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Williams gas pipelines on Wright track to success: pipeline chief details road to recovery.

Article Excerpt
One of the most important success stories in the natural gas industry has been one of the least publicized. Now, after years of beinga forced into making the gut-wrenching decisions that ultimately did save their company, the folks at Williams want you to know they're back in business. The truth is that they were never really gone, even when the specter of bankruptcy approached.

In May, Williams announced first quarter net income of $201.1 million or 34 cents per share, compared with $9.9 million, or 2 cents per share, for first-quarter 2004. Increased natural gas production and higher prices for natural gas and natural gas liquids were largely responsible, but so were lower levels of interest expense. For 2005, Williams anticipates $555-$586 million in "segment profit" from the gas pipeline group.

For the interview with P&GJ, Phillip D. Wright, who was named senior vice president of Williams gas pipeline business last January, replacing the retiring Doug Whisenant, left his cubicle on the twelfth floor of the Williams Tower to discuss both the company's strategy for moving his business lines forward and the decisions that were made to keep the long-respected company afloat.

Before the downturns that affected its energy and telecommunications businesses, Williams was a giant in both industries. Its coast-to-coast and border-to-border pipeline system was among the largest and most profitable in North America. Production assets in the Rockies and midstream assets in the Gulf of Mexico were also pouring money into the Tulsa-based headquarters of Williams.

In trying to keep up with its competitors, Williams built an energy marketing company that became costly to maintain. About the same time, the company's telecommunications sector imploded. Simultaneously, Williams faced a major financial crisis on two fronts, as it helplessly watched its stock plummet from $50 per share to 88 cents per share in early 2002. At one point, the company was even forced to take out a loan carrying a 30% interest rate from Warren Buffett's Berkshire Hathaway Co. to stay afloat. And that was after they sold their cherished Kern River Pipeline system to his Mid-America utility company at a bargain price.

Today, Williams' stock price hovers between $17-18 with some analysts predicting that it will rise to $25 by year-end. The company has been drastically scaled down in the past three years through the sale of $9 billion worth of assets. Gone are the Kern River Pipeline; Texas Gas Transmission, and Central Pipeline formerly known as Williams Natural Gas. Gone are its interests in Northern Border and Alliance pipelines as well as the Cove Point LNG terminal. Williams has also had to sell several of its potentially profitable producing properties and its downstream refining portfolio.

The company had more than 20,000 employees at its apex just five years ago. There are now about 3,600 employees at Williams, nearly half of whom report to Wright through their work at Transco, Northwest Pipeline and Gulfstream (jointly owned with Duke Energy). The company is comprised of four core units: Gas Pipeline & Power, Exploration & Production, Power, and Midstream Gas & Liquids.

Wright, 50, a civil engineering graduate of Oklahoma State University, joined Williams in 1989 as vice president of marketing and transportation after spending 13 years learning the business at Conoco including graduating from the Conoco Pipe Line Co. management development program. He offers an unusually candid look at a company's turning point from the view of a chief restructuring officer who is intimately aware of every aspect of the company's business.

P&GJ: How would you describe the state of Williams' gas pipeline business in 2005?

Wright: We've emerged from our piece of the corporate restructuring...

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