Item 1. Financial Statements

The Williams Companies, Inc.

Consolidated Statement of Income

(Unaudited)

									Three Months Ended March 31,
															2023						2022
															(Millions, except per-share amounts)
Revenues:
Service revenues															$	1,694					$	1,537
Service revenues – commodity consideration															36						77
Product sales															845						1,104
Net gain (loss) on commodity derivatives															506						(194)
Total revenues															3,081						2,524
Costs and expenses:
Product costs															553						803
Net processing commodity expenses															54						30
Operating and maintenance expenses															463						394
Depreciation and amortization expenses															506						498
Selling, general, and administrative expenses															176						154
Other (income) expense – net															(31)						(9)
Total costs and expenses															1,721						1,870
Operating income (loss)															1,360						654
Equity earnings (losses)															147						136
Other investing income (loss) – net															8						1
Interest incurred															(304)						(289)
Interest capitalized															10						3
Other income (expense) – net															20						5
Income (loss) before income taxes															1,241						510
Less: Provision (benefit) for income taxes															284						118
Net income (loss)															957						392
Less: Net income (loss) attributable to noncontrolling interests															30						12
Net income (loss) attributable to The Williams Companies, Inc.															927						380
Less: Preferred stock dividends															1						1
Net income (loss) available to common stockholders															$	926					$	379
Basic earnings (loss) per common share:
Net income (loss) available to common stockholders															$	.76					$	.31
Weighted-average shares (thousands)															1,219,465						1,216,940
Diluted earnings (loss) per common share:
Net income (loss) available to common stockholders															$	.76					$	.31
Weighted-average shares (thousands)															1,225,781						1,221,279

See accompanying notes.

The Williams Companies, Inc.

Consolidated Statement of Comprehensive Income (Loss)

(Unaudited)

									Three Months Ended March 31,
															2023						2022
															(Millions)
Net income (loss)															$	957					$	392
Other comprehensive income (loss):
Designated interest rate cash flow hedging activities:
Net unrealized gain (loss) from derivative instruments, net of taxes of $(7) in 2023 and $(1) in 2022															20						3
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 $0 in 2023 and ($1) in 2022															1						2
Other comprehensive income (loss)															21						5
Comprehensive income (loss)															978						397
Less: Comprehensive income (loss) attributable to noncontrolling interests															30						12
Comprehensive income (loss) attributable to The Williams Companies, Inc.															$	948					$	385

See accompanying notes.

The Williams Companies, Inc.

Consolidated Balance Sheet

(Unaudited)

						March 31, 2023						December 31, 2022
						(Millions, except per-share amounts)
ASSETS
Current assets:
Cash and cash equivalents						$	477					$	152
Trade accounts and other receivables						1,530						2,729
Allowance for doubtful accounts						(6)						(6)
Trade accounts and other receivables – net						1,524						2,723
Inventories						244						320
Derivative assets						243						323
Other current assets and deferred charges						269						279
Total current assets						2,757						3,797
Investments						5,067						5,065
Property, plant, and equipment						49,546						47,057
Accumulated depreciation and amortization						(17,451)						(16,168)
Property, plant, and equipment – net						32,095						30,889
Intangible assets – net of accumulated amortization						7,660						7,363
Regulatory assets, deferred charges, and other						1,357						1,319
Total assets						$	48,936					$	48,433
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable						$	1,258					$	2,327
Derivative liabilities						180						316
Accrued and other current liabilities						955						1,270
Commercial paper						—						350
Long-term debt due within one year						1,627						627
Total current liabilities						4,020						4,890
Long-term debt						22,785						21,927
Deferred income tax liabilities						3,177						2,887
Regulatory liabilities, deferred income, and other						4,631						4,684
Contingent liabilities and commitments (Note 9)
Equity:
Stockholders’ equity:
Preferred stock ($1 par value; 30 million shares authorized at March 31, 2023 and December 31, 2022; 35,000 shares issued at March 31, 2023 and December 31, 2022)						35						35
Common stock ($1 par value; 1,470 million shares authorized at March 31, 2023 and December 31, 2022; 1,256 million shares issued at March 31, 2023 and 1,253 million shares issued at December 31, 2022)						1,256						1,253
Capital in excess of par value						24,516						24,542
Retained deficit						(12,895)						(13,271)
Accumulated other comprehensive income (loss)						(3)						(24)
Treasury stock, at cost (37 million shares at March 31, 2023 and 35 million shares at December 31, 2022 of common stock)						(1,124)						(1,050)
Total stockholders’ equity						11,785						11,485
Noncontrolling interests in consolidated subsidiaries						2,538						2,560
Total equity						14,323						14,045
Total liabilities and equity						$	48,936					$	48,433

See accompanying notes.

The Williams Companies, Inc.

Consolidated Statement of Changes in Equity

(Unaudited)

			The Williams Companies, Inc. Stockholders
			Preferred Stock						Common Stock						Capital in Excess of Par Value						Retained Deficit						AOCI*						Treasury Stock						Total Stockholders’ Equity						Noncontrolling Interests						Total Equity
			(Millions)
Balance – December 31, 2022			$	35					$	1,253					$	24,542					$	(13,271)					$	(24)					$	(1,050)					$	11,485					$	2,560					$	14,045
Net income (loss)			—						—						—						927						—						—						927						30						957
Other comprehensive income (loss)			—						—						—						—						21						—						21						—						21
Cash dividends – common stock ($0.4475 per share)			—						—						—						(546)						—						—						(546)						—						(546)
Dividends and distributions to noncontrolling interests			—						—						—						—						—						—						—						(54)						(54)
Stock-based compensation and related common stock issuances, net of tax			—						3						(26)						—						—						—						(23)						—						(23)
Contributions from noncontrolling interests			—						—						—						—						—						—						—						3						3
Purchases of treasury stock			—						—						—						—						—						(74)						(74)						—						(74)
Other			—						—						—						(5)						—						—						(5)						(1)						(6)
Net increase (decrease) in equity			—						3						(26)						376						21						(74)						300						(22)						278
Balance – March 31, 2023			$	35					$	1,256					$	24,516					$	(12,895)					$	(3)					$	(1,124)					$	11,785					$	2,538					$	14,323
Balance – December 31, 2021			$	35					$	1,250					$	24,449					$	(13,237)					$	(33)					$	(1,041)					$	11,423					$	2,678					$	14,101
Net income (loss)			—						—						—						380						—						—						380						12						392
Other comprehensive income (loss)			—						—						—						—						5						—						5						—						5
Cash dividends – common stock ($0.425 per share)			—						—						—						(518)						—						—						(518)						—						(518)
Dividends and distributions to noncontrolling interests			—						—						—						—						—						—						—						(37)						(37)
Stock-based compensation and related common stock issuances, net of tax			—						2						27						—						—						—						29						—						29
Contributions from noncontrolling interests			—						—						—						—						—						—						—						3						3
Other			—						—						—						(3)						—						—						(3)						(1)						(4)
Net increase (decrease) in equity			—						2						27						(141)						5						—						(107)						(23)						(130)
Balance – March 31, 2022			$	35					$	1,252					$	24,476					$	(13,378)					$	(28)					$	(1,041)					$	11,316					$	2,655					$	13,971

*Accumulated Other Comprehensive Income (Loss)

See accompanying notes.

The Williams Companies, Inc.

Consolidated Statement of Cash Flows

(Unaudited)

			Three Months Ended March 31,
			2023						2022
			(Millions)
OPERATING ACTIVITIES:
Net income (loss)			$	957					$	392
Adjustments to reconcile to net cash provided (used) by operating activities:
Depreciation and amortization			506						498
Provision (benefit) for deferred income taxes			283						115
Equity (earnings) losses			(147)						(136)
Distributions from equity-method investees			208						212
Net unrealized (gain) loss from derivative instruments			(327)						123
Inventory write-downs			18						—
Amortization of stock-based awards			17						21
Cash provided (used) by changes in current assets and liabilities:
Accounts receivable			1,269						(3)
Inventories			27						178
Other current assets and deferred charges			(4)						(65)
Accounts payable			(1,017)						(138)
Accrued and other current liabilities			(318)						(149)
Changes in current and noncurrent derivative assets and liabilities			82						101
Other, including changes in noncurrent assets and liabilities			(40)						(67)
Net cash provided (used) by operating activities			1,514						1,082
FINANCING ACTIVITIES:
Proceeds from (payments of) commercial paper – net			(352)						—
Proceeds from long-term debt			1,502						3
Payments of long-term debt			(7)						(1,256)
Proceeds from issuance of common stock			3						37
Purchases of treasury stock			(74)						—
Common dividends paid			(546)						(518)
Dividends and distributions paid to noncontrolling interests			(54)						(37)
Contributions from noncontrolling interests			3						3
Payments for debt issuance costs			(8)						—
Other – net			(17)						(30)
Net cash provided (used) by financing activities			450						(1,798)
INVESTING ACTIVITIES:
Property, plant, and equipment:
Capital expenditures (1)			(545)						(291)
Dispositions – net			(7)						(6)
Contributions in aid of construction			11						(3)
Purchases of businesses, net of cash acquired (Note 3)			(1,056)						—
Purchases of and contributions to equity-method investments			(39)						(56)
Other – net			(3)						(4)
Net cash provided (used) by investing activities			(1,639)						(360)
Increase (decrease) in cash and cash equivalents			325						(1,076)
Cash and cash equivalents at beginning of year			152						1,680
Cash and cash equivalents at end of period			$	477					$	604
_____________
(1) Increases to property, plant, and equipment			$	(484)					$	(260)
Changes in related accounts payable and accrued liabilities			(61)						(31)
Capital expenditures			$	(545)					$	(291)

See accompanying notes.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – General, Description of Business, and Basis of Presentation

General

Our accompanying interim consolidated financial statements do not include all the notes in our annual financial statements and, therefore, should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, 2022, in our Annual Report on Form 10-K. The accompanying unaudited financial statements include all normal recurring adjustments and others that, in the opinion of management, are necessary to present fairly our interim financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Unless the context clearly indicates otherwise, references in this report to “Williams,” “we,” “our,” “us,” or like terms refer to The Williams Companies, Inc. and its subsidiaries. Unless the context clearly indicates otherwise, references to “Williams,” “we,” “our,” and “us” include the operations in which we own interests accounted for as equity-method investments that are not consolidated in our financial statements. When we refer to our equity investees by name, we are referring exclusively to their businesses and operations

Share Repurchase Program

In September 2021, our Board of Directors authorized a share repurchase program with a maximum dollar limit of $1.5 billion. Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions, or in such other manner as determined by our management. Our management will also determine the timing and amount of any repurchases based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or discontinued at any time. This share repurchase program does not have an expiration date. During 2023, there have been $74 million in repurchases under the program which are included in our Consolidated Statement of Changes in Equity. Cumulative repurchases to date under the program total $83 million.

Description of Business

We are a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange. Our operations are located in the United States and are presented within the following reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. All remaining business activities, including our upstream operations and corporate activities, are included in Other.

Transmission & Gulf of Mexico is comprised of our interstate natural gas pipelines, Transcontinental Gas Pipe Line Company, LLC (Transco), Northwest Pipeline LLC (Northwest Pipeline), and MountainWest (see Note 3 – Acquisitions**)**, and their related natural gas storage facilities, 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 LLC (Gulfstar One) (a consolidated variable interest entity, or VIE), a 50 percent equity-method investment in Gulfstream Natural Gas System, L.L.C. (Gulfstream), and a 60 percent equity-method investment in Discovery Producer Services LLC (Discovery). Transmission & Gulf of Mexico also includes natural gas storage facilities and pipelines providing services in north Texas.

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

Notes (Continued)			Table of Contents

as a 65 percent interest in Ohio Valley Midstream LLC (Northeast JV) (a consolidated VIE) which operates in West Virginia, Ohio, and Pennsylvania, a 66 percent interest in Cardinal Gas Services, L.L.C. (Cardinal) (a consolidated VIE) which operates in Ohio, a 69 percent equity-method investment in Laurel Mountain Midstream, LLC (Laurel Mountain), a 50 percent equity-method investment in Blue Racer Midstream LLC (Blue Racer), and Appalachia Midstream Services, LLC, 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 (Appalachia Midstream Investments).

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 east Texas and 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 Overland Pass Pipeline Company LLC (OPPL), a 50 percent equity-method investment in Rocky Mountain Midstream Holdings LLC (RMM), a 20 percent equity-method investment in Targa Train 7 LLC (Targa Train 7) (a nonconsolidated VIE), and a 15 percent equity-method investment in Brazos Permian II, LLC (Brazos Permian II) (a nonconsolidated VIE).

Gas & NGL Marketing Services is comprised of our NGL and natural gas marketing and trading operations, which includes risk management and transactions related to the storage and transportation of natural gas and natural gas liquids (NGLs) on strategically positioned assets.

Basis of Presentation

Significant risks and uncertainties

We believe that the carrying value of certain of our property, plant, and equipment and intangible assets, notably certain acquired assets accounted for as business combinations between 2012 and 2014, may be in excess of current fair value. However, the carrying value of these assets, in our judgment, continues to be recoverable. It is reasonably possible that future strategic decisions, including transactions such as monetizing assets or contributing assets to new ventures with third parties, as well as unfavorable changes in expected producer activities, could impact our assumptions and ultimately result in impairments of these assets. Such transactions or developments may also indicate that certain of our equity-method investments have experienced other-than-temporary declines in value, which could result in impairment.

Note 2 – Variable Interest Entities

Consolidated VIEs

As of March 31, 2023, we consolidate the following VIEs:

Northeast JV

We own a 65 percent interest in the Northeast JV, a subsidiary that is a VIE due to certain of our voting rights being disproportionate to our obligation to absorb losses and substantially all of the Northeast JV’s activities being performed on our behalf. We are the primary beneficiary because we have the power to direct the activities that most significantly impact the Northeast JV’s economic performance. The Northeast JV provides midstream services for producers in the Marcellus Shale and Utica Shale regions. Future expansion activity is expected to be funded with capital contributions from us and the other equity partner on a proportional basis.

Gulfstar One

We own a 51 percent interest in Gulfstar One, a subsidiary that, due to certain risk-sharing provisions in its customer contracts, is a VIE. Gulfstar One includes a proprietary floating production system, Gulfstar FPS, and associated pipelines that provide production handling and gathering services in the eastern deepwater Gulf of

Notes (Continued)			Table of Contents

Mexico. We are the primary beneficiary because we have the power to direct the activities that most significantly impact Gulfstar One’s economic performance.

Cardinal

We own a 66 percent interest in Cardinal, a subsidiary that provides gathering services for the Utica Shale region and is a VIE due to certain risks shared with customers. We are the primary beneficiary because we have the power to direct the activities that most significantly impact Cardinal’s economic performance. Future expansion activity is expected to be funded with capital contributions from us and the other equity partner.

The following table presents amounts included in our Consolidated Balance Sheet that are only for the use or obligation of our consolidated VIEs:

			March 31, 2023						December 31, 2022
			(Millions)
Assets (liabilities):
Cash and cash equivalents			$	33					$	49
Trade accounts and other receivables – net			156						136
Inventories			4						4
Other current assets and deferred charges			4						7
Property, plant, and equipment – net			5,123						5,154
Intangible assets – net of accumulated amortization			2,131						2,158
Regulatory assets, deferred charges, and other			30						29
Accounts payable			(74)						(76)
Accrued and other current liabilities			(33)						(34)
Regulatory liabilities, deferred income, and other			(275)						(275)

Nonconsolidated VIEs

Targa Train 7

We own a 20 percent interest in Targa Train 7, which provides fractionation services at Mont Belvieu, Texas, and is a VIE due primarily to our limited participating rights as the minority equity holder. At March 31, 2023, the carrying value of our investment in Targa Train 7 was $45 million. Our maximum exposure to loss is limited to the carrying value of our investment.

Brazos Permian II

We own a 15 percent interest in Brazos Permian II, which provides gathering and processing services in the Delaware basin and is a VIE due primarily to our limited participating rights as the minority equity holder. At March 31, 2023, the carrying value of our investment in Brazos Permian II was $18 million. Our maximum exposure to loss is limited to the carrying value of our investment.

Note 3 – Acquisitions

MountainWest Acquisition

On February 14, 2023, we closed on the acquisition of 100 percent of MountainWest Pipelines Holding Company (MountainWest), which includes Federal Energy Regulatory Commission (FERC) -regulated interstate natural gas pipeline systems and natural gas storage capacity (MountainWest Acquisition), for $1.08 billion of cash, funded with available sources of short-term liquidity, and retaining $430 million outstanding principal amount of MountainWest long-term debt, subject to post-closing adjustments. The purpose of the MountainWest Acquisition was to expand our existing transmission and storage infrastructure footprint into major markets in Utah, Wyoming, and Colorado.

Notes (Continued)			Table of Contents

During the period from the acquisition date of February 14, 2023 to March 31, 2023, the operations acquired in the MountainWest Acquisition contributed Revenues of $34 million and Modified EBITDA (as defined in Note 10 – Segment Disclosures) of $20 million.

Acquisition-related costs for the MountainWest Acquisition of $12 million are reported within our Transmission & Gulf of Mexico segment and included in Selling, general, and administrative expenses in our Consolidated Statement of Income during 2023.

We accounted for the MountainWest Acquisition as a business combination, which requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their acquisition date fair values. The valuation techniques used consisted of depreciated replacement costs for non-regulated property, plant, and equipment, as well as the market approach for the assumed long-term debt consistent with the valuation technique discussed in Note 7 – Fair Value Measurements and Guarantees. MountainWest’s regulated operations are accounted for pursuant to Accounting Standards Codification 980, Regulated Operations. The fair value of assets and liabilities subject to rate making and cost recovery provisions were determined utilizing the income approach. MountainWest’s expected return on rate base is consistent with expected returns of similarly situated assets, resulting in carryover basis of these assets and liabilities equaling their fair value.

The following table presents the preliminary allocation of the acquisition date fair value of the major classes of the assets acquired, which are included in our Transmission & Gulf of Mexico segment, and liabilities assumed at February 14, 2023. The fair value of accounts receivable acquired equals contractual amounts receivable. The allocation is considered preliminary because the valuation work has not been completed due to the ongoing review of the valuation results and validation of significant inputs and assumptions. Preliminary fair value measurements were made for certain acquired assets and liabilities, primarily property, plant, and equipment and long-term debt; however, adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as new information related to facts and circumstances as of the acquisition date may be identified.

			(Millions)
Cash and cash equivalents			$	23
Trade accounts and other receivables – net			14
Other current assets			28
Investments			22
Property, plant, and equipment – net			1,092
Other noncurrent assets			33
Total identifiable assets acquired			$	1,212
Current liabilities			$	(38)
Long-term debt (see Note 6)			(365)
Other noncurrent liabilities			(155)
Total liabilities assumed			$	(558)
Net identifiable assets acquired			$	654
Goodwill included in Intangible assets – net of accumulated amortization			400
Net assets acquired			$	1,054

Goodwill recognized in the MountainWest Acquisition relates primarily to enhancing and diversifying our basin positions and the long-term value associated with rate regulated businesses and is reported within our Transmission & Gulf of Mexico segment. Substantially all of the goodwill is deductible for tax purposes. Goodwill is included within Intangible assets – net of accumulated amortization in our Consolidated Balance Sheet and represents the excess of the consideration over the fair value of the net assets acquired. It is not subject to amortization but is evaluated annually as of October 1 for impairment or more frequently if impairment indicators are present that would indicate it is more likely than not that the fair value of the reporting unit is less than its carrying amount. As part of the evaluation, we compare our estimate of the fair value of the reporting unit with its

Notes (Continued)			Table of Contents

carrying value, including goodwill. If the carrying value of the reporting unit exceeds its fair value, an impairment charge is recorded for the difference (not to exceed the carrying value of goodwill). Judgments and assumptions are inherent in our management’s estimates of fair value.

Trace Acquisition

On April 29, 2022, we closed on the acquisition of 100 percent of Gemini Arklatex, LLC through which we acquired the Haynesville Shale region gas gathering and related assets of Trace Midstream (Trace) for $972 million of cash funded with cash on hand and proceeds from issuance of commercial paper (Trace Acquisition). The purpose of the Trace Acquisition was to expand our footprint into the east Texas area of the Haynesville Shale region, increasing in-basin scale in one of the largest growth basins in the country.

During the period from the acquisition date of April 29, 2022 to December 31, 2022, the operations acquired in the Trace Acquisition contributed Revenues of $148 million and Modified EBITDA of $73 million.

Acquisition-related costs for the Trace Acquisition of $8 million are reported within our West segment and were included in Selling, general, and administrative expenses in our Consolidated Statement of Income during 2022.

We accounted for the Trace Acquisition as a business combination. The following table presents the allocation of the acquisition date fair value of the major classes of the assets acquired, which are included in our West segment, and liabilities assumed at April 29, 2022. The fair value of accounts receivable acquired equals contractual amounts receivable. The valuation techniques used consisted of the income approach (excess earnings method) for valuation of intangible assets and depreciated replacement costs for property, plant, and equipment.

			(Millions)
Cash and cash equivalents			$	39
Trade accounts and other receivables – net			18
Property, plant, and equipment – net			448
Intangible assets – net of accumulated amortization			472
Other noncurrent assets			20
Total assets acquired			$	997
Accounts payable			$	(12)
Accrued and other current liabilities			(5)
Other noncurrent liabilities			(8)
Total liabilities assumed			$	(25)
Net assets acquired			$	972

Other intangible assets

Other intangible assets recognized in the Trace Acquisition are related to contractual customer relationships from gas gathering agreements with our customers. The basis for determining the value of these intangible assets is estimated future net cash flows to be derived from acquired contractual customer relationships discounted using a risk-adjusted discount rate. These intangible assets are being amortized on a straight-line basis over an initial period of 20 years which represents the term over which the contractual customer relationships are expected to contribute to our cash flows. Approximately 2 percent of the expected future revenues from these contractual customer relationships are impacted by our ability and intent to renew or renegotiate existing customer contracts. We expense costs incurred to renew or extend the terms of our gas gathering contracts with customers. Based on the estimated future revenues during the current contract periods (as estimated at the time of the acquisition), the weighted-average period prior to the next renewal or extension of the existing contractual customer relationships is approximately 19 years.

Notes (Continued)			Table of Contents

Supplemental Pro Forma

The following pro forma Revenues and Net income (loss) attributable to The Williams Companies, Inc. for the three months ended March 31, 2023 and 2022, are presented as if the MountainWest Acquisition had been completed on January 1, 2022, and the Trace Acquisition had been completed on January 1, 2021. These pro forma amounts are not necessarily indicative of what the actual results would have been if the MountainWest Acquisition and Trace Acquisition had in fact occurred on the dates or for the periods indicated, nor do they purport to project Revenues or Net income (loss) attributable to The Williams Companies, Inc. for any future periods or as of any date. These amounts do not give effect to any potential cost savings, operating synergies, or revenue enhancements to result from the transaction or the potential costs to achieve these cost savings, operating synergies, and revenue enhancements.

			Three Months Ended March 31, 2023
			As Reported						Pro Forma MountainWest (1)												Pro Forma Combined
			(Millions)
Revenues			$	3,081					$	35											$	3,116
Net income (loss) attributable to The Williams Companies, Inc.			927						6												933
			Three Months Ended March 31, 2022
			As Reported						Pro Forma MountainWest						Pro Forma Trace						Pro Forma Combined
			(Millions)
Revenues			$	2,524					$	67					$	35					$	2,626
Net income (loss) attributable to The Williams Companies, Inc.			380						17						14						411

(1)Excludes results from operations acquired in the MountainWest Acquisition for the period beginning on the acquisition date of February 14, 2023, as these results are included in the amounts as reported.

NorTex Asset Purchase

On August 31, 2022, we purchased a group of assets in north Texas, primarily natural gas storage facilities and pipelines, from NorTex Midstream Holdings, LLC (NorTex Asset Purchase) for approximately $424 million. These assets are included in our Transmission & Gulf of Mexico segment.

Notes (Continued)			Table of Contents

Note 4 – Revenue Recognition

Revenue by Category

The following table presents our revenue disaggregated by major service line:

			Regulated Interstate Transportation & Storage						Gulf of Mexico Midstream & Storage						Northeast Midstream						West Midstream						Gas & NGL Marketing Services						Other						Eliminations						Total
			(Millions)
Three Months Ended March 31, 2023
Revenues from contracts with customers:
Service revenues:
Regulated interstate natural gas transportation and storage			$	813					$	—					$	—					$	—					$	—					$	—					$	(11)					$	802
Gathering, processing, transportation, fractionation, and storage:
Monetary consideration			—						100						391						343						—						—						(43)						791
Commodity consideration			—						12						6						18						—						—						—						36
Other			4						6						56						10						1						—						(5)						72
Total service revenues			817						118						453						371						1						—						(59)						1,701
Product sales			22						36						49						90						1,373						102						(254)						1,418
Total revenues from contracts with customers			839						154						502						461						1,374						102						(313)						3,119
Other revenues (1)			13						4						7						42						1,916						15						—						1,997
Other adjustments (2)			—						—						—						—						(2,159)						—						124						(2,035)
Total revenues			$	852					$	158					$	509					$	503					$	1,131					$	117					$	(189)					$	3,081
Three Months Ended March 31, 2022
Revenues from contracts with customers:
Service revenues:
Regulated interstate natural gas transportation and storage			$	778					$	—					$	—					$	—					$	—					$	—					$	(18)					$	760
Gathering, processing, transportation, fractionation, and storage:
Monetary consideration			—						82						323						317						—						—						(30)						692
Commodity consideration			—						21						7						49						—						—						—						77
Other			2						6						51						12						1						—						(6)						66
Total service revenues			780						109						381						378						1						—						(54)						1,595
Product sales			16						87						36						187						2,470						104						(393)						2,507
Total revenues from contracts with customers			796						196						417						565						2,471						104						(447)						4,102
Other revenues (1)			4						2						6						(3)						1,615						(65)						(3)						1,556
Other adjustments (2)			—						—						—						—						(3,232)						—						98						(3,134)
Total revenues			$	800					$	198					$	423					$	562					$	854					$	39					$	(352)					$	2,524

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(1)Revenues not derived from contracts with customers primarily consist of physical product sales related to derivative contracts, realized and unrealized gains and losses associated with our derivative contracts, which are reported in Net gain (loss) on commodity derivatives in the Consolidated Statement of Income, management fees that we receive for certain services we provide to operated equity-method investments, and leasing revenues associated with our headquarters building.

(2)Other adjustments reflect certain costs of Gas & NGL Marketing Services’ risk management activities. As we are acting as agent for natural gas marketing customers or engage in energy trading activities, the resulting revenues are presented net of the related costs of those activities in our Consolidated Statement of Income.

Notes (Continued)			Table of Contents

Contract Assets

The following table presents a reconciliation of our contract assets:

									Three Months Ended March 31,
															2023						2022
															(Millions)
Balance at beginning of period															$	29					$	22
Revenue recognized in excess of amounts invoiced															43						55
Minimum volume commitments invoiced															(30)						(41)
Balance at end of period															$	42					$	36

Contract Liabilities

The following table presents a reconciliation of our contract liabilities:

									Three Months Ended March 31,
															2023						2022
															(Millions)
Balance at beginning of period															$	1,043					$	1,126
Payments received and deferred															29						29
Significant financing component															2						2
Contract liability acquired															5						—
Recognized in revenue															(69)						(64)
Balance at end of period															$	1,010					$	1,093

Remaining Performance Obligations

Remaining performance obligations primarily include reservation charges on contracted capacity for our gas pipeline firm transportation contracts with customers, storage capacity contracts, long-term contracts containing minimum volume commitments (MVC) associated with our midstream businesses, and fixed payments associated with offshore production handling. For our interstate natural gas pipeline businesses, remaining performance obligations reflect the rates for such services in our current FERC tariffs for the life of the related contracts; however, these rates may change based on future tariffs approved by the FERC and the amount and timing of these changes are not currently known.

Our remaining performance obligations exclude variable consideration, including contracts with variable consideration for which we have elected the practical expedient for consideration recognized in revenue as billed. Certain of our contracts contain evergreen and other renewal provisions for periods beyond the initial term of the contract. The remaining performance obligation amounts as of March 31, 2023, do not consider potential future performance obligations for which the renewal has not been exercised and exclude contracts with customers for which the underlying facilities have not received FERC authorization to be placed into service. Consideration received prior to March 31, 2023, that will be recognized in future periods is also excluded from our remaining performance obligations and is instead reflected in contract liabilities.

Notes (Continued)			Table of Contents

The following table presents the amount of the contract liabilities balance expected to be recognized as revenue when performance obligations are satisfied and the transaction price allocated to the remaining performance obligations under certain contracts as of March 31, 2023.

			Contract Liabilities						Remaining Performance Obligations
			(Millions)
2023 (nine months)			$	98					$	2,887
2024 (one year)			124						3,647
2025 (one year)			122						3,363
2026 (one year)			107						2,837
2027 (one year)			101						2,564
Thereafter			458						15,096
Total			$	1,010					$	30,394

Accounts Receivable

The following is a summary of our Trade accounts and other receivables – net:

			March 31, 2023						December 31, 2022
			(Millions)
Accounts receivable related to revenues from contracts with customers			$	1,205					$	1,771
Receivables from derivatives			291						889
Other accounts receivable			28						63
Trade accounts and other receivables – net			$	1,524					$	2,723

Note 5 – Provision (Benefit) for Income Taxes

The Provision (benefit) for income taxes includes:

									Three Months Ended March 31,
															2023						2022
															(Millions)
Current:
Federal															$	1					$	1
State															—						2
															1						3
Deferred:
Federal															237						94
State															46						21
															283						115
Provision (benefit) for income taxes															$	284					$	118

The effective income tax rates for the total provision (benefit) for both the three months ended March 31, 2023 and 2022, are greater than the federal statutory rate primarily due to the effect of state income taxes.

Notes (Continued)			Table of Contents

Note 6 – Debt and Banking Arrangements

Long-Term Debt

Issuances and retirements

On March 2, 2023, we issued $750 million of 5.40 percent senior unsecured notes due March 2, 2026, and $750 million of 5.65 percent senior unsecured notes due March 15, 2033.

As a result of the MountainWest Acquisition on February 14, 2023, our Consolidated Balance Sheet now includes $100 million of 3.53 percent senior unsecured notes due January 31, 2028, $150 million of 3.91 percent senior unsecured notes due January 31, 2038, and $180 million of 4.875 percent senior unsecured notes due December 1, 2041. The acquisition date fair value reflects a $65 million reduction to the aggregate principal amount. (See Note 3 – Acquisitions).

Commercial Paper Program

At March 31, 2023, no commercial paper was outstanding under our $3.5 billion commercial paper program.

Credit Facility

			March 31, 2023
			Stated Capacity						Outstanding
			(Millions)
Long-term credit facility (1)			$	3,750					$	—
Letters of credit under certain bilateral bank agreements									18

(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.

Notes (Continued)			Table of Contents

Note 7 – Fair Value Measurements and Guarantees

The following table presents, by level within the fair value hierarchy, certain of our significant financial assets and liabilities. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and commercial paper approximate fair value because of the short-term nature of these instruments. Therefore, these assets and liabilities are not presented in the following table.

																		Fair Value Measurements Using
						Carrying Amount						Fair Value						Quoted Prices In Active Markets for Identical Assets (Level 1)						Significant Other Observable Inputs (Level 2)						Significant Unobservable Inputs (Level 3)
						(Millions)
Assets (liabilities) at March 31, 2023:
Measured on a recurring basis:
ARO Trust investments						$	242					$	242					$	242					$	—					$	—
Commodity derivative assets (1)						132						132						17						109						6
Commodity derivative liabilities (1)						(449)						(449)						(1)						(395)						(53)
Other financial assets (liabilities) – net						(1)						(1)						—						(1)						—
Additional disclosures:
Long-term debt, including current portion						(24,412)						(23,727)						—						(23,727)						—
Guarantees						(38)						(27)						—						(11)						(16)
Assets (liabilities) at December 31, 2022:
Measured on a recurring basis:
ARO Trust investments						$	230					$	230					$	230					$	—					$	—
Commodity derivative assets (2)						166						166						20						132						14
Commodity derivative liabilities (2)						(810)						(810)						(22)						(718)						(70)
Other financial assets (liabilities) – net						(5)						(5)						—						(5)						—
Additional disclosures:
Long-term debt, including current portion						(22,554)						(21,569)						—						(21,569)						—
Guarantees						(38)						(25)						—						(9)						(16)

(1)Net commodity derivative assets and liabilities exclude $120 million of net cash collateral in Level 1.

(2)Net commodity derivative assets and liabilities exclude $202 million of net cash collateral in Level 1.

Fair Value Methods

We use the following methods and assumptions in estimating the fair value of our financial instruments:

Assets measured at fair value on a recurring basis

ARO Trust investments*:* Transco deposits a portion of its collected rates, pursuant to its rate case settlement, into an external trust (ARO Trust) that is specifically designated to fund future asset retirement obligations (ARO). The ARO Trust invests in a portfolio of actively traded mutual funds that are measured at fair value on a recurring basis based on quoted prices in an active market and is reported in Regulatory assets, deferred charges, and other in our

Notes (Continued)			Table of Contents

Consolidated Balance Sheet. Both realized and unrealized gains and losses are ultimately recorded as regulatory assets or liabilities.

Commodity derivatives*:* Commodity derivatives include exchange-traded contracts and over-the-counter (OTC) contracts, which consist of physical forwards, futures, and swaps that are measured at fair value on a recurring basis. We also have other derivatives related to asset management agreements and other contracts that require physical delivery. Derivatives classified as Level 1 are valued using New York Mercantile Exchange (NYMEX) futures prices. Derivatives classified as Level 2 are valued using basis transactions that represent the cost to transport natural gas from a NYMEX delivery point to the contract delivery point. These transactions are based on quotes obtained either through electronic trading platforms or directly from brokers. Derivatives classified as Level 3 are valued using a combination of observable and unobservable inputs. The fair value amounts are presented on a net basis and reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements and cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions. Commodity derivative assets are reported in Derivative assets and Regulatory assets, deferred charges, and other in our Consolidated Balance Sheet. Commodity derivative liabilities are reported in Derivative liabilities and Regulatory liabilities, deferred income, and other in our Consolidated Balance Sheet. Changes in the fair value of our derivative assets and liabilities are recorded in Net gain (loss) on commodity derivatives and Net processing commodity expenses in our Consolidated Statement of Income. See Note 8 – Derivatives for additional information on our derivatives.

Additional fair value disclosures

Long-term debt, including current portion*:* The disclosed fair value of our long-term debt is determined primarily by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. The fair values of the financing obligations associated with our Dalton, Leidy South, and Atlantic Sunrise projects, which are included within long-term debt, were determined using an income approach.

Guarantees*:* Guarantees primarily consist of a guarantee we have provided in the event of nonpayment by our previously owned communications subsidiary, Williams Communications Group (WilTel), on a lease performance obligation that extends through 2042. Guarantees also include an indemnification related to a disposed operation.

To estimate the fair value of the WilTel guarantee, an estimated default rate is applied to the sum of the future contractual lease payments using an income approach. The estimated default rate is determined by obtaining the average cumulative issuer-weighted default rate based on the credit rating of WilTel’s current owner and the term of the underlying obligation. The default rate is published by Moody’s Investors Service. The carrying value of the WilTel guarantee is reported in Accrued and other current liabilities in our Consolidated Balance Sheet. The maximum potential undiscounted liquidity exposure is approximately $24 million at March 31, 2023. Our exposure declines systematically through the remaining term of WilTel’s obligation.

The fair value of the guarantee associated with the indemnification related to a disposed operation was estimated using an income approach that considered probability-weighted scenarios of potential levels of future performance. The terms of the indemnification do not limit the maximum potential future payments associated with the guarantee. The carrying value of this guarantee is reported in Regulatory liabilities, deferred income, and other in our Consolidated Balance Sheet.

We are required by our revolving credit agreement to indemnify lenders for certain taxes required to be withheld from payments due to the lenders and for certain tax payments made by the lenders. The maximum potential amount of future payments under these indemnifications is based on the related borrowings and such future payments cannot currently be determined. These indemnifications generally continue indefinitely unless limited by the underlying tax regulations and have no carrying value. We have never been called upon to perform under these indemnifications and have no current expectation of a future claim.

Notes (Continued)			Table of Contents

Note 8 – Derivatives

Commodity-Related Derivatives

We are exposed to commodity price risk. To manage this volatility, we use various contracts in our marketing and trading activities that generally meet the definition of derivatives. Derivative positions are monitored using techniques including, but not limited to value at risk. Derivative instruments are recognized at fair value in our Consolidated Balance Sheet as either assets or liabilities and are presented on a net basis by counterparty, net of margin deposits. See Note 7 – Fair Value Measurements and Guarantees for additional fair value information. In our Consolidated Statement of Cash Flows, any cash impacts of settled commodity-related derivatives are recorded as operating activities.

We enter into commodity-related derivatives to economically hedge exposures to natural gas, NGLs, and crude oil and retain exposure to price changes that can, in a volatile energy market, be material and can adversely affect our results of operations.

At March 31, 2023, the notional volume of the net long (short) positions for our commodity-related derivative contracts were as follows:

						Commodity						Unit of Measure						Net Long (Short) Position
Index Risk						Natural Gas						MMBtu						931,475,691
Central Hub Risk - Henry Hub						Natural Gas						MMBtu						(30,773,146)
Basis Risk						Natural Gas						MMBtu						(38,069,941)
Central Hub Risk - Mont Belvieu						Natural Gas Liquids						Barrels						(1,153,119)
Basis Risk						Natural Gas Liquids						Barrels						(2,231,000)
Central Hub Risk - WTI						Crude Oil						Barrels						91,250

Derivative Financial Statement Presentation

The fair value of commodity-related derivatives, which are not designated as hedging instruments for accounting purposes, was reflected as follows:

						March 31, 2023												December 31, 2022
Derivative Category						Assets						(Liabilities)						Assets						(Liabilities)
						(Millions)
Current						$	611					$	(623)					$	1,099					$	(1,278)
Noncurrent						156						(461)						269						(734)
Total derivatives						$	767					$	(1,084)					$	1,368					$	(2,012)
Counterparty and collateral netting offset						(511)						631						(1,034)						1,236
Amounts recognized in our Consolidated Balance Sheet						$	256					$	(453)					$	334					$	(776)

Notes (Continued)			Table of Contents

The pre-tax effects of commodity-related derivative instruments in Net gain (loss) on commodity derivatives reflected within Total revenues and Net processing commodity expenses in our Consolidated Statement of Income were as follows:

																		Gain (Loss)
												Three Months Ended March 31,
																		2023						2022
																		(Millions)
Realized commodity-related derivatives not designated as hedging instruments																		$	174					$	(69)
Unrealized commodity-related derivatives not designated as hedging instruments																		332						(125)
Net gain (loss) on commodity derivatives																		$	506					$	(194)
Realized commodity-related derivatives not designated as hedging instruments in Net processing commodity expenses																		$	(4)					$	1
Unrealized commodity-related derivatives not designated as hedging instruments in Net processing commodity expenses																		$	(5)					$	2

Contingent Features

Generally, collateral may be provided by a parent guaranty, letter of credit, or cash. If collateral is required, fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are offset against fair value amounts recognized for derivatives executed with the same counterparty.

We have specific trade and credit contracts that contain minimum credit rating requirements. These credit rating requirements typically give counterparties the right to suspend or terminate credit if our credit ratings are downgraded to non-investment grade status. Under such circumstances, we would need to post collateral to continue transacting business with these counterparties. At March 31, 2023, the contractually required collateral in the event of a credit rating downgrade to non-investment grade status was $7 million.

We maintain accounts with brokers or the clearing houses of certain exchanges to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, we may be required to deposit cash into these accounts. At March 31, 2023, net cash collateral held on deposit in broker margin accounts was $120 million.

Note 9 – Contingent Liabilities

Alaska Refinery Contamination Litigation

We are involved in litigation arising from our ownership and operation of the North Pole Refinery in North Pole, Alaska, from 1980 until 2004, through our wholly owned subsidiaries Williams Alaska Petroleum Inc. (WAPI) and MAPCO Inc. We sold the refinery to Flint Hills Resources Alaska, LLC (FHRA), a subsidiary of Koch Industries, Inc., in 2004. The litigation involves three cases, with filing dates ranging from 2010 to 2014. The actions primarily arise from sulfolane contamination allegedly emanating from the refinery. A putative class action lawsuit was filed by James West in 2010 naming us, WAPI, and FHRA as defendants. We and FHRA filed claims against each other seeking, among other things, contractual indemnification alleging that the other party caused the sulfolane contamination. In 2011, we and FHRA settled the claim with James West. Certain claims by FHRA against us were resolved by the Alaska Supreme Court in our favor. FHRA’s claims against us for contractual indemnification and statutory claims for damages related to off-site sulfolane were remanded to the Alaska Superior Court. The State of Alaska filed its action in March 2014, seeking damages. The City of North Pole (North Pole) filed its lawsuit in November 2014, seeking past and future damages, as well as punitive damages. Both we and WAPI asserted counterclaims against the State of Alaska and North Pole, and cross-claims against FHRA. FHRA has also filed cross-claims against us.

Notes (Continued)			Table of Contents

The underlying factual basis and claims in the cases are similar and may duplicate exposure. As such, in February 2017, the three cases were consolidated into one action in state court containing the remaining claims from the James West case and those of the State of Alaska and North Pole. The State of Alaska later announced the discovery of additional contaminants per- and polyfluoralkyl (PFOS and PFOA) offsite of the refinery, and the court permitted the State of Alaska to amend its complaint to add a claim for offsite PFOS/PFOA contamination. The court subsequently remanded the offsite PFOS/PFOA claims to the Alaska Department of Environmental Conservation for investigation and stayed the claims pending their potential resolution at the administrative agency. Several trial dates encompassing all three cases have been scheduled and stricken. In the summer of 2019, the court deconsolidated the cases for purposes of trial. A bench trial on all claims except North Pole’s claims began in October 2019.

In January 2020, the Alaska Superior Court issued its Memorandum of Decision finding in favor of the State of Alaska and FHRA, with the total incurred and potential future damages estimated to be $86 million. The court found that FHRA is not entitled to contractual indemnification from us because FHRA contributed to the sulfolane contamination. On March 23, 2020, the court entered final judgment in the case. Filing deadlines were stayed until May 1, 2020. However, on April 21, 2020, we filed a Notice of Appeal. We also filed post-judgment motions including a Motion for New Trial and a Motion to Alter or Amend the Judgment. These post-trial motions were resolved with the court’s denial of the last motion on June 11, 2020. Our Statement of Points on Appeal was filed on July 13, 2020. On June 22, 2020, the court stayed the North Pole’s case pending resolution of the appeal in the State of Alaska and FHRA case. On December 23, 2020, we filed our opening brief on appeal. Oral argument was held on December 15, 2021. We have recorded an accrued liability in the amount of our estimate of the probable loss. It is reasonably possible that we may not be successful on appeal and could ultimately pay up to the amount of judgment.

Royalty Matters

Certain of our customers, including Chesapeake Energy Corporation (Chesapeake), have been named in various lawsuits alleging underpayment of royalties and claiming, among other things, violations of anti-trust laws and the Racketeer Influenced and Corrupt Organizations Act. We have also been named as a defendant in certain of these cases filed in Pennsylvania based on allegations that we improperly participated with Chesapeake in causing the alleged royalty underpayments. We believe that the claims asserted are subject to indemnity obligations owed to us by Chesapeake. Chesapeake has reached a settlement to resolve substantially all Pennsylvania royalty cases pending, which settlement applies to both Chesapeake and us. The settlement does not require any contribution from us. On August 23, 2021, the court approved the settlement, but two objectors filed an appeal with the United States Court of Appeals for the Fifth Circuit.

Litigation Against Energy Transfer and Related Parties

On April 6, 2016, we filed suit in Delaware Chancery Court against Energy Transfer Equity, L.P. (Energy Transfer) and LE GP, LLC (the general partner for Energy Transfer) alleging willful and material breaches of the Agreement and Plan of Merger (ETE Merger Agreement) with Energy Transfer resulting from the private offering by Energy Transfer on March 8, 2016, of Series A Convertible Preferred Units (Special Offering) to certain Energy Transfer insiders and other accredited investors. The suit seeks, among other things, an injunction ordering the defendants to unwind the Special Offering and to specifically perform their obligations under the ETE Merger Agreement. On April 19, 2016, we filed an amended complaint seeking the same relief. On May 3, 2016, Energy Transfer and LE GP, LLC filed an answer and counterclaims.

On May 13, 2016, we filed a separate complaint in Delaware Chancery Court against Energy Transfer, LE GP, LLC and the other Energy Transfer affiliates that are parties to the ETE Merger Agreement, alleging material breaches of the ETE Merger Agreement for failing to cooperate and use necessary efforts to obtain a tax opinion required under the ETE Merger Agreement (Tax Opinion) and for otherwise failing to use necessary efforts to consummate the merger under the ETE Merger Agreement wherein we would be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger). The suit sought, among other things, a declaratory judgment and injunction preventing Energy Transfer from terminating or otherwise avoiding its obligations under the ETE Merger Agreement due to any failure to obtain the Tax Opinion.

Notes (Continued)			Table of Contents

The Court of Chancery coordinated the Special Offering and Tax Opinion suits. On May 20, 2016, the Energy Transfer defendants filed amended affirmative defenses and verified counterclaims in the Special Offering and Tax Opinion suits, alleging certain breaches of the ETE Merger Agreement by us and seeking, among other things, a declaration that we were not entitled to specific performance, that Energy Transfer could terminate the ETC Merger, and that Energy Transfer is entitled to a $1.48 billion termination fee. On June 24, 2016, following a two-day trial, the court issued a Memorandum Opinion and Order denying our requested relief in the Tax Opinion suit. The court did not rule on the substance of our claims related to the Special Offering or on the substance of Energy Transfer’s counterclaims. On June 27, 2016, we filed an appeal of the court’s decision with the Supreme Court of Delaware, seeking reversal and remand to pursue damages. On March 23, 2017, the Supreme Court of Delaware affirmed the Court of Chancery’s ruling. On March 30, 2017, we filed a motion for reargument with the Supreme Court of Delaware, which was denied on April 5, 2017.

On September 16, 2016, we filed an amended complaint with the Court of Chancery seeking damages for breaches of the ETE Merger Agreement by defendants. On September 23, 2016, Energy Transfer filed a second amended and supplemental affirmative defenses and verified counterclaim with the Court of Chancery seeking, among other things, payment of the $1.48 billion termination fee due to our alleged breaches of the ETE Merger Agreement. On December 1, 2017, the court granted our motion to dismiss certain of Energy Transfer’s counterclaims, including its claim seeking payment of the $1.48 billion termination fee. On December 8, 2017, Energy Transfer filed a motion for reargument, which the Court of Chancery denied on April 16, 2018. Trial was held May 10 through May 17, 2021. On December 29, 2021, the court entered judgment in our favor in the amount of $410 million, plus interest at the contractual rate, and our reasonable attorneys’ fees and expenses. On September 21, 2022, the court entered a final order and judgment awarding us the termination fee, attorney’s fees, expenses, and interest in the amount of $602 million plus additional interest starting September 17, 2022. Energy Transfer has appealed to the Delaware Supreme Court.

Environmental Matters

We are a participant in certain environmental activities in various stages including assessment studies, cleanup operations, and/or remedial processes at certain sites, some of which we currently do not own. We are monitoring these sites in a coordinated effort with other potentially responsible parties, the U.S. Environmental Protection Agency (EPA), or other governmental authorities. We are jointly and severally liable along with unrelated third parties in some of these activities and solely responsible in others. Certain of our subsidiaries have been identified as potentially responsible parties at various Superfund and state waste disposal sites. In addition, these subsidiaries have incurred, or are alleged to have incurred, various other hazardous materials removal or remediation obligations under environmental laws. As of March 31, 2023, we have accrued liabilities totaling $40 million for these matters, as discussed below. Estimates of the most likely costs of cleanup are generally based on completed assessment studies, preliminary results of studies, or our experience with other similar cleanup operations. At March 31, 2023, certain assessment studies were still in process for which the ultimate outcome may yield different estimates of most likely costs. Therefore, the actual costs incurred will depend on the final amount, type, and extent of contamination discovered at these sites, the final cleanup standards mandated by the EPA or other governmental authorities, and other factors.

The EPA and various state regulatory agencies routinely propose and promulgate new rules and issue updated guidance to existing rules. These rulemakings include, but are not limited to, rules for reciprocating internal combustion engine and combustion turbine maximum achievable control technology, reviews and updates to the National Ambient Air Quality Standards, and rules for new and existing source performance standards for volatile organic compound and methane. We continuously monitor these regulatory changes and how they may impact our operations. Implementation of new or modified regulations may result in impacts to our operations and increase the cost of additions to Property, plant, and equipment – net in our Consolidated Balance Sheet for both new and existing facilities in affected areas; however, due to regulatory uncertainty on final rule content and applicability timeframes, we are unable to reasonably estimate the cost of these regulatory impacts at this time.

Notes (Continued)			Table of Contents

Continuing operations

Our interstate gas pipelines are involved in remediation and monitoring activities related to certain facilities and locations for polychlorinated biphenyls, mercury, and other hazardous substances. These activities have involved the EPA and various state environmental authorities, resulting in our identification as a potentially responsible party at various Superfund waste sites. At March 31, 2023, we have accrued liabilities of $13 million for these costs and expect to recover approximately $4 million through rates.

We also accrue environmental remediation costs for natural gas underground storage facilities, primarily related to soil and groundwater contamination. At March 31, 2023, we have accrued liabilities totaling $10 million for these costs.

Former operations

We have potential obligations in connection with assets and businesses we no longer operate. These potential obligations include remediation activities at the direction of federal and state environmental authorities and the indemnification of the purchasers of certain of these assets and businesses for environmental and other liabilities existing at the time the sale was consummated. Our responsibilities relate to the operations of the assets and businesses described below.

• Former agricultural fertilizer and chemical operations and former retail petroleum and refining operations;

• Former petroleum products and natural gas pipelines;

• Former petroleum refining facilities;

• Former exploration and production and mining operations;

• Former electricity and natural gas marketing and trading operations.

At March 31, 2023, we have accrued environmental liabilities of $17 million related to these matters.

Other Divestiture Indemnifications

Pursuant to various purchase and sale agreements relating to divested businesses and assets, we have indemnified certain purchasers against liabilities that they may incur with respect to the businesses and assets acquired from us. The indemnities provided to the purchasers are customary in sale transactions and are contingent upon the purchasers incurring liabilities that are not otherwise recoverable from third parties. The indemnities generally relate to breach of warranties, tax, historic litigation, personal injury, property damage, environmental matters, right of way, and other representations that we have provided.

At March 31, 2023, other than as previously disclosed, we are not aware of any material claims against us involving the above-described indemnities; thus, we do not expect any of the indemnities provided pursuant to the sales agreements to have a material impact on our future financial position. Any claim for indemnity brought against us in the future may have a material adverse effect on our results of operations in the period in which the claim is made.

In addition to the foregoing, various other proceedings are pending against us that are incidental to our operations, none of which are expected to be material to our expected future annual results of operations, liquidity, and financial position.

Summary

We have disclosed our estimated range of reasonably possible losses for certain matters above, as well as all significant matters for which we are unable to reasonably estimate a range of possible loss. We estimate that for all other matters for which we are able to reasonably estimate a range of loss, our aggregate reasonably possible losses

Notes (Continued)			Table of Contents

beyond amounts accrued are immaterial to our expected future annual results of operations, liquidity, and financial position. These calculations have been made without consideration of any potential recovery from third parties.

Note 10 – Segment Disclosures

Our reportable segments are Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services. All remaining business activities are included in Other. (See Note 1 – General, Description of Business, and Basis of Presentation.)

Performance Measurement

We evaluate segment operating performance based upon Modified EBITDA. This measure represents the basis of our internal financial reporting and is the primary performance measure used by our chief operating decision maker in measuring performance and allocating resources among our reportable segments. Intersegment Service revenues primarily represent transportation services provided to our marketing business and gathering services provided to our oil and gas properties. Intersegment Product sales primarily represent the sale of natural gas and NGLs from our natural gas processing plants and our oil and gas properties to our marketing business.

We define Modified EBITDA as follows:

• Net income (loss) before:

◦Provision (benefit) for income taxes;

◦Interest incurred, net of interest capitalized;

◦Equity earnings (losses);

◦Other investing income (loss) – net;

◦Depreciation and amortization expenses;

◦Accretion expense associated with asset retirement obligations for nonregulated operations.

• This measure is further adjusted to include our proportionate share (based on ownership interest) of Modified EBITDA from our equity-method investments calculated consistently with the definition described above.

Notes (Continued)			Table of Contents

The following table reflects the reconciliation of Modified EBITDA to Net income (loss) as reported in our Consolidated Statement of Income.

									Three Months Ended March 31,
															2023						2022
															(Millions)
Modified EBITDA by segment:
Transmission & Gulf of Mexico															$	715					$	697
Northeast G&P															470						418
West															304						260
Gas & NGL Marketing Services (1)															567						13
Other															74						5
															2,130						1,393
Accretion expense associated with asset retirement obligations for nonregulated operations															(15)						(11)
Depreciation and amortization expenses															(506)						(498)
Equity earnings (losses)															147						136
Other investing income (loss) – net															8						1
Proportional Modified EBITDA of equity-method investments															(229)						(225)
Interest expense															(294)						(286)
(Provision) benefit for income taxes															(284)						(118)
Net income (loss)															$	957					$	392

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(1) Modified EBITDA for the three months ended March 31, 2023 and 2022, includes charges of $18 million and $0 million, respectively, associated with lower of cost or net realizable value adjustments to our inventory. These charges are reflected in Product sales and Product costs in our Consolidated Statement of Income. Net unrealized commodity-related derivatives gains (losses) of $(5) million and $2 million for the three months ended March 31, 2023 and 2022, respectively, are reflected in Net processing commodity expenses.

Notes (Continued)			Table of Contents

The following table reflects the reconciliation of Segment revenues to Total revenues as reported in our Consolidated Statement of Income.

			Transmission &Gulf of Mexico						Northeast G&P						West						Gas & NGL Marketing Services (1)						Other						Eliminations						Total
			(Millions)
Three Months Ended March 31, 2023
Segment revenues:
Service revenues
External			$	915					$	443					$	332					$	1					$	3					$	—					$	1,694
Internal			25						11						24						—						—						(60)						—
Total service revenues			940						454						356						1						3						(60)						1,694
Total service revenues – commodity consideration			12						6						18						—						—						—						36
Product sales
External			24						8						19						776						18						—						845
Internal			31						41						71						(101)						84						(126)						—
Total product sales			55						49						90						675						102						(126)						845
Net gain (loss) on commodity derivatives
Realized			—						—						39						117						18						—						174
Unrealized			—						—						—						338						(6)						—						332
Total net gain (loss) on commodity derivatives (2)			—						—						39						455						12						—						506
Total revenues			$	1,007					$	509					$	503					$	1,131					$	117					$	(186)					$	3,081
Three Months Ended March 31, 2022
Segment revenues:
Service revenues
External			$	845					$	370					$	316					$	1					$	5					$	—					$	1,537
Internal			29						10						15						—						4						(58)						—
Total service revenues			874						380						331						1						9						(58)						1,537
Total service revenues – commodity consideration			21						7						49						—						—						—						77
Product sales
External			51						5						11						1,015						22						—						1,104
Internal			49						31						176						(47)						82						(291)						—
Total product sales			100						36						187						968						104						(291)						1,104
Net gain (loss) on commodity derivatives
Realized			—						—						(5)						(56)						(8)						—						(69)
Unrealized			—						—						—						(59)						(66)						—						(125)
Total net gain (loss) on commodity derivatives (2)			—						—						(5)						(115)						(74)						—						(194)
Total revenues			$	995					$	423					$	562					$	854					$	39					$	(349)					$	2,524

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(1) As we are acting as agent for natural gas marketing customers or engage in energy trading activities, the resulting revenues are presented net of the related costs of those activities.

(2) We record transactions that qualify as derivatives at fair value with changes in fair value recognized in earnings in the period of change and characterized as unrealized gains or losses. Gains and losses on derivatives held for energy trading purposes are presented on a net basis in revenue.