We are a natural gas company originally incorporated under the laws of the state
of Nevada in 1949 and reincorporated under the laws of the state of Delaware in
1987. We were founded in 1908 when two Williams brothers began a construction
company in Fort'Smith, Arkansas.
Today, we primarily find, produce, gather, process and transport natural gas.
Our operations stretch across the country and serve the Northwest, California,
Rocky Mountains, Gulf Coast and Eastern Seaboard markets.
Substantially all of our operations are conducted through our subsidiaries.
To achieve organizational and operating efficiencies, our activities are primarily
operated through our wholly-owned subsidiary, Williams Power Company; our interstate
natural gas pipelines and pipeline joint venture investments are organized under
our wholly-owned subsidiary, Williams Gas Pipeline Company, LLC; our Exploration'
& Production business is operated through several wholly-owned subsidiaries
including Williams Production Company LLC and Williams Production RMT Company;
our Midstream business is operated primarily through wholly-owned subsidiaries
including Williams Field Services Group, Inc. and Williams Natural Gas Liquids,
Inc.; and our previously reported Petroleum Services and International segments
are now reported under our Other segment. This report is organized to reflect
this structure.
Our business segments include Power, Gas Pipeline, Exploration'& Production,
Midstream, and Other.
Our domestic gas gathering and processing customers are generally natural gas
producers who have proved and/or producing natural gas fields in the areas surrounding
our infrastructure. Our top four gathering and processing customers accounted
for about one-third (1/3) of our domestic gathering revenue and processing gross
margin. Our gathering and processing agreements are generally long-term agreements.
In addition to our gathering and processing operations, we also market natural
gas liquids and petrochemical products to a wide range of users in the energy
and petrochemical industries. We provide these products to third parties from
the production at our domestic facilities. The majority of domestic sales are
based on supply contracts of less than one-year in duration. Our Canadian operations
sell the ethane produced from the Canadian facilities to third party end users
and the plant operator markets the remainder of the products. Our Canadian ethane
sales contracts are typically long-term in nature.
Competition and market environment
We compete directly with large independent energy marketers, marketing affiliates
of regulated pipelines and utilities and natural gas producers. We also compete
with both brokerage houses and other energy-based companies offering similar
services. Since 2002, we have fewer competitors due to the exit of independent
energy marketers from the marketplace and the exit of utilities from financial
merchant activities. We anticipate more competition in the future from brokerage
houses, which are increasing their trading activity.
The FERC has taken various actions to strengthen market forces in the natural
gas pipeline industry which has led to increased competition throughout the
industry. In a number of key markets, interstate pipelines are now facing competitive
pressures from other major pipeline systems, enabling local distribution companies
and end users to choose a supplier or switch suppliers based on the short-term
price of gas and the cost of transportation.
We expect competition for natural gas transportation to continue to intensify
in future years due to increased customer access to other pipelines, rate ,
competitiveness among pipelines, customers' desire to have more than one transporter,
shorter contract terms and regulatory developments. Future utilization of pipeline
capacity will depend on competition from other pipelines, use of alternative
fuels, the general level of natural gas demand and weather conditions.
Electricity and distillate fuel oil are the primary competitive forms of energy
for residential and commercial markets. Coal and residual fuel oil compete for
industrial and electric generation markets. Nuclear and hydroelectric power
and power purchased from electric transmission grid arrangements among electric
utilities also compete with gas-fired electric generation in certain markets.'
The natural gas industry is highly competitive. We compete in the areas of
property acquisitions and the development, production and marketing of, and
exploration for, natural gas with major oil companies, other independent oil
and natural gas concerns and individual producers and operators. We also compete
with major and independent oil and gas concerns in recruiting and retaining
qualified employees.
The gathering and processing business is a regional business with varying competitive
factors in each basin. Our gathering and processing business competes with other
midstream companies, interstate and intrastate pipelines, master limited partnerships
(MLP), producers and independent gatherers and processors. We primarily compete
with five to ten companies across all basins in which we provide services. Our
focus is to provide our customers with reliable service at a competitive price.
Numerous factors impact any given customer's choice of a gathering or processing
services provider, including rate, location, term, timeliness of well connections,
pressure obligations and the willingness of the provider to process for either
a fee or for liquids taken in-kind. Our gathering and processing services are
generally covered by long-term contracts with applicable acreage or reserve
dedications. The active drilling programs near our relatively large positions
in the San'Juan Basin, Wyoming area and Gulf Coast Region are indicators that
demand for future gathering and processing infrastructure and services should
continue.