighted-average shares (thousands)															1,221,279						1,217,211

See accompanying notes.

The Williams Companies, Inc.

Consolidated Statement of Comprehensive Income (Loss)

(Unaudited)

									Three Months Ended March 31,
															2022						2021
															(Millions)
Net income (loss)															$	392					$	435
Other comprehensive income (loss):
Cash flow hedging activities:
Net unrealized gain (loss) from derivative instruments, net of taxes of ($1) in 2022 and $2 in 2021															3						(9)
Reclassifications into earnings of net derivative instruments (gain) loss, net of taxes of $— in 2022 and $— in 2021															—						2
Pension and other postretirement benefits:
Amortization of actuarial (gain) loss and net actuarial loss from settlements included in net periodic benefit cost (credit), net of taxes of ($1) in 2022 and ($1) in 2021															2						3
Other comprehensive income (loss)															5						(4)
Comprehensive income (loss)															397						431
Less: Comprehensive income (loss) attributable to noncontrolling interests															12						9
Comprehensive income (loss) attributable to The Williams Companies, Inc.															$	385					$	422

See accompanying notes.

The Williams Companies, Inc.

Consolidated Balance Sheet

(Unaudited)

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General

We are an energy company committed to being the leader in providing infrastructure that safely delivers natural gas products to reliably fuel the clean energy economy. Our operations are located in the United States.

Our interstate natural gas pipeline strategy is to create value by maximizing the utilization of our pipeline capacity by providing high quality, low cost transportation of natural gas to large and growing markets. Our gas pipeline businesses’ interstate transmission and storage activities are subject to regulation by the FERC and as such, our rates and charges for the transportation of natural gas in interstate commerce, and the extension, expansion or abandonment of jurisdictional facilities and accounting, among other things, are subject to regulation. The rates are established primarily through the FERC’s ratemaking process, but we also may negotiate rates with our customers pursuant to the terms of our tariffs and FERC policy. Changes in commodity prices and volumes transported have limited near-term impact on these revenues because the majority of cost of service is recovered through firm capacity reservation charges in transportation rates.

The ongoing strategy of our midstream operations is to safely and reliably operate large-scale midstream infrastructure where our assets can be fully utilized and drive low per-unit costs. We focus on consistently attracting new business by providing highly reliable service to our customers. These services include natural gas gathering, processing, treating, and compression, NGL fractionation and transportation, crude oil production handling and transportation, marketing services for NGL, crude oil and natural gas, as well as storage facilities.

Consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources, our operations are conducted, managed, and presented within the following reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services. All remaining business activities are included in Other. Our reportable segments are comprised of the following businesses:

• Transmission & Gulf of Mexico is comprised of our interstate natural gas pipelines, Transco and Northwest Pipeline, as well as natural gas gathering and processing and crude oil production handling and transportation assets in the Gulf Coast region, including a 51 percent interest in Gulfstar One (a consolidated VIE), which is a proprietary floating production system, a 50 percent equity-method investment in Gulfstream, and a 60 percent equity-method investment in Discovery.

• Northeast G&P is comprised of our midstream gathering, processing, and fractionation businesses in the Marcellus Shale region primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio, as well as a 65 percent interest in our Northeast JV (a consolidated VIE) which operates in West Virginia, Ohio, and Pennsylvania, a 66 percent interest in Cardinal (a consolidated VIE) which operates in Ohio, a 69 percent equity-method investment in Laurel Mountain, a 50 percent equity-method investment in Blue Racer, and Appalachia Midstream Investments, a wholly owned subsidiary that owns equity-method investments with an approximate average 66 percent interest in multiple gas gathering systems in the Marcellus Shale region.

• West is comprised of our gas gathering, processing, and treating operations in the Rocky Mountain region of Colorado and Wyoming, the Barnett Shale region of north-central Texas, the Eagle Ford Shale region of south Texas, the Haynesville Shale region of northwest Louisiana, and the Mid-Continent region which includes the Anadarko and Permian basins. This segment also includes our NGL storage facilities, an undivided 50 percent interest in an NGL fractionator near Conway, Kansas, a 50 percent equity-method investment in OPPL, a 50 percent equity-method investment in RMM, a 20 percent equity-method investment in Targa Train 7, and a 15 percent interest in Brazos Permian II, LLC.

• Gas & NGL Marketing Services includes our NGL and natural gas marketing and trading operations previously reported within the West segment prior to January 1, 2022, as well as the operations acquired in the Sequent Acquisition in 2021. This segment includes risk management and the storage and transportation of natural gas on strategically positioned assets, including our Transco system.

Management’s Discussion and Analysis (Continued)			Table of Contents

Dividends

In March 2022, we paid a regular quarterly dividend of $0.425 per share.

Overview of Three Months Ended March 31, 2022

Net income (loss) attributable to The Williams Companies, Inc., for the three months ended March 31, 2022, decreased $46 million compared to the three months ended March 31, 2021, reflecting the benefit of higher service revenues from commodity-based gathering and processing rates in the West and Transco’s Leidy South project placed in service during the second half of 2021, higher commodity margins, and higher results from our upstream operations associated with increased scale of operations, more than offset by a $123 million net unrealized loss on commodity derivatives, the absence of a $77 million favorable impact in 2021 from Winter Storm Uri, and increased intangible asset amortization and selling, general, and administrative expenses, primarily resulting from the Sequent Acquisition.

Our results include $123 million of net unrealized losses from commodity derivatives not designated as hedges for accounting purposes. We can experience significant earnings volatility from the fair value accounting required for the derivatives used to hedge a portion of the economic value of the underlying transportation and storage marketing portfolio as well as upstream related production. However, the unrealized fair value measurement gains and losses are generally offset by valuation changes in the economic value of the underlying production or contracts, which is not recognized until the underlying transaction occurs.

The following discussion and analysis of results of operations and financial condition and liquidity should be read in conjunction with our consolidated financial statements and notes thereto of this Form 10‑Q and our Annual Report on Form 10-K dated February 28, 2022.

Recent Developments

Trace Acquisition

In April 2022, we completed the acquisition of 100 percent of Gemini Arklatex, LLC through which we acquired the gas gathering and related assets of Trace Midstream, located in the Haynesville Shale region (Trace Acquisition), for approximately $950 million, subject to working capital and post-closing adjustments. The purpose of the Trace Acquisition was to expand our footprint into the East Texas region of the Haynesville Shale region, increasing in-basin scale in one of the largest growth basins in the country, and to advance our clean energy strategy. The transaction closed on April 29, 2022.

Company Outlook

Our strategy is to provide a large-scale, reliable, and clean energy infrastructure designed to maximize the opportunities created by the vast supply of natural gas and natural gas products that exists in the United States. We accomplish this by connecting the growing demand for cleaner fuels and feedstocks with our major positions in the premier natural gas and natural gas products supply basins. We continue to maintain a strong commitment to safety, environmental stewardship including seeking opportunities for renewable energy ventures, operational excellence, and customer satisfaction. We believe that accomplishing these goals will position us to deliver safe, reliable, clean energy services to our customers and an attractive return to our shareholders. Our business plan for 2022 includes a continued focus on earnings and cash flow growth.

In 2022, our operating results are expected to benefit from higher commodity prices and volume growth in our Haynesville, Ohio Valley Midstream, and Cardinal areas. We also anticipate increases resulting from recently completed Transco expansion projects, development of our upstream oil and gas properties, and our recently completed Trace Acquisition. These increases are partially offset by the absence of favorable results captured during Winter Storm Uri in 2021 by our Gas & NGL Marketing Services business and lower expected results in the Bradford Supply Hub primarily due to lower gathering rates resulting from annual cost of service contract redetermination.

Management’s Discussion and Analysis (Continued)			Table of Contents

We seek to maintain a strong financial position and liquidity, as well as manage a diversified portfolio of safe, clean, and reliable energy infrastructure assets that continue to serve key growth markets and supply basins in the United States. Our growth capital and investment expenditures in 2022 are expected to be in a range from $2.25 billion to $2.35 billion. Growth capital spending in 2022 primarily includes Transco expansions, all of which are fully contracted with firm transportation agreements, projects supporting the Northeast G&P business, the Trace Acquisition, and an expansion in the Western Gulf area. We also expect to invest capital in the development of our upstream oil and gas properties. In addition to growth capital and investment expenditures, we also remain committed to projects that maintain our assets for safe and reliable operations, as well as projects that meet legal, regulatory, and/or contractual commitments.

Potential risks and obstacles that could impact the execution of our plan include:

• Continued negative impacts of COVID-19 driving a global recession, which could result in downturns in financial markets and commodity prices, as well as impact demand for natural gas and related products;

• Opposition to, and regulations affecting, our infrastructure projects, including the risk of delay or denial in permits and approvals needed for our projects;

• Counterparty credit and performance risk;

• Unexpected significant increases in capital expenditures or delays in capital project execution;

• Unexpected changes in customer drilling and production activities, which could negatively impact gathering and processing volumes;

• Lower than anticipated demand for natural gas and natural gas products which could result in lower than expected volumes, energy commodity prices, and margins;

• General economic, financial markets, or industry downturns, including increased inflation and interest rates;

• Physical damages to facilities, including damage to offshore facilities by weather-related events;

• Other risks set forth under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC on February 28, 2022, as supplemented by the disclosure in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.

Expansion Projects

Our ongoing major expansion projects include the following:

Transmission & Gulf of Mexico

Regional Energy Access

In March 2021, we filed an application with the FERC for the project to expand Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from receipt points in northeastern Pennsylvania to multiple delivery points in Pennsylvania, New Jersey, and Maryland. We plan to place the project into service as early as the fourth quarter of 2024, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 829 Mdth/d.

Management’s Discussion and Analysis (Continued)			Table of Contents

Results of Operations

Consolidated Overview

The following table and discussion is a summary of our consolidated results of operations for the three months ended March 31, 2022, compared to the three months ended March 31, 2021. The results of operations by segment are discussed in further detail following this consolidated overview discussion.

																					Three Months Ended March 31,
																											2022						2021						$ Change*						% Change*
																					(Millions)
Revenues:
Service revenues																											$	1,537					$	1,452					+85						+6		%
Service revenues – commodity consideration																											77						49						+28						+57		%
Product sales																											1,104						1,147						-43						-4		%
Net gain (loss) on commodity derivatives																											(194)						(36)						-158						NM
Total revenues																											2,524						2,612
Costs and expenses:
Product costs																											803						932						+129						+14		%
Processing commodity expenses																											30						21						-9						-43		%
Operating and maintenance expenses																											394						360						-34						-9		%
Depreciation and amortization expenses																											498						438						-60						-14		%
Selling, general, and administrative expenses																											154						123						-31						-25		%
Other (income) expense – net																											(9)						(1)						+8						NM
Total costs and expenses																											1,870						1,873
Operating income (loss)																											654						739
Equity earnings (losses)																											136						131						+5						+4		%
Other investing income (loss) – net																											1						2						-1						-50		%
Interest expense																											(286)						(294)						+8						+3		%
Other income (expense) – net																											5						(2)						+7						NM
Income (loss) before income taxes																											510						576
Less: Provision (benefit) for income taxes																											118						141						+23						+16		%
Net income (loss)																											392						435
Less: Net income (loss) attributable to noncontrolling interests																											12						9						-3						-33		%
Net income (loss) attributable to The Williams Companies, Inc.																											$	380					$	426

• • = Favorable change; - = Unfavorable change; NM = A percentage calculation is not meaningful due to a change in signs, a zero-value denominator, or a percentage change greater than 200.

Three months ended March 31, 2022 vs. three months ended March 31, 2021

Service revenues increased primarily due to higher gathering and processing rates driven by favorable commodity prices and annual contractual rate escalations for certain of our West and Northeast operations as well as higher transportation fee revenues associated with the Leidy South expansion project placed in service at Transco in the second half of 2021.

Service revenues – commodity consideration increased primarily due to higher NGL prices. These revenues represent consideration we receive in the form of commodities as full or partial payment for processing services

Management’s Discussion and Analysis (Continued)			Table of Contents

provided. Most of these NGL volumes are sold during the month processed and therefore are offset within Product costs below.

Product sales decreased primarily due to the impact of netting the 2022 legacy natural gas marketing revenues with the associated costs (see Note 1 – General, Description of Business, and Basis of Presentation of Notes to Consolidated Financial Statements) and lower gas marketing sales prices related to the absence of severe winter weather in 2022 as compared to the first quarter of 2021. These decreases were partially offset by higher marketing sales volumes of NGLs and natural gas, including the increase associated with the Sequent Acquisition in third-quarter 2021, higher sales associated with our upstream operations presented in our Other segment, and higher sales prices related to our equity NGL sales activities. As we are acting as agent for natural gas marketing customers of our Gas & NGL Marketing Services segment, our natural gas marketing product sales are presented net of the related costs of those activities.

Net gain (loss) on commodity derivatives includes realized and unrealized gains and losses from derivative instruments. The unfavorable change primarily reflects net realized and unrealized losses in our Other and Gas & NGL Marketing Services segments.

Product costs decreased primarily due to the impact of netting the 2022 legacy natural gas marketing revenues with the associated costs. These decreases were partially offset by higher prices and volumes for our NGL marketing activities, as well as higher NGL prices associated with volumes acquired as commodity consideration related to our equity NGL production activities.

The net sum of Service revenues – commodity consideration, Product sales, Product costs, Processing commodity expenses, and net realized gains and losses on commodity derivatives related to sales of product comprise our commodity margins. However, Product sales at our Other segment reflect sales related to our upstream operations and are excluded from our commodity margins.

Operating and maintenance expenses increased primarily due to increased costs associated with Transco's Leidy South expansion project placed in service in 2021 and higher expenses associated with our upstream operations.

Depreciation and amortization expenses increased primarily due to amortization of intangibles acquired in the Sequent Acquisition and an increase in depreciation at Transco related to ARO revisions (offset in Other (income) expense – net within Operating income (loss) resulting in no net impact on our results of operations).

Selling, general, and administrative expenses increased primarily due to higher employee-related expenses associated with the Sequent Acquisition.

Other (income) expense – net within Operating income (loss) changed favorably primarily due to the deferral of ARO depreciation (offset in Depreciation and amortization expenses resulting in no net impact on our results of operations).

Provision (benefit) for income taxes changed favorably primarily due to lower pre-tax income. See Note 5 – Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods.

Period-Over-Period Operating Results - Segments

We evaluate segment operating performance based upon Modified EBITDA. Note 13 – Segment Disclosures of Notes to Consolidated Financial Statements includes a reconciliation of this non-GAAP measure to Net income (loss). Management uses Modified EBITDA because it is an accepted financial indicator used by investors to compare company performance. In addition, management believes that this measure provides investors an enhanced perspective of the operating performance of our assets. Modified EBITDA should not be considered in isolation or as a substitute for a measure of performance prepared in accordance with GAAP.

Management’s Discussion and Analysis (Continued)			Table of Contents

Transmission & Gulf of Mexico

									Three Months Ended March 31,
															2022						2021
															(Millions)
Service revenues															$	874					$	834
Service revenues – commodity consideration															21						11
Product sales															100						67
Segment revenues															995						912
Product costs															(100)						(66)
Processing commodity expenses															(6)						(4)
Other segment costs and expenses															(240)						(229)
Proportional Modified EBITDA of equity-method investments															48						47
Transmission & Gulf of Mexico Modified EBITDA															$	697					$	660
Commodity margins															$	15					$	8

Three months ended March 31, 2022 vs. three months ended March 31, 2021

Transmission & Gulf of Mexico Modified EBITDA increased primarily due to a favorable change to Service revenues, partially offset by higher Other segment costs and expenses.

Service revenues increased primarily due to a $39 million increase in Transco’s natural gas transportation revenues primarily associated with the Leidy South expansion project placed in service in the second half of 2021, and higher reimbursable electric power costs, which is offset by a similar change in electricity charges, reflected in Other segment costs and expenses.

Other segment costs and expenses increased primarily due to higher operating costs, including higher costs associated with the Leidy South expansion project and higher reimbursable electric power costs, which is offset by a similar change in electricity reimbursements, reflected in Service revenues. These increases are partially offset by a favorable change in the deferral of ARO related depreciation at Transco.

Northeast G&P

									Three Months Ended March 31,
															2022						2021
															(Millions)
Service revenues															$	380					$	358
Service revenues – commodity consideration															7						3
Product sales															36						32
Segment revenues															423						393
Product costs															(37)						(32)
Other segment costs and expenses															(118)						(112)
Proportional Modified EBITDA of equity-method investments															150						153
Northeast G&P Modified EBITDA															$	418					$	402
Commodity margins															$	6					$	3

Management’s Discussion and Analysis (Continued)			Table of Contents

Three months ended March 31, 2022 vs. three months ended March 31, 2021

Northeast G&P Modified EBITDA increased primarily due to higher Service revenues.

Service revenues increased primarily due to:

*•*A $9 million increase in revenues at Susquehanna Supply Hub primarily related to higher gathering rates, partially offset by lower gathering volumes;

• A $7 million increase in revenues associated with reimbursable electricity expenses, which is offset by similar changes in electricity charges, reflected in Other segment costs and expenses;

*•*A $5 million increase in revenues at the Northeast JV primarily related to higher processing volumes, partially offset by lower gathering volumes.

Other segment costs and expenses increased primarily due to higher operating expenses, including higher electricity charges.

Proportional Modified EBITDA of equity-method investments decreased at Appalachia Midstream Investments primarily driven by lower gathering rates resulting from annual cost of service contract redetermination, partially offset by an increase at Laurel Mountain due to higher commodity-based gathering rates and higher MVC revenue.

West

									Three Months Ended March 31,
															2022						2021
															(Millions)
Service revenues															$	331					$	291
Service revenues – commodity consideration															49						35
Product sales															187						152
Net gain (loss) on commodity derivatives															(5)						(2)
Segment revenues															562						476
Product costs															(182)						(137)
Processing commodity expenses															(26)						(17)
Other segment costs and expenses															(121)						(125)
Proportional Modified EBITDA of equity-method investments															27						25
West Modified EBITDA															$	260					$	222
Commodity margins															$	23					$	31

Three months ended March 31, 2022 vs. three months ended March 31, 2021

West Modified EBITDA increased primarily due to higher Service revenues, partially offset by lower Commodity margins.

Service revenues increased primarily due to:

• A $50 million increase primarily due to higher processing rates in the Piceance region and higher gathering rates in the Barnett Shale and Haynesville Shale regions, driven by favorable commodity pricing;

• A $1 million increase associated gathering volumes primarily due to a production increase in the Haynesville Shale region, substantially offset by a production decline in the Eagle Ford Shale region (the

Management’s Discussion and Analysis (Continued)			Table of Contents

impact of which is substantially offset by the recognition of higher MVC revenue described below); partially offset by

• A $7 million decrease in revenues associated with reimbursable compressor power and fuel purchases primarily due to lower prices related to the impact of the absence of severe winter weather in the first quarter of 2022 as compared to the first quarter of 2021, which are offset by similar changes in Other segment costs and expenses;

*•*A $3 million decrease associated with lower MVC revenue in the Wamsutter region, partially offset by higher MVC revenue in the Eagle Ford Shale region.

The net sum of Service revenues – commodity consideration, Product sales, Product costs, Processing commodity expenses, and net realized gains and losses on commodity derivatives related to sales of product comprise our Commodity margins. We further segregate our Commodity margins into product margins associated with our equity NGLs and marketing margins. Marketing margins decreased $12 million, primarily due to the absence of severe winter weather in the first quarter of 2022 as compared to the first quarter of 2021. Product margins from our equity NGLs increased $1 million, primarily due to higher net realized commodity sales prices, offset by lower non-ethane sales volumes and higher net realized prices for natural gas purchases associated with our equity NGL production activities.

Other segment costs and expenses changed favorably primarily due to lower reimbursable compressor power and fuel purchases which are offset in Service revenues.

Gas & NGL Marketing Services

									Three Months Ended March 31,
															2022						2021
															(Millions)
Service revenues															$	1					$	1
Product sales															968						1,088
Net realized gain (loss) from derivative instruments															(56)						(34)
Net unrealized gain (loss) from derivative instruments															(59)						—
Net gain (loss) on commodity derivatives															(115)						(34)
Segment revenues															854						1,055
Product costs															(812)						(959)
Other segment costs and expenses															(29)						(3)
Gas & NGL Marketing Services Modified EBITDA															$	13					$	93
Commodity margins															$	100					$	95

Three months ended March 31, 2022 vs. three months ended March 31, 2021

Gas & NGL Marketing Services Modified EBITDA decreased primarily due to higher net unrealized loss from derivative instruments and higher Other segment costs and expenses, partially offset by higher Commodity margins.

The net sum of Product sales, Product costs, and Net realized gain (loss) from derivative instruments related to sales of product comprise our Commodity margins. Commodity margins increased $5 million primarily due to:

*•*A $63 million increase associated with the operations acquired in the Sequent Acquisition in the third quarter of 2021 primarily related to favorable pricing spreads on transportation capacity reflecting gains on physical transactions, partially offset by net realized losses on derivatives and a $15 million charge related

Management’s Discussion and Analysis (Continued)			Table of Contents

to the remaining recognition of a purchase accounting inventory fair value adjustment which increased the weighted-average cost of inventory. This increase was substantially offset by

• A $58 million decrease associated with our legacy natural gas marketing operations primarily due to lower net realized natural gas prices from the absence of severe winter weather in the first quarter of 2022 as compared to the first quarter of 2021.

Net unrealized gain (loss) from derivative instruments relates to derivative contracts that are not designated as hedges for accounting purposes. We can experience significant earnings volatility from the fair value accounting required for the derivatives used to hedge a portion of the economic value of the underlying transportation and storage portfolio. However, the unrealized fair value measurement gains and losses are offset by valuation changes in the economic value of the underlying transportation and storage portfolio, which is not accounted for on a fair value basis.

Other segment costs and expenses increased primarily due to higher employee-related costs related to the Sequent Acquisition.

Other

									Three Months Ended March 31,
															2022						2021
															(Millions)
Service revenues															$	9					$	7
Product sales															104						56
Net realized gain (loss) from derivative instruments															(8)						—
Net unrealized gain (loss) from derivative instruments															(66)						—
Net gain (loss) on commodity derivatives															(74)						—
Segment revenues															39						63
Other segment costs and expenses															(34)						(30)
Other Modified EBITDA															$	5					$	33

Three months ended March 31, 2022 vs. three months ended March 31, 2021

Other Modified EBITDA decreased primarily due to $32 million lower results from our upstream operations which included the following:

*•*A $66 million net unrealized loss on commodity derivatives in the first quarter of 2022 related to hedges of future upstream production; partially offset by

• A $40 million increase in realized product sales primarily due to higher volumes associated with acquisitions of additional ownership interests in the second and third quarters of 2021. This volume increase was partially offset by lower average realized commodity prices due to the absence of severe winter weather in the first quarter of 2022 as compared to the first quarter of 2021.

Management’s Discussion and Analysis (Continued)			Table of Contents

Management’s Discussion and Analysis of Financial Condition and Liquidity

Outlook

Our growth capital and investment expenditures in 2022 are currently expected to be in a range from $2.25 billion to $2.35 billion. Growth capital spending in 2022 primarily includes Transco expansions, all of which are fully contracted with firm transportation agreements, projects supporting the Northeast G&P business, the Trace Acquisition, and an expansion in the Western Gulf area. We also expect to invest capital in the development of our upstream oil and gas properties. In addition to growth capital and investment expenditures, we also remain committed to projects that maintain our assets for safe and reliable operations, as well as projects that meet legal, regulatory, and/or contractual commitments. We funded the Trace Acquisition with available sources of short-term liquidity and intend to fund substantially all additional planned 2022 capital spending with cash available after paying dividends. We retain the flexibility to adjust planned levels of growth capital and investment expenditures in response to changes in economic conditions or business opportunities including the repurchase of our common stock.

During the first quarter of 2022, we early retired of $1.25 billion of 3.6 percent senior unsecured notes that were scheduled to mature in March 2022. As of March 31, 2022, we have approximately $1.6 billion of long-term debt due within one year. Our potential sources of liquidity available to address these maturities include cash on hand, proceeds from refinancing or from our credit facility, as well as proceeds from asset monetizations. In May 2022, we expect to early retire our $750 million of 3.35 percent senior unsecured notes that are scheduled to mature in August 2022.

Liquidity

Based on our forecasted levels of cash flow from operations and other sources of liquidity, we expect to have sufficient liquidity to manage our businesses in 2022. Our potential material internal and external sources and uses of liquidity are as follows:

Sources:
			Cash and cash equivalents on hand
			Cash generated from operations
			Distributions from our equity-method investees
			Utilization of our credit facility and/or commercial paper program
			Cash proceeds from issuance of debt and/or equity securities
			Proceeds from asset monetizations
Uses:
			Working capital requirements
			Capital and investment expenditures
			Product costs
			Other operating costs including human capital expenses
			Quarterly dividends to our shareholders
			Debt service payments, including payments of long-term debt
			Distributions to noncontrolling interests
			Share repurchase program

As of March 31, 2022, we have approximately $20.8 billion of long-term debt due after one year. Our potential sources of liquidity available to address these maturities include cash generated from operations, proceeds from refinancing or from our credit facility, as well as proceeds from asset monetizations.

Management’s Discussion and Analysis (Continued)			Table of Contents

Potential risks associated with our planned levels of liquidity discussed above include those previously discussed in Company Outlook*.*

As of March 31, 2022, we had a working capital deficit of $1.154 billion, including cash and cash equivalents and long-term debt due within one year. Our available liquidity is as follows:

Available Liquidity			March 31, 2022
			(Millions)
Cash and cash equivalents			$	604
Capacity available under our $3.75 billion credit facility, less amounts outstanding under our $3.5 billion commercial paper program (1)			3,750
			$	4,354

(1)In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of our credit facility inclusive of any outstanding amounts under our commercial paper program. We had no commercial paper outstanding as of March 31, 2022. Through March 31, 2022, there was no amount outstanding under our commercial paper program and credit facility. At March 31, 2022, we were in compliance with the financial covenants associated with our credit facility.

Dividends

We increased our regular quarterly cash dividend to common stockholders by approximately 3.7 percent from the $0.41 per share paid in each quarter of 2021, to $0.425 per share paid in March 2022.

Distributions from Equity-Method Investees

The organizational documents of entities in which we have an equity-method investment generally require periodic distributions of their available cash to their members. In each case, available cash is reduced, in part, by reserves appropriate for operating their respective businesses.

Credit Ratings

The interest rates at which we are able to borrow money are impacted by our credit ratings. The current ratings are as follows:

Rating Agency						Outlook						Senior Unsecured Debt Rating
S&P Global Ratings						Stable						BBB
Moody’s Investors Service						Stable						Baa2
Fitch Ratings						Stable						BBB

These credit ratings are included for informational purposes and are not recommendations to buy, sell, or hold our securities, and each rating should be evaluated independently of any other rating. No assurance can be given that the credit rating agencies will continue to assign us investment-grade ratings even if we meet or exceed their current criteria for investment-grade ratios. A downgrade of our credit ratings might increase our future cost of borrowing and, if ratings were to fall below investment-grade, could require us to provide additional collateral to third parties, negatively impacting our available liquidity.

Management’s Discussion and Analysis (Continued)			Table of Contents

Sources (Uses) of Cash

The following table summarizes the sources (uses) of cash and cash equivalents for each of the periods presented (see Notes to Consolidated Financial Statements for the Notes referenced in the table):

			Cash Flow						Three Months Ended March 31,
			Category						2022						2021
									(Millions)
Sources of cash and cash equivalents:
Operating activities – net			Operating						$	1,082					$	915
Proceeds from long-term debt			Financing						3						897
Uses of cash and cash equivalents:
Payments of long-term debt			Financing						(1,256)						(5)
Common dividends paid			Financing						(518)						(498)
Capital expenditures			Investing						(291)						(260)
Dividends and distributions paid to noncontrolling interests			Financing						(37)						(54)
Purchases of and contributions to equity-method investments			Investing						(56)						(14)
Other sources / (uses) – net			Financing and Investing						(3)						3
Increase (decrease) in cash and cash equivalents									$	(1,076)					$	984

Operating activities

The factors that determine operating activities are largely the same as those that affect Net income (loss), with the exception of noncash items such as Depreciation and amortization, Provision (benefit) for deferred income taxes, Equity (earnings) losses, and Net unrealized (gain) loss from derivative instruments.

Our Net cash provided (used) by operating activities for the three months ended March 31, 2022, increased from the same period in 2021 primarily due to higher operating income (excluding noncash items as previously discussed), favorable changes in margin requirements, and higher distributions from unconsolidated affiliates.

Interest Rate Risk

Our current interest rate risk exposure is related primarily to our debt portfolio and has not materially changed during the first three months of 2022.

Commodity Price Risk

We are exposed to commodity price risk primarily through the operations acquired in the Sequent Acquisition (Sequent), which routinely utilize various types of derivative instruments to economically hedge certain commodity price risks inherent in the natural gas marketing industry. These instruments include a variety of exchange-traded and OTC energy contracts such as forward contracts, futures contracts, and basis swaps, as well as physical transactions that qualify as derivatives. These economic hedging activities are not designated and do not qualify for hedge accounting treatment.

The maturities of Sequent’s derivative contracts at March 31, 2022 were as follows:

						Total Fair Value						Maturity
Fair Value Measurements Using (1)									2022						2023 - 2024						2025 - 2026+
						(Millions)
Level 1						$	(32)					$	15					$	(59)					$	12
Level 2						(408)						(52)						(195)						(161)
Level 3						(11)						4						(14)						(1)
Fair value of contracts outstanding at end of period (2)						$	(451)					$	(33)					$	(268)					$	(150)

---

(1)See Note 10 – Fair Value Measurements and Guarantees of Notes to Consolidated Financial Statements for discussion of valuation techniques by level within the fair value hierarchy. See Note 11 – Derivatives for the amount of change in fair value recognized in our Consolidated Statement of Income.

(2)Excludes cash collateral of $107 million in Level 1.

Sequent Value at Risk (VaR)

VaR is the maximum potential loss in portfolio value over a specified time period that is not expected to be exceeded within a given degree of probability. Sequent’s VaR may not be comparable to that of other companies due to differences in the factors used to calculate VaR. Sequent’s VaR is determined using a parametric model with a 95 percent confidence interval and a one-day holding period, which means that 95 percent of the time, the risk of loss in a day from a portfolio of positions is expected to be less than or equal to the amount of VaR calculated. Sequent’s open exposure is managed in accordance with established policies that limit market risk and require daily reporting of potential financial exposure to senior management. Because Sequent generally manages physical gas assets and economically protects its positions by hedging in the futures markets, Sequent’s open exposure is generally mitigated. Sequent employs daily risk testing, using both VaR and stress testing, to evaluate the risk of its positions.

Sequent actively monitors open commodity positions and the resulting VaR and maintains a relatively small risk exposure as total buy volume is close to sell volume, with minimal open natural gas price risk.

Sequent had the following VaRs for the period shown:

			Three Months Ended March 31, 2022
			(Millions)
Average			$	6.2
High			$	10.4
Low			$	4.1