Williams Blames Quarterly Loss on Trading Decline
Cash-strapped energy conglomerate Williams Cos. on Monday reported the large quarterly loss it had warned of last week, and blamed it on a devastating decline in its marketing and trading unit.
Williams shares dropped to less than $1 last week as investors feared the asset-rich company did not have enough money to avoid bankruptcy. Williams warned it was facing the massive quarterly loss on July 22.
John Olson, an analyst with Houston investment bank Sanders Morris Harris, said Williams is by no means out of the woods yet.
“We got a difficult earnings report, about in line with expectations, but everyone is waiting on pins and needles to see what happens on Thursday morning,” Olson said.
That is when a $450-million bank debt is due--and that amount is about all that Williams said it has in cash on hand. It is negotiating a secured financing agreement for about $1.2 billion, after failing last week to land an unsecured credit line of about $2 billion.
The Tulsa, Okla.-based energy and pipeline firm reported a second-quarter net loss of $349.1 million, or 68 cents a share, compared with a profit of $339.5 million, or 69 cents a share, a year earlier.
Williams’ stock closed up nearly 88%, gaining 93 cents at $1.99 on the New York Stock Exchange.
Williams’ financial problems have caused a severe slowdown in its trading business, and are partly to blame for an industrywide drop in wholesale power and natural gas deals.
Wall Street analysts, expressing fears it might be forced into bankruptcy, have used quarterly earnings conference calls as an opportunity to grill other trading houses about their financial exposure to Williams.
Energy traders have been pulling back their positions with Williams and Dynegy Inc.
Williams said on Monday that it would delay its scheduled conference call until later this week.
Woes in the power trading business were evident in the results from Williams’ energy marketing and trading business, which reported a second-quarter loss of $497.5 million compared with a profit of $262.2 million for the same period last year.
The company blamed the loss on a “significant decline” in the value of controversial mark-to-market contracts and the need for higher credit and liquidity reserves.
Its energy services business fared slightly better. The division, which includes its natural gas exploration and transportation business as well as its refining and retail operations, posted a profit of $131.8 million, compared with $263.9 million during the same period last year.
Williams’ pipelines unit, a key backbone, posted a second-quarter profit of $156.7 million against $181 million a year earlier. The drop was attributed to retirement costs and construction fees on projects that have since been abandoned.
Excluding special items, the company posted a recurring loss in the quarter of 34 cents a share. Analysts polled by Thomson First Call expected the company to post a loss on average of 38 cents.
