Full Description

The Williams Companies, Inc. (Williams), incorporated in 1949, is a natural gas company. The Company primarily finds, produces, gathers, processes and transports natural gas. Its operations are concentrated in the Pacific Northwest, Rocky Mountains, Gulf Coast, the Eastern Seaboard, and the province of Alberta in Canada. Its activities are primarily operated through business segments, which include Exploration & Production, Gas Pipeline, Midstream Gas & Liquids, Gas Marketing Services and Other. Exploration & Production produces, develops and manages natural gas reserves primarily located in the Rocky Mountain and Mid-Continent regions of the United States. Gas Pipeline includes its interstate natural gas pipelines and pipeline joint venture investments organized under its wholly owned subsidiary, Williams Gas Pipeline Company, LLC (WGP). Midstream Gas & Liquids includes its natural gas gathering, treating and processing business. Gas Marketing Services manages its natural gas commodity risk through purchases, sales and other related transactions, under its wholly owned subsidiary Williams Gas Marketing, Inc. Its other segment primarily consists of corporate operations.

Exploration & Production

The Company specializes in natural gas production from tight-sands and shale formations and coal bed methane reserves in the Piceance, San Juan, Powder River, Arkoma, Green River and Fort Worth basins. Over 99 % of Exploration & Production’s domestic reserves are natural gas. Its Exploration & Production segment also has international oil and gas interests, which include a 69 % equity interest in Apco Argentina Inc., an oil and gas exploration and production company with operations in Argentina, and a 4 % equity interest in Petrowayu S.A., a Venezuelan corporation that is the operator of a 100 % interest in the La Concepcion block located in western Venezuela.

The Company’s oil and gas properties include Piceance, San Juan, Powder River, and Mid-Continent. The Piceance basin is located in northwestern Colorado and is its largest area of concentrated development. During the year ended December 31, 2008, it operated an average of 26 drilling rigs in the basin. As of December 31, 2008, 15 of these rigs were the new high efficiency rigs designed to drill up to 22 wells from one location. This area has approximately 1,770 undrilled proved locations in inventory. Within this basin it owns and operates natural gas gathering facilities including some 300 miles of gathering lines and associated field compression. Approximately 85 % of the gas gathered is its own equity production. The gathering system also includes seven processing plants and associated treating facilities with an eighth plant that came on-line in February 2009, for a total capacity of 1.25 billion cubic feet per day (Bcfd). During 2008, these plants recovered approximately 69 million gallons of natural gas liquids (NGLs) which were marketed separately from the residue natural gas.

The San Juan basin is located in northwest New Mexico and southwest Colorado. The Powder River basin is located in northeast Wyoming. The Powder River basin includes large areas with multiple coal seam potential, targeting thick coal bed methane formations at shallow depths. The Mid-Continent properties are located in the southeastern Oklahoma portion of the Arkoma basin and the Barnett Shale in the Fort Worth basin of Texas. Other properties are primarily comprised of interests in the Green River basin in southwestern Wyoming.

Gas Pipeline

Williams owns and operates, a combined total of approximately 14,000 miles of pipelines with a total annual throughput of approximately 2,700 trillion British Thermal Units of natural gas and peak-day delivery capacity of approximately 12 million dekatherms (MMdt) of gas. Gas Pipeline consists of Transcontinental Gas Pipe Line Company, LLC (Transco) and Northwest Pipeline GP (Northwest Pipeline). Gas Pipeline also holds interests in joint venture interstate and intrastate natural gas pipeline systems including a 50 % interest in Gulfstream Natural Gas System, L.L.C. Gas Pipeline also includes Williams Pipeline Partners L.P. (WMZ). Transco is an interstate natural gas transportation company that owns and operates a 10,100-mile natural gas pipeline system extending from Texas, Louisiana, Mississippi and the offshore Gulf of Mexico through Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Pennsylvania, and New Jersey to the New York City metropolitan area. The system serves customers in Texas and 11 southeast and Atlantic seaboard states, including major metropolitan areas in Georgia, North Carolina, Washington, D.C., New York, New Jersey, and Pennsylvania. At December 31, 2008, Transco’s system had a mainline delivery capacity of approximately 4.7 MMdt of natural gas per day from its production areas to its primary markets.

Transco’s major natural gas transportation customers are public utilities and municipalities that provide service to residential, commercial, industrial and electric generation end users. Shippers on Transco’s system include public utilities, municipalities, intrastate pipelines, direct industrial users, electrical generators, gas marketers and producers. One customer accounted for approximately 11 % and another customer accounted for approximately 10 % of Transco’s total revenues in 2008. Transco has natural gas storage capacity in four underground storage fields located on or near its pipeline system or market areas and operates two of these storage fields.

The Sentinel Expansion Project involves an expansion of its natural gas transmission system from the Leidy Hub in Clinton County, Pennsylvania and from the Pleasant Valley interconnection with Cove Point LNG in Fairfax County, Virginia to various delivery points requested by the shippers under the project. The Mobile Bay South Expansion Project involves the addition of compression at Transco’s Station 85 in Choctaw County, Alabama to allow Transco to provide firm transportation service southbound on the Mobile Bay line from Station 85 to various delivery points. The 85 North Expansion Project involves an expansion of its natural gas transmission system from Station 85 in Choctaw County, Alabama to various delivery points as far north as North Carolina.

Northwest Pipeline is an interstate natural gas transportation company that owns and operates a natural gas pipeline system extending from the San Juan basin in northwestern New Mexico and southwestern Colorado through Colorado, Utah, Wyoming, Idaho, Oregon and Washington to a point on the Canadian border near Sumas, Washington. Northwest Pipeline provides services for markets in California, Arizona, New Mexico, Colorado, Utah, Nevada, Wyoming, Idaho, Oregon and Washington directly or indirectly through interconnections with other pipelines. As of December 31, 2008, Northwest Pipeline’s system, having long-term firm transportation agreements including peaking service of approximately 3.6 billion cubic feet (Bcf) of natural gas per day, was composed of approximately 3,900 miles of mainline and lateral transmission pipelines and 41 transmission compressor stations having a combined sea level-rated capacity of approximately 473,000 horsepower. In 2008, Northwest Pipeline served a total of 136 transportation and storage customers.

Midstream Gas & Liquids

The Midstream segments natural gas gatherers and processors, has primary service areas concentrated in major producing basins in Colorado, New Mexico, Wyoming, the Gulf of Mexico, Venezuela and western Canada. Midstream’s primary businesses natural gas gathering, treating, and processing; NGL fractionation, storage and transportation; and oil transportation fall within the middle of the process of taking natural gas and crude oil from the wellhead to the consumer. NGLs, ethylene and propylene are extracted/produced at its plants, including its Canadian and Gulf Coast olefins plants. These products are used primarily for the manufacture of petrochemicals, home heating fuels and refinery feedstock. In addition to its natural gas assets, it owns and operates three deepwater crude oil pipelines and a deepwater floating production platform in the Gulf of Mexico. Its offshore floating production platform provides centralized services to deepwater producers, such as compression, separation, production handling, water removal and pipeline landings.

It owns and/or operates domestic gas gathering, processing and treating assets within the western states of Wyoming, Colorado and New Mexico. In the Rocky Mountain area, its assets include, Approximately 3,500 miles of gathering pipelines serving the Wamsutter and southwest Wyoming areas in Wyoming; Ignacio, Kutz and Lybrook processing plants with a combined daily inlet capacity of 765 one million cubic feet per day (MMcf/d) and NGL processing capacity of approximately 40 one thousand barrels per day (Mbbls/d); Milagro and Esperanza natural gas treating plants, which remove carbon dioxide but do not extract NGLs, with a combined daily inlet capacity of 750 MMcf/d. At its Milagro facility, it also uses the steam generated by gas-driven turbines to produce approximately 60 mega-watts per day of electricity which it primarily sell into the local electrical grid.

Gas Marketing Services

Gas Marketing Services (Gas Marketing) primarily supports its natural gas businesses by providing marketing and risk management services, which includes marketing and hedging the gas produced by Exploration & Production, and procuring fuel and shrink gas and hedging natural gas liquids sales for Midstream. Gas Marketing also provides similar services to third parties, such as producers. In addition, Gas Marketing manages various natural gas-related contracts such as transportation, storage, related hedges and trading positions, including certain legacy natural gas contracts and positions.