Williams Analyst Conference Call 1st Quarter 2003

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Williams Analyst Conference Call1st Quarter 2003
May 13, 2003
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Forward Looking Statements

• Williams reports, filings, and other public
  announcements might contain or incorporate by
  reference statements that do not directly or
  exclusively relate to historical facts. Such
  statements are forward-looking statements with
  in the meaning of Private Securities Litigation
  Reform Act of 1995. You typically can identify
  forward-looking statements by the use of
  forward-looking words, such as anticipate,
  believe, could, continue, estimate,
  expect, forecast, may, plan,
  potential, project, schedule, will, and
  other similar words. These statements are based
  on our intentions, beliefs, and assumptions about
  future events and are subject to risks,
  uncertainties, and other factors. Actual results
  could differ materially from those contemplated
  by the forward-looking statements. In addition to
  any assumptions and other factors referred to
  specifically in connection with such statements,
  other factors could cause our actual results to
  differ materially from the results expressed or
  implied in any forward-looking statements. Those
  factors include, among others
• changes in general economic conditions and
  changes in the industries in which Williams
  conducts business
• changes in federal or state laws and regulations
  to which Williams is subject, including tax,
  environmental and employment laws and
  regulations
• the cost and outcomes of legal and administrative
  claims proceedings, investigations, or inquiries
• the results of financing efforts, including our
  ability to obtain financing on favorable terms,
  which can be affected by various factors,
  including our credit ratings and general economic
  conditions
• the level of creditworthiness of counterparties
  to our transactions
• the amount of collateral required to be posted
  from time to time in our transactions
• the effect of changes in accounting policies
• the ability to control costs
• the ability of each business unit to successfully
  implement key systems, such as order entry
  systems and service delivery systems
• the impact of future federal and state
  regulations of business activities, including
  allowed rates of return, the pace of deregulation
  in retail natural gas and electricity markets,
  and the resolution of other regulatory matters
• changes in environmental and other laws and
  regulations to which Williams and its
  subsidiaries are subject or other external
  factors over which we have no control
• changes in foreign economies, currencies, laws
  and regulations, and political climates,
  especially in Canada, Argentina, Brazil, and
  Venezuela, where Williams has direct investments
• the timing and extent of changes in commodity
  prices, interest rates, and foreign currency
  exchange rates
• the weather and other natural phenomena
• the ability of Williams to develop or access
  expanded markets and product offerings as well as
  their ability to maintain existing markets
• the ability of Williams and its subsidiaries to
  obtain governmental and regulatory approval of
  various expansion projects
• future utilization of pipeline capacity, which
  can depend on energy prices, competition from
  other pipelines and alternative fuels, the
  general level of natural gas and petroleum
  product demand, decisions by customers not to
  renew expiring natural gas transportation
  contracts
• the accuracy of estimated hydrocarbon reserves
  and seismic data and

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Williams Analyst Conference Call1st Quarter 2003
Steve Malcolm Chairman, President CEO May 13,
2003
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Agenda

• 1Q2003 Results
• Earnings
• Cash
• 1Q2003 Accomplishments
• Energy Marketing Trading Discussion
• Core Asset Business Unit Review
• Financial Strategy
• 2003-2005
• QA

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1st Quarter 2003 Results
Dollars in millions

• 1Q2003 1Q2002
• /share /share
• Income (Loss) Continuing Operations (58) (.13)
  98 .05
• Income (Loss) Discontinued 4 .01 9 .02
• Accounting Change (761) (1.47) -- --
• Reported Net Income (Loss) (815) (1.59) 108 .07
• Recurring Income from Cont. Ops 22 .04 240 .46

A schedule reconciling income (loss) from
continuing operations to recurring income from
continuing operations is available on Williams
web site at www.williams.com.
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Income (Loss) from Continuing Operations
Dollars in millions
1Q03 1Q02 Inc./(Dec.) Income (Loss) from
Continuing Operations (58) 98
(156) Major Items Changes in core segment
profit - Charge related
to Texas Gas sale (109) -
Other 98 Decrease in EMT
segment profit (419) Increase in
interest expense (162) Increase in
investing Income (includes WCG charge in 02)
264 Other - Net 75 Decrease
in income tax provision
97 Decrease (156)
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Recurring Income fromContinuing Operations
Dollars in millions
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Core Business Segment Profit
Dollars in millions

• 1Q2003 1Q2002

Gas Pipelines 95 179 Exploration
Production 126 106 Midstream Gas
Liquids 107 54 328 339 Includes 109
million charge related to sale of Texas Gas
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Cash
Dollars in millions

1Q03 Cash _at_
12/31/02 1,736 Operating Income 227 DDA 198 A
sset Impairments 130 Debt Issues 177 Asset
Sales 680 Debt Payments (361) Interest
Payments (373) Capital Expenditures (244) Memphi
s Escrow Account (228) W/C Changes Other -
Net (441) Cash _at_ 3/31/03 1,501
Includes remaining operating, investing and
financing activities for continuing
discontinued operations
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Asset Sales
Dollars in millions

• 
  Cash Proceeds Debt Assumed
• Completed in 1Q2003 (Net of Closing Costs)
• Worthington (27mm in op. income) 40 --
• TravelCenters 187 --
• Memphis Refinery 453 --
• 680 --
• Announced but not closed
• BioEnergy 75 --
• Jackson EMC 188 --
• EP Properties to XTO 400 --
• EP Brundage Canyon 49 --
• EP Julesberg 28 --
• Texas Gas 795 250
• WEG 512 570
• Memphis retained interest monetization 24 --
• 2071 820
• Total Completed and Announced 2,751 820

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Debt Balances 1Q03
Dollars in millions
Debt Balance _at_ 12/31/02 13,991 Debt
Associated with Discontinued Operations (77) Debt
Balance Adjusted for Disc. Oper. _at_
12/31/02 13,914 Scheduled Debt
Retirements (132) Progeny Debt
Payments (229) Accrued Capitalized
Interest 33 New Debt Issues 177 Debt Balance
_at_ 3/31/03 13,763 Net Change in
Debt (228) Remaining Progeny Debt 437
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SGA Expenses
Dollars in millions
(32) or (14)
Excludes amounts reclassified as discontinued
operations
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Williams Analyst Conference Call1st Quarter 2003
Bill Hobbs Andrew Sunderman May 13, 2003
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EMT

• Headcount reductions of 70
• Reduced liquidity needs
• Largely exiting petroleum trading
• What remains is an 8,000 MW merchant power company

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EMT - Adoption of EITF 02-3
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EMT Accounting Methods

• Due to the fact that EMT is a non-core business
  unit, certain derivative contracts that are
  economic hedges of non-derivative portions of
  EMTs portfolio do not qualify for hedge
  accounting treatment under SFAS 133
• Acctg Acctg Income Gross/
• Contract Type Bucket Method Cash?
  Net
• Tolling Non-Derivative Accrual Yes
  Gross
• Full Requirements Non-Derivative Accrual
  Yes Gross
• Storage Non-Derivative Accrual Yes
  Gross
• Transportation Non-Derivative Accrual
  Yes Gross
• Transmission Non-Derivative Accrual Yes
  Gross
• Firm Service Non-Derivative Accrual Yes
  Gross
• CDWR Product D Non-Derivative Accrual
  Yes Gross
• Spot Physical Transactions Non-Derivative
  Accrual Yes Gross
• CDWR Products A, B, C MTM Derivative MTM
  No Gross Net
• OTC NYMEX Financial
• Instruments MTM Derivative MTM
  No Gross Net
• Forward Physical Contracts MTM Derivative
  MTM No Gross Net

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EMT - First Quarter 2003 Results
Dollars in millions
1Q2003 1Q2002

• Origination Earnings
  0 181
• Accrual (Non-Derivative) Earnings (Losses)
  (17) 7
• MTM Earnings (Losses)
  (28) 92
• Addl California Refund Obligations
  (37) 0
• Other
  (8) 67
• 
  (90) 347
• Cost Associated with Workforce Reductions
  (12) 0
• SGA and Other Income (Expense)
  (34) (65)
• Segment Profit
  (136) 283

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Williams Analyst Conference Call1st Quarter 2003
Doug Whisenant, Gas Pipelines Alan Armstrong,
Midstream Ralph Hill, Exploration
Production May 13, 2003
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Gas Pipelines
Dollars in millions

• 1Q2003 1Q2002

• Segment Profit 95 179
• Segment profit up 14 excluding Texas Gas
  impairment of 109 million
• NWP and Transco segment profit contribution up
  31
• Cash flow from operations exceeds capital
  spending
• 2003 Accomplishments
• Transco sets new single day delivery record in
  January
• Northwest completed issuance of 175 million in
  notes due 2010
• Agreement to sell Texas Gas for 1.0 billion,
  scheduled to close May 16
• Transco Momentum expansion in-service on May 1
• 2003 Expectations
• NWP Evergreen, Rocky Mountain, Columbia Gorge
  expansions in-service by November
• Positive segment profit impact from 2002/2003
  project completions

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Restructuring Scorecard

• Built liquidity to address upcoming debt
  maturities
• 1.5 billion in cash as of March 31
• Announced agreements to sell 2.8 billion of
  assets
• Texas Gas, WEG, selected EP and other
• EMT contracts plant for 255 million
• Completed 704 million of asset sales as of April
  30
• De-levered by approximately 228 million as of
  March 31
• Reduced workforce by 28 or 2,771 as of April 30

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Williams Analyst Conference Call1st Quarter 2003
Don Chappel Chief Financial Officer May 13, 2003
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Financial Strategy Focus

• Communications
• Financial reporting transparency
• Enhance business unit reporting
• Efficiency and controls
• Streamline business processes
• Fully integrate enterprise risk management
• Discipline
• Continue cost reductions
• Reinforce disciplined capital allocation process

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Financial Strategy Capital Structure

• Liquidity
• Provide adequate liquidity to support businesses
• Continue planned asset sales
• Access capital markets to bridge asset sales and
  smooth liquidity hurdles
• Capital structure
• De-lever over time with objective of returning to
  investment grade
• Provide flexibility to enhance three core
  business units performance

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Williams Analyst Conference Call1st Quarter 2003
Steve Malcolm Chairman, President CEO May 13,
2003
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Strategy

• Commercial
• Natural gas assets in key growth markets where
  we enjoy the competitive advantages of scale,
  low-cost position and market leadership

• Financial
• Create and maintain adequate liquidity from all
  available sources to fully support business
  strategy
• De-leverage through combination of asset sales,
  refinancing, cost-cutting
• Develop balance sheet capable of supporting and
  ultimately growing high-return assets

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What We Will Be

• 2.5 Tcf of proved reserves with 470mmcf/d of
  production
• 17 plants and 8,500 miles of gathering lines
• 14,000 miles of interstate pipelines in high
  growth areas transporting 12 of gas used in the
  U.S.

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Next 18 months

• Financial
• Execute the liquidity management plan
• De-lever prudently
• Cost reductions
• Continue to align costs w/ new scope of business
• Further reduce work force
• Sufficient assets to support long-term earnings,
  debt repayment
• Continue to grow profits cash flows in core
  businesses
• Disciplined investment in core businesses
• EMT
• Continue to reduce risk, limit liquidity
  requirements and pursue the sale and wind down of
  the business

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2003 guidance consolidated
Dollars in millions, except per-share amounts
2003
1,100 1,600
Segment profit
700 1,000
Cash flow from operations
(100) 50
Income (Loss) from continuing operations
150 - 300
Reported net income before acctg change
(761)
Accounting change - EITF 02-03
Loss per share
(1.20) (0.80)
Includes gains and losses on all announced
asset sales
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2003 - 2005 outlook
Dollars in millions
2005
2004
2003
1,450 - 1,650
950 - 1,050
700 - 1,000
Cash flow from operations
500 - 600
400 - 550
900 - 1,000
Capital expenditures
850 - 1,150
400 - 650
(200) - 0
Free cash flow
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Building Williams future

• Core businesses continued profitability
• Continue to reduce risk and liquidity impact of
  EMT
• Finish cost reductions and work force alignments
  to support remaining base of core assets
• Maintain financial flexibility strong liquidity
  profile
• Invest available dollars in core businesses with
  focus on balancing portfolio risk, generating
  free cash flow

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Plan is comprehensive response

• Addresses all near-term and medium-termliquidity
  issues
• De-levers the company with objective of return
  to investment grade in 2005
• Results in portfolio of appropriately capitalized
  business

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Questions Answers