UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2021~~March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number 1-4174

THE WILLIAMS COMPANIES, INC.


(Exact name of registrant as specified in its charter)


Delaware						73-0569878
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

One Williams Center
Tulsa, Oklahoma						74172-0172
(Address of principal executive offices)						(Zip Code)

Registrant’s telephone number, including area code: (918) 573-2000

NO CHANGE

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $1.00 par value	WMB	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Class						Shares Outstanding at ~~October~~April 28, ~~2021~~2022
Common Stock, $1.00 par value						~~1,215,029,799~~1,218,011,601

The Williams Companies, Inc.

Index


						Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Statement of Income – Three ~~and~~ ~~Nine~~Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~						6
Consolidated Statement of Comprehensive Income (Loss) – Three ~~andNine~~ Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~						7
Consolidated Balance Sheet – Se ~~ptember~~ ~~30, 2021~~March 31, 2022 and December 31, ~~2020~~2021						8
Consolidated Statement of Changes in Equity – Three ~~and~~ ~~Nine~~ Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~						9
Consolidated Statement of Cash Flows – ~~Nine~~Three Months Ended ~~September~~ ~~30,~~March 31, 2022 and 2021 ~~and 2020~~						1110
Notes to Consolidated Financial Statements						1211
Note 1 - General, Description of Business, and Basis of Presentation						1211
Note 2 - Variable Interest Entities						1312
Note 3 - Acquisitions						1413
Note 4 - Revenue Recognition						1716
Note 5 - ~~Investing Activities~~Provision (Benefit) for Income Taxes						18
Note 6 - Earnings (Loss) Per Common Share						19
Note 7 - Employee Benefit Plans						19

Note 8 - Debt and Banking Arrangements						20
Note 6 9 - ~~Provision (Benefit) for Income Taxes~~Stockholders’ Equity						20
Note 1 0 - Fair Value Measurements and Guarantees						21
Note 71 1 - ~~Earnings (Loss) Per Common Share~~						21
~~Note 8 - Employee Benefit Plans~~Derivatives						22
Note 91 2 - ~~Debt and Banking Arrangements~~						22
~~Note 10 - Stockholders’ Equity~~Contingent Liabilities						24
Note ~~11 - Fair Value Measurements and Guarantees~~1						263
~~Note 12 - Derivatives~~						29
~~Note 13 - Contingent Liabilities and Commitments~~						31
~~Note 14~~ - Segment Disclosures						3528
Note 1 4 - Subsequent Event						31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						3932
Item 3. Quantitative and Qualitative Disclosures About Market Risk						5744
Item 4. Controls and Procedures						5845
Part II. Other Information						5945
Item 1. Legal Proceedings						5945
Item 1A. Risk Factors						5946

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						6048
Item 6. Exhibits						6149

The reports, filings, and other public announcements of The Williams Companies, Inc. (Williams) may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These

forward-looking statements relate to anticipated financial performance, management’s plans and objectives for

future operations, business prospects, outcomes of regulatory proceedings, market conditions, and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.

All statements, other than statements of historical facts, included in this report that address activities, events, or developments that we expect, believe, or anticipate will exist or may occur in the future are forward-looking statements. Forward-looking statements can be identified by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “assumes,” “guidance,” “outlook,” “in-service date,” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

•Levels of dividends to Williams stockholders;

•Future credit ratings of Williams and its affiliates;

•Amounts and nature of future capital expenditures;

•Expansion and growth of our business and operations;

•Expected in-service dates for capital projects;

•Financial condition and liquidity;

•Business strategy;

•Cash flow from operations or results of operations;

•Seasonality of certain business components;

•Natural gas, natural gas liquids, and crude oil prices, supply, and demand;

•Demand for our services;

•The impact of the coronavirus (COVID-19) pandemic.

Forward-looking statements are based on numerous assumptions, uncertainties, and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:

•Availability of supplies, market demand, and volatility of prices;

•Development and rate of adoption of alternative energy sources;

•The impact of existing and future laws and regulations, the regulatory environment, environmental matters, and litigation, as well as our ability to obtain necessary permits and approvals, and achieve favorable rate proceeding outcomes;

•Our exposure to the credit risk of our customers and counterparties;

•Our ability to acquire new businesses and assets and successfully integrate those operations and assets into existing businesses as well as successfully expand our facilities, and to consummate asset sales on acceptable terms;

•Whether we are able to successfully identify, evaluate, and timely execute our capital projects and investment opportunities;

•The strength and financial resources of our competitors and the effects of competition;

•The amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate;

•Whether we will be able to effectively execute our financing plan;

•Increasing scrutiny and changing expectations from stakeholders with respect to our environmental, social, and governance practices;

•The physical and financial risks associated with climate change;

•The impacts of operational and developmental hazards and unforeseen interruptions;

•The risks resulting from outbreaks or other public health crises, including COVID-19;

•Risks associated with weather and natural phenomena, including climate conditions and physical damage to our facilities;

•Acts of terrorism, cybersecurity incidents, and related disruptions;

•Our costs and funding obligations for defined benefit pension plans and other postretirement benefit plans;

•Changes in maintenance and construction costs, as well as our ability to obtain sufficient construction-related inputs, including skilled labor;

•Inflation, interest rates, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on customers and suppliers);

•Risks related to financing, including restrictions stemming from debt agreements, future changes in credit ratings as determined by nationally recognized credit rating agencies, and the availability and cost of capital;

•The ability of the members of the Organization of Petroleum Exporting Countries (OPEC) and other oil exporting nations to agree to and maintain oil price and production controls and the impact on domestic production;

•Changes in the current geopolitical ~~situation;~~situation, including the Russian invasion of Ukraine;

•Changes in U.S. governmental administration and policies;

•Whether we are able to pay current and expected levels of dividends;

•Additional risks described in our filings with the Securities and Exchange Commission (SEC).

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.

Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as supplemented by the disclosure in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.

Table of Contents

DEFINITIONS

The following is a listing of certain abbreviations, acronyms, and other industry terminology that may be used throughout this Form 10-Q.

Measurements:

Barrel: One barrel of petroleum products that equals 42 U.S. gallons

Mbbls/d: One thousand barrels per day

Bcf: One billion cubic feet of natural gas

Bcf/d: One billion cubic feet of natural gas per day

MMcf/d: One million cubic feet per day

British Thermal Unit (Btu): A unit of energy needed to raise the temperature of one pound of water by one degree Fahrenheit

MMbtu: One million British thermal units

Tbtu: One trillion British thermal units

Dekatherms (Dth): A unit of energy equal to one million British thermal units

Mdth/d: One thousand dekatherms per day

MMdth: One million dekatherms or approximately one trillion British thermal units

MMdth/d: One million dekatherms per day

Consolidated Entities:

~~Caiman II:~~BRMH: ~~Caiman Energy II, LLC, (renamed~~ Blue Racer Midstream Holdings, LLC effective February 2, 2021) a former equity-method investment which is a wholly owned consolidated entity following our acquisition of a controlling interest of Caiman II in November 2020 and the remaining interest in September 2021

Cardinal: Cardinal Gas Services, L.L.C.

Gulfstar One: Gulfstar One LLC

Northeast JV: Ohio Valley Midstream LLC

Northwest Pipeline: Northwest Pipeline LLC

Transco: Transcontinental Gas Pipe Line Company, LLC

Partially Owned Entities: Entities in which we do not own a 100 percent ownership interest and which, as of ~~September 30, 2021,~~March 31, 2022, we account for as equity-method investments, including principally the following:

Aux Sable: Aux Sable Liquid Products LP

Blue Racer: Blue Racer Midstream LLC

Discovery: Discovery Producer Services LLC

Gulfstream: Gulfstream Natural Gas System, L.L.C.

Laurel Mountain: Laurel Mountain Midstream, LLC

OPPL: Overland Pass Pipeline Company LLC

~~Table of Contents~~

RMM: Rocky Mountain Midstream Holdings LLC

Targa Train 7: Targa Train 7 LLC

Table of Contents

Government and Regulatory:

EPA: Environmental Protection Agency

Exchange Act, the: Securities and Exchange Act of 1934, as amended

FERC: Federal Energy Regulatory Commission

IRS: Internal Revenue Service

SEC: Securities and Exchange Commission

Other:

EBITDA: Earnings before interest, taxes, depreciation, and amortization

Fractionation: The process by which a mixed stream of natural gas liquids is separated into constituent products, such as ethane, propane, and butane

GAAP: U.S. generally accepted accounting principles

LNG: Liquefied natural gas; natural gas which has been liquefied at cryogenic temperatures

MVC: Minimum volume commitments

NGLs: Natural gas liquids; natural gas liquids result from natural gas processing and crude oil refining and are used as petrochemical feedstocks, heating fuels, and gasoline additives, among other applications

NGL margins: NGL revenues less any applicable Btu replacement cost, plant fuel, transportation, and fractionation

Sequent Acquisition: The July 1, 2021, acquisition of 100 percent of Sequent Energy Management, L.P. and Sequent Energy Canada, Corp.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

The Williams Companies, Inc.

Consolidated Statement of Income

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(Millions, except per-share amounts)										(Millions, except per-share amounts)
Revenues:	Revenues:									Revenues:
Service revenues	Service revenues	$	1,506	$	1,479	$	4,418	$	4,399	Service revenues		$	1,537	$	1,452
Service revenues – commodity consideration	Service revenues – commodity consideration	64		40		164		93		Service revenues – commodity consideration		77		49
Product sales	Product sales	1,296		418		3,229		1,139		Product sales		1,104		1,147
Net gain (loss) on commodity derivatives	Net gain (loss) on commodity derivatives	(391)		(4)		(441)		(4)		Net gain (loss) on commodity derivatives		(194)		(36)
Total revenues	Total revenues	2,475		1,933		7,370		5,627		Total revenues		2,524		2,612
Costs and expenses:	Costs and expenses:									Costs and expenses:
Product costs	Product costs	1,043		380		2,672		1,047		Product costs		803		932
Processing commodity expenses	Processing commodity expenses	28		21		67		49		Processing commodity expenses		30		21
Operating and maintenance expenses	Operating and maintenance expenses	409		336		1,148		993		Operating and maintenance expenses		394		360
Depreciation and amortization expenses	Depreciation and amortization expenses	487		426		1,388		1,285		Depreciation and amortization expenses		498		438
Selling, general, and administrative expenses	Selling, general, and administrative expenses	152		114		389		354		Selling, general, and administrative expenses		154		123

Impairment of goodwill (Note 11)		—		—		—		187

Other (income) expense – net	Other (income) expense – net	1		15		12		28		Other (income) expense – net		(9)		(1)
Total costs and expenses	Total costs and expenses	2,120		1,292		5,676		3,943		Total costs and expenses		1,870		1,873
Operating income (loss)	Operating income (loss)	355		641		1,694		1,684		Operating income (loss)		654		739
Equity earnings (losses) (Note 5)		157		106		423		236
Impairment of equity-method investments (Note 11)		—		—		—		(938)
Equity earnings (losses)										Equity earnings (losses)		136		131

Other investing income (loss) – net	Other investing income (loss) – net	2		2		6		6		Other investing income (loss) – net		1		2
Interest incurred	Interest incurred	(295)		(298)		(892)		(898)		Interest incurred		(289)		(296)
Interest capitalized	Interest capitalized	3		6		8		16		Interest capitalized		3		2
Other income (expense) – net	Other income (expense) – net	4		(23)		4		(14)		Other income (expense) – net		5		(2)
Income (loss) before income taxes	Income (loss) before income taxes	226		434		1,243		92		Income (loss) before income taxes		510		576
Less: Provision (benefit) for income taxes	Less: Provision (benefit) for income taxes	53		111		313		24		Less: Provision (benefit) for income taxes		118		141

Net income (loss)	Net income (loss)	173		323		930		68		Net income (loss)		392		435
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	8		14		35		(27)		Less: Net income (loss) attributable to noncontrolling interests		12		9
Net income (loss) attributable to The Williams Companies, Inc.	Net income (loss) attributable to The Williams Companies, Inc.	165		309		895		95		Net income (loss) attributable to The Williams Companies, Inc.		380		426
Less: Preferred stock dividends	Less: Preferred stock dividends	1		1		2		2		Less: Preferred stock dividends		1		1
Net income (loss) available to common stockholders	Net income (loss) available to common stockholders	$	164	$	308	$	893	$	93	Net income (loss) available to common stockholders		$	379	$	425

Basic earnings (loss) per common share:	Basic earnings (loss) per common share:									Basic earnings (loss) per common share:

Net income (loss)	Net income (loss)	$	.14	$	.25	$	.74	$	.08	Net income (loss)		$	.31	$	.35
Weighted-average shares (thousands)	Weighted-average shares (thousands)	1,215,434		1,213,912		1,215,113		1,213,512		Weighted-average shares (thousands)		1,216,940		1,214,646
Diluted earnings (loss) per common share:	Diluted earnings (loss) per common share:									Diluted earnings (loss) per common share:

Net income (loss)	Net income (loss)	$	.13	$	.25	$	.73	$	.08	Net income (loss)		$	.31	$	.35
Weighted-average shares (thousands)	Weighted-average shares (thousands)	1,217,979		1,215,335		1,217,558		1,214,757		Weighted-average shares (thousands)		1,221,279		1,217,211

See accompanying notes.

Table of Contents

The Williams Companies, Inc.

Consolidated Statement of Comprehensive Income (Loss)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(Millions)										(Millions)
Net income (loss)	Net income (loss)	$	173	$	323	$	930	$	68	Net income (loss)		$	392	$	435
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Cash flow hedging activities:	Cash flow hedging activities:									Cash flow hedging activities:
Net unrealized gain (loss) from derivative instruments, net of taxes of $5 and $14 in 2021 and $— and $— in 2020		(17)		—		(43)		—
Reclassifications into earnings of net derivative instruments (gain) loss, net of taxes of ($5) and ($7) in 2021 and $— and $— in 2020		15		—		21		—
Net unrealized gain (loss) from derivative instruments, net of taxes of ($1) in 2022 and $2 in 2021										Net unrealized gain (loss) from derivative instruments, net of taxes of ($1) in 2022 and $2 in 2021		3		(9)
Reclassifications into earnings of net derivative instruments (gain) loss, net of taxes of $— in 2022 and $— in 2021										Reclassifications into earnings of net derivative instruments (gain) loss, net of taxes of $— in 2022 and $— in 2021		—		2

Pension and other postretirement benefits:	Pension and other postretirement benefits:									Pension and other postretirement benefits:

Net actuarial gain (loss) arising during the year, net of taxes of $— and $— in 2021 and ($4) and ($7) in 2020		—		11		—		20
Amortization of actuarial (gain) loss and net actuarial loss from settlements included in net periodic benefit cost (credit), net of taxes of ($1) and ($3) in 2021 and ($1) and ($6) in 2020		3		5		9		19

Amortization of actuarial (gain) loss and net actuarial loss from settlements included in net periodic benefit cost (credit), net of taxes of ($1) in 2022 and ($1) in 2021										Amortization of actuarial (gain) loss and net actuarial loss from settlements included in net periodic benefit cost (credit), net of taxes of ($1) in 2022 and ($1) in 2021		2		3
Other comprehensive income (loss)	Other comprehensive income (loss)	1		16		(13)		39		Other comprehensive income (loss)		5		(4)
Comprehensive income (loss)	Comprehensive income (loss)	174		339		917		107		Comprehensive income (loss)		397		431
Less: Comprehensive income (loss) attributable to noncontrolling interests	Less: Comprehensive income (loss) attributable to noncontrolling interests	8		14		35		(27)		Less: Comprehensive income (loss) attributable to noncontrolling interests		12		9
Comprehensive income (loss) attributable to The Williams Companies, Inc.	Comprehensive income (loss) attributable to The Williams Companies, Inc.	$	166	$	325	$	882	$	134	Comprehensive income (loss) attributable to The Williams Companies, Inc.		$	385	$	422

See accompanying notes.

Table of Contents

The Williams Companies, Inc.

Consolidated Balance Sheet

(Unaudited)


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(Millions, except per-share amounts)					(Millions, except per-share amounts)
ASSETS	ASSETS					ASSETS
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	214	$	142	Cash and cash equivalents	$	604	$	1,680
Trade accounts and other receivables	Trade accounts and other receivables	1,987		1,000		Trade accounts and other receivables	1,987		1,986
Allowance for doubtful accounts	Allowance for doubtful accounts	(1)		(1)		Allowance for doubtful accounts	(14)		(8)
Trade accounts and other receivables – net	Trade accounts and other receivables – net	1,986		999		Trade accounts and other receivables – net	1,973		1,978
Inventories	Inventories	368		136		Inventories	201		379

Derivative assets						Derivative assets	104		301
Other current assets and deferred charges	Other current assets and deferred charges	317		152		Other current assets and deferred charges	272		211
Total current assets	Total current assets	2,885		1,429		Total current assets	3,154		4,549
Investments	Investments	5,085		5,159		Investments	5,107		5,127
Property, plant, and equipment	Property, plant, and equipment	43,900		42,489		Property, plant, and equipment	44,416		44,184
Accumulated depreciation and amortization	Accumulated depreciation and amortization	(14,586)		(13,560)		Accumulated depreciation and amortization	(15,230)		(14,926)
Property, plant, and equipment – net	Property, plant, and equipment – net	29,314		28,929		Property, plant, and equipment – net	29,186		29,258
Intangible assets – net of accumulated amortization	Intangible assets – net of accumulated amortization	7,481		7,444		Intangible assets – net of accumulated amortization	7,278		7,402
Regulatory assets, deferred charges, and other	Regulatory assets, deferred charges, and other	1,220		1,204		Regulatory assets, deferred charges, and other	1,324		1,276
Total assets	Total assets	$	45,985	$	44,165	Total assets	$	46,049	$	47,612
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	1,674	$	482	Accounts payable	$	1,584	$	1,746

Accrued liabilities	Accrued liabilities	1,242		944		Accrued liabilities	1,099		1,201

Long-term debt due within one year	Long-term debt due within one year	2,024		893		Long-term debt due within one year	1,625		2,025
Total current liabilities	Total current liabilities	4,940		2,319		Total current liabilities	4,308		4,972
Long-term debt	Long-term debt	20,338		21,451		Long-term debt	20,801		21,650
Deferred income tax liabilities	Deferred income tax liabilities	2,233		1,923		Deferred income tax liabilities	2,570		2,453
Regulatory liabilities, deferred income, and other	Regulatory liabilities, deferred income, and other	4,555		3,889		Regulatory liabilities, deferred income, and other	4,399		4,436
Contingent liabilities and commitments (Note 13)		0		0
Contingent liabilities and commitments (Note 12)						Contingent liabilities and commitments (Note 12)	0		0
Equity:	Equity:					Equity:
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock	Preferred stock	35		35		Preferred stock	35		35
Common stock ($1 par value; 1,470 million shares authorized at September 30, 2021 and December 31, 2020; 1,249 million shares issued at September 30, 2021 and 1,248 million shares issued at December 31, 2020)		1,249		1,248
Common stock ($1 par value; 1,470 million shares authorized at March 31, 2022 and December 31, 2021; 1,252 million shares issued at March 31, 2022 and 1,250 million shares issued at December 31, 2021)						Common stock ($1 par value; 1,470 million shares authorized at March 31, 2022 and December 31, 2021; 1,252 million shares issued at March 31, 2022 and 1,250 million shares issued at December 31, 2021)	1,252		1,250
Capital in excess of par value	Capital in excess of par value	24,425		24,371		Capital in excess of par value	24,476		24,449
Retained deficit	Retained deficit	(13,361)		(12,748)		Retained deficit	(13,378)		(13,237)
Accumulated other comprehensive income (loss)	Accumulated other comprehensive income (loss)	(109)		(96)		Accumulated other comprehensive income (loss)	(28)		(33)
Treasury stock, at cost (35 million shares of common stock)	Treasury stock, at cost (35 million shares of common stock)	(1,041)		(1,041)		Treasury stock, at cost (35 million shares of common stock)	(1,041)		(1,041)
Total stockholders’ equity	Total stockholders’ equity	11,198		11,769		Total stockholders’ equity	11,316		11,423
Noncontrolling interests in consolidated subsidiaries	Noncontrolling interests in consolidated subsidiaries	2,721		2,814		Noncontrolling interests in consolidated subsidiaries	2,655		2,678
Total equity	Total equity	13,919		14,583		Total equity	13,971		14,101
Total liabilities and equity	Total liabilities and equity	$	45,985	$	44,165	Total liabilities and equity	$	46,049	$	47,612

See accompanying notes.

Table of Contents

The Williams Companies, Inc.

Consolidated Statement of Changes in Equity

(Unaudited)


		The Williams Companies, Inc. Stockholders																			The Williams Companies, Inc. Stockholders
		Preferred Stock		Common Stock		Capital in Excess of Par Value		Retained Deficit		AOCI*		Treasury Stock		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity			Preferred Stock		Common Stock		Capital in Excess of Par Value		Retained Deficit		AOCI*		Treasury Stock		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
		(Millions)																			(Millions)
Balance – June 30, 2021		$	35	$	1,249	$	24,401	$	(13,022)	$	(110)	$	(1,041)	$	11,512	$	2,753	$	14,265
Balance – December 31, 2021																				Balance – December 31, 2021	$	35	$	1,250	$	24,449	$	(13,237)	$	(33)	$	(1,041)	$	11,423	$	2,678	$	14,101
Net income (loss)	Net income (loss)	—		—		—		165		—		—		165		8		173		Net income (loss)	—		—		—		380		—		—		380		12		392
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		1		—		1		—		1		Other comprehensive income (loss)	—		—		—		—		5		—		5		—		5
Cash dividends – common stock ($0.41 per share)		—		—		—		(498)		—		—		(498)		—		(498)
Cash dividends – common stock ($0.425 per share)																				Cash dividends – common stock ($0.425 per share)	—		—		—		(518)		—		—		(518)		—		(518)
Dividends and distributions to noncontrolling interests	Dividends and distributions to noncontrolling interests	—		—		—		—		—		—		—		(40)		(40)		Dividends and distributions to noncontrolling interests	—		—		—		—		—		—		—		(37)		(37)
Stock-based compensation and related common stock issuances, net of tax	Stock-based compensation and related common stock issuances, net of tax	—		—		23		—		—		—		23		—		23		Stock-based compensation and related common stock issuances, net of tax	—		2		27		—		—		—		29		—		29
Purchase of partial interest in consolidated subsidiary (Note 1)		—		—		—		—		—		—		—		(3)		(3)

Contributions from noncontrolling interests	Contributions from noncontrolling interests	—		—		—		—		—		—		—		3		3		Contributions from noncontrolling interests	—		—		—		—		—		—		—		3		3
Other	Other	—		—		1		(6)		—		—		(5)		—		(5)		Other	—		—		—		(3)		—		—		(3)		(1)		(4)
Net increase (decrease) in equity	Net increase (decrease) in equity	—		—		24		(339)		1		—		(314)		(32)		(346)		Net increase (decrease) in equity	—		2		27		(141)		5		—		(107)		(23)		(130)
Balance – September 30, 2021		$	35	$	1,249	$	24,425	$	(13,361)	$	(109)	$	(1,041)	$	11,198	$	2,721	$	13,919
Balance – March 31, 2022																				Balance – March 31, 2022	$	35	$	1,252	$	24,476	$	(13,378)	$	(28)	$	(1,041)	$	11,316	$	2,655	$	13,971


Balance – June 30, 2020		$	35	$	1,248	$	24,343	$	(12,197)	$	(176)	$	(1,041)	$	12,212	$	2,868	$	15,080
Balance – December 31, 2020																				Balance – December 31, 2020	$	35	$	1,248	$	24,371	$	(12,748)	$	(96)	$	(1,041)	$	11,769	$	2,814	$	14,583

Net income (loss)	Net income (loss)	—		—		—		309		—		—		309		14		323		Net income (loss)	—		—		—		426		—		—		426		9		435
Other comprehensive income (loss)	Other comprehensive income (loss)	—		—		—		—		16		—		16		—		16		Other comprehensive income (loss)	—		—		—		—		(4)		—		(4)		—		(4)

Cash dividends – common stock ($0.40 per share)		—		—		—		(485)		—		—		(485)		—		(485)
Cash dividends – common stock ($0.41 per share)																				Cash dividends – common stock ($0.41 per share)	—		—		—		(498)		—		—		(498)		—		(498)
Dividends and distributions to noncontrolling interests	Dividends and distributions to noncontrolling interests	—		—		—		—		—		—		—		(49)		(49)		Dividends and distributions to noncontrolling interests	—		—		—		—		—		—		—		(54)		(54)
Stock-based compensation and related common stock issuances, net of tax	Stock-based compensation and related common stock issuances, net of tax	—		—		16		—		—		—		16		—		16		Stock-based compensation and related common stock issuances, net of tax	—		1		10		—		—		—		11		—		11

Contributions from noncontrolling interests	Contributions from noncontrolling interests	—		—		—		—		—		—		—		1		1		Contributions from noncontrolling interests	—		—		—		—		—		—		—		2		2

Other	Other	—		—		—		(3)		—		—		(3)		(1)		(4)		Other	—		—		3		(5)		—		—		(2)		—		(2)
Net increase (decrease) in equity	Net increase (decrease) in equity	—		—		16		(179)		16		—		(147)		(35)		(182)		Net increase (decrease) in equity	—		1		13		(77)		(4)		—		(67)		(43)		(110)
Balance – September 30, 2020		$	35	$	1,248	$	24,359	$	(12,376)	$	(160)	$	(1,041)	$	12,065	$	2,833	$	14,898

Balance – March 31, 2021																				Balance – March 31, 2021	$	35	$	1,249	$	24,384	$	(12,825)	$	(100)	$	(1,041)	$	11,702	$	2,771	$	14,473

*Accumulated Other Comprehensive Income (Loss)

See accompanying notes.

Table of Contents

The Williams Companies, Inc.

Consolidated Statement of ~~Changes in Equity (Continued)~~

~~(Unaudited)~~

The Williams Companies, Inc. Stockholders
Preferred
Stock Common
Stock Capital in
Excess of
Par Value Retained
Deficit AOCI* Treasury
Stock Total
Stockholders’
Equity Noncontrolling
Interests Total Equity
(Millions)
Balance – December 31, 2020 $ 35 $ 1,248 $ 24,371 $ (12,748) $ (96) $ (1,041) $ 11,769 $ 2,814 $ 14,583
Net income (loss) — — — 895 — — 895 35 930
Other comprehensive income (loss) — — — — (13) — (13) — (13)
Cash dividends – common stock ($1.23 per share) — — — (1,494) — — (1,494) — (1,494)
Dividends and distributions to noncontrolling interests — — — — — — — (135) (135)
Stock-based compensation and related common stock issuances, net of tax — 1 53 — — — 54 — 54
Purchase of partial interest in consolidated subsidiary (Note 1) — — — — — — — (3) (3)
Contributions from noncontrolling interests — — — — — — — 9 9
Other — — 1 (14) — — (13) 1 (12)
Net increase (decrease) in equity — 1 54 (613) (13) — (571) (93) (664)
Balance – September 30, 2021 $ 35 $ 1,249 $ 24,425 $ (13,361) $ (109) $ (1,041) $ 11,198 $ 2,721 $ 13,919

Balance – December 31, 2019 $ 35 $ 1,247 $ 24,323 $ (11,002) $ (199) $ (1,041) $ 13,363 $ 3,001 $ 16,364
Net income (loss) — — — 95 — — 95 (27) 68
Other comprehensive income (loss) — — — — 39 — 39 — 39
Cash dividends – common stock ($1.20 per share) — — — (1,456) — — (1,456) — (1,456)
Dividends and distributions to noncontrolling interests — — — — — — — (147) (147)
Stock-based compensation and related common stock issuances, net of tax — 1 36 — — — 37 — 37
Contributions from noncontrolling interests — — — — — — — 5 5
Other — — — (13) — — (13) 1 (12)
Net increase (decrease) in equity — 1 36 (1,374) 39 — (1,298) (168) (1,466)
Balance – September 30, 2020 $ 35 $ 1,248 $ 24,359 $ (12,376) $ (160) $ (1,041) $ 12,065 $ 2,833 $ 14,898

*~~Accumulated Other Comprehensive Income (Loss)~~

~~See accompanying notes.~~

~~Table of Contents~~

~~The Williams Companies, Inc.~~

~~Consolidated Statement of~~ Cash Flows

(Unaudited)


		Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020			2022		2021
		(Millions)					(Millions)
OPERATING ACTIVITIES:	OPERATING ACTIVITIES:					OPERATING ACTIVITIES:
Net income (loss)	Net income (loss)	$	930	$	68	Net income (loss)	$	392	$	435
Adjustments to reconcile to net cash provided (used) by operating activities:	Adjustments to reconcile to net cash provided (used) by operating activities:					Adjustments to reconcile to net cash provided (used) by operating activities:
Depreciation and amortization	Depreciation and amortization	1,388		1,285		Depreciation and amortization	498		438
Provision (benefit) for deferred income taxes	Provision (benefit) for deferred income taxes	313		52		Provision (benefit) for deferred income taxes	115		144
Equity (earnings) losses	Equity (earnings) losses	(423)		(236)		Equity (earnings) losses	(136)		(131)
Distributions from unconsolidated affiliates	Distributions from unconsolidated affiliates	574		466		Distributions from unconsolidated affiliates	212		176

Impairment of goodwill (Note 11)		—		187
Impairment of equity-method investments (Note 11)		—		938

Net unrealized (gain) loss from derivative instruments	Net unrealized (gain) loss from derivative instruments	317		—		Net unrealized (gain) loss from derivative instruments	123		—
Amortization of stock-based awards	Amortization of stock-based awards	60		39		Amortization of stock-based awards	21		20

Cash provided (used) by changes in current assets and liabilities:	Cash provided (used) by changes in current assets and liabilities:					Cash provided (used) by changes in current assets and liabilities:
Accounts receivable	Accounts receivable	(538)		(18)		Accounts receivable	(3)		(59)
Inventories	Inventories	(112)		(33)		Inventories	178		(8)

Other current assets and deferred charges	Other current assets and deferred charges	(67)		(15)		Other current assets and deferred charges	(65)		(6)
Accounts payable	Accounts payable	570		(77)		Accounts payable	(138)		38
Accrued liabilities	Accrued liabilities	67		(286)		Accrued liabilities	(149)		(116)
Changes in current and noncurrent derivative assets and liabilities	Changes in current and noncurrent derivative assets and liabilities	(267)		(2)		Changes in current and noncurrent derivative assets and liabilities	101		(6)
Other, including changes in noncurrent assets and liabilities	Other, including changes in noncurrent assets and liabilities	(6)		14		Other, including changes in noncurrent assets and liabilities	(67)		(10)
Net cash provided (used) by operating activities	Net cash provided (used) by operating activities	2,806		2,382		Net cash provided (used) by operating activities	1,082		915
FINANCING ACTIVITIES:	FINANCING ACTIVITIES:					FINANCING ACTIVITIES:
Proceeds from (payments of) commercial paper – net		—		40

Proceeds from long-term debt	Proceeds from long-term debt	898		3,898		Proceeds from long-term debt	3		897
Payments of long-term debt	Payments of long-term debt	(887)		(3,836)		Payments of long-term debt	(1,256)		(5)
Proceeds from issuance of common stock	Proceeds from issuance of common stock	6		9		Proceeds from issuance of common stock	37		3

Common dividends paid	Common dividends paid	(1,494)		(1,456)		Common dividends paid	(518)		(498)
Dividends and distributions paid to noncontrolling interests	Dividends and distributions paid to noncontrolling interests	(135)		(147)		Dividends and distributions paid to noncontrolling interests	(37)		(54)
Contributions from noncontrolling interests	Contributions from noncontrolling interests	6		5		Contributions from noncontrolling interests	3		2
Payments for debt issuance costs	Payments for debt issuance costs	(7)		(20)		Payments for debt issuance costs	—		(6)

Other – net	Other – net	(13)		(12)		Other – net	(30)		(13)
Net cash provided (used) by financing activities	Net cash provided (used) by financing activities	(1,626)		(1,519)		Net cash provided (used) by financing activities	(1,798)		326
INVESTING ACTIVITIES:	INVESTING ACTIVITIES:					INVESTING ACTIVITIES:
Property, plant, and equipment:	Property, plant, and equipment:					Property, plant, and equipment:
Capital expenditures (1)	Capital expenditures (1)	(957)		(938)		Capital expenditures (1)	(291)		(260)
Dispositions – net	Dispositions – net	5		(30)		Dispositions – net	(6)		(1)
Contributions in aid of construction	Contributions in aid of construction	46		27		Contributions in aid of construction	(3)		19

Purchases of businesses, net of cash acquired (Note 3)		(126)		—
Proceeds from dispositions of equity-method investments		1		—

Purchases of and contributions to equity-method investments	Purchases of and contributions to equity-method investments	(79)		(150)		Purchases of and contributions to equity-method investments	(56)		(14)

Other – net	Other – net	2		9		Other – net	(4)		(1)
Net cash provided (used) by investing activities	Net cash provided (used) by investing activities	(1,108)		(1,082)		Net cash provided (used) by investing activities	(360)		(257)
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents	72		(219)		Increase (decrease) in cash and cash equivalents	(1,076)		984

Cash and cash equivalents at beginning of year	Cash and cash equivalents at beginning of year	142		289		Cash and cash equivalents at beginning of year	1,680		142
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	214	$	70	Cash and cash equivalents at end of period	$	604	$	1,126
_____________	_____________					_____________
(1) Increases to property, plant, and equipment	(1) Increases to property, plant, and equipment	$	(1,001)	$	(912)	(1) Increases to property, plant, and equipment	$	(260)	$	(263)
Changes in related accounts payable and accrued liabilities	Changes in related accounts payable and accrued liabilities	44		(26)		Changes in related accounts payable and accrued liabilities	(31)		3
Capital expenditures	Capital expenditures	$	(957)	$	(938)	Capital expenditures	$	(291)	$	(260)

See accompanying notes.

1110

Table of Contents

The Williams Companies, Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – General, Description of Business, and Basis of Presentation

General

Our accompanying interim consolidated financial statements do not include all the notes in our annual financial statements and, therefore, should be read in conjunction with ~~the~~our consolidated financial statements and notes thereto for the year ended December 31, ~~2020,~~2021, in our Annual Report on Form 10-K. The accompanying unaudited financial statements include all normal recurring adjustments and others that, in the opinion of management, are necessary to present fairly our interim financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in ~~the~~our consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Unless the context clearly indicates otherwise, references in this report to “Williams,” “we,” “our,” “us,” or like terms refer to The Williams Companies, Inc. and its subsidiaries. Unless the context clearly indicates otherwise, references to “Williams,” “we,” “our,” and “us” include the operations in which we own interests accounted for as equity-method investments that are not consolidated in our financial statements. When we refer to our equity investees by name, we are referring exclusively to their businesses and operations.

Description of Business

We are a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange. Our operations are located in the United ~~States~~States. Effective January 1, 2022, following an organizational realignment, our natural gas liquid (NGL) and natural gas marketing services, previously reported within the West segment, along with the former Sequent segment, are now all managed within the Gas & NGL Marketing Services segment. As a result, our operations are presented within the following reportable ~~segments:~~segments as of March 31, 2022: Transmission & Gulf of Mexico, Northeast G&P, West, and ~~Sequent,~~Gas & NGL Marketing Services, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources. All remaining business activities, including our ~~recently acquired~~ upstream operations, as well as corporate activities are included in Other. Prior period segment disclosures have been recast for the new segment presentation. Additionally, beginning in 2022 and concurrent with the integration of our legacy gas marketing operations and the marketing operations acquired in the Sequent Acquisition (see Note 3 – Acquisitions), all natural gas marketing revenues from Gas & NGL Marketing Services are presented net of the related costs of those activities in our Consolidated Statement of Income, as subsequent to the integration the entire natural gas marketing portfolio is considered held for trading purposes which requires net presentation.

Transmission & Gulf of Mexico is comprised of our interstate natural gas pipelines, Transcontinental Gas Pipe Line Company, LLC (Transco) and Northwest Pipeline LLC (Northwest Pipeline), as well as natural gas gathering and processing and crude oil production handling and transportation assets in the Gulf Coast region, including a 51 percent interest in Gulfstar One LLC (Gulfstar One) (a consolidated variable interest entity, or VIE), which is a proprietary floating production system, a 50 percent equity-method investment in Gulfstream Natural Gas System, L.L.C. (Gulfstream), and a 60 percent equity-method investment in Discovery Producer Services LLC (Discovery).

Northeast G&P is comprised of our midstream gathering, processing, and fractionation businesses in the Marcellus Shale region primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio, as well as a 65 percent interest in Ohio Valley Midstream LLC (Northeast JV) (a consolidated VIE) which operates in West Virginia, Ohio, and Pennsylvania, a 66 percent interest in Cardinal Gas Services, L.L.C. (Cardinal) (a consolidated VIE) which operates in Ohio, a 69 percent equity-method investment in Laurel Mountain Midstream, LLC (Laurel Mountain), a 50 percent equity-method investment in Blue Racer Midstream LLC (Blue Racer) (we previously effectively owned a 29 percent indirect interest in Blue Racer through our 58 percent equity-method investment in Caiman Energy II, LLC (Caiman II) until acquiring a controlling interest of Caiman II in November 2020 and the remaining interest in September 2021), and Appalachia


Notes (Continued)			Table of Contents

Midstream Services, LLC, a wholly owned subsidiary that owns equity-method investments with an approximate average 66 percent interest in multiple gas gathering systems in the Marcellus Shale region (Appalachia Midstream Investments).

West is comprised of our gas gathering, processing, and treating operations in the Rocky Mountain region of Colorado and Wyoming, the Barnett Shale region of north-central Texas, the Eagle Ford Shale region of south Texas, the Haynesville Shale region of northwest Louisiana, and the Mid-Continent region which includes the


~~Notes (Continued)~~			~~Table of Contents~~

Anadarko and Permian basins. This segment also includes our ~~natural gas liquid (NGL) and natural gas marketing business (excluding the activities within the Sequent segment described below),~~NGL storage facilities, an undivided 50 percent interest in an NGL fractionator near Conway, Kansas, a 50 percent equity-method investment in Overland Pass Pipeline Company LLC (OPPL), a 50 percent equity-method investment in Rocky Mountain Midstream Holdings LLC (RMM), a 20 percent equity-method investment in Targa Train 7 LLC (Targa Train 7) (a nonconsolidated VIE), and a 15 percent interest in Brazos Permian II, LLC (Brazos Permian II) ~~(a nonconsolidated VIE)~~.

~~Sequent~~Gas & NGL Marketing Services is comprised of our NGL and natural gas marketing and trading operations, which includes ~~the operations of Sequent Energy Management, L.P. and Sequent Energy Canada, Corp. (collectively, Sequent) acquired on July 1, 2021. Sequent focuses on~~ risk management and the ~~marketing, trading,~~ storage and transportation of natural gas ~~for a diverse set of natural gas utilities, municipalities, power generators, and producers, and moves gas to markets through transportation and storage agreements~~ on strategically positioned assets, including ~~along~~ our Transco system. ~~See Note 3 – Acquisitions.~~

Basis of Presentation

Significant risks and uncertainties

We believe that the carrying value of certain of our property, plant, and equipment and ~~other identifiable~~ intangible assets, notably certain acquired assets accounted for as business combinations between 2012 and 2014, may be in excess of current fair value. However, the carrying value of these assets, in our judgment, continues to be recoverable. It is reasonably possible that future strategic decisions, including transactions such as monetizing ~~non-core~~ assets or contributing assets to new ventures with third parties, as well as unfavorable changes in expected producer activities, could impact our assumptions and ultimately result in impairments of these assets. Such transactions or developments may also indicate that certain of our equity-method investments have experienced other-than-temporary declines in value, which could result in impairment.

Note 2 – Variable Interest Entities

Consolidated VIEs

As of ~~September 30, 2021,~~March 31, 2022, we consolidate the following VIEs:

Northeast JV

We own a 65 percent interest in the Northeast JV, a subsidiary that is a VIE due to certain of our voting rights being disproportionate to our obligation to absorb losses and substantially all of the Northeast JV’s activities being performed on our behalf. We are the primary beneficiary because we have the power to direct the activities that most significantly impact the Northeast JV’s economic performance. The Northeast JV provides midstream services for producers in the Marcellus Shale and Utica Shale regions. Future expansion activity is expected to be funded with capital contributions from us and the other equity partner on a proportional basis.

Gulfstar One

We own a 51 percent interest in Gulfstar One, a subsidiary that, due to certain risk-sharing provisions in its customer contracts, is a VIE. Gulfstar One includes a proprietary floating production system, Gulfstar FPS, and associated pipelines that provide production handling and gathering services in the eastern deepwater Gulf of Mexico. We are the primary beneficiary because we have the power to direct the activities that most significantly impact Gulfstar One’s economic performance.


Notes (Continued)			Table of Contents

Cardinal

We own a 66 percent interest in Cardinal, a subsidiary that provides gathering services for the Utica Shale region and is a VIE due to certain risks shared with customers. We are the primary beneficiary because we have the power to direct the activities that most significantly impact Cardinal’s economic performance. ~~Future~~In accordance with the contract, future expansion activity is ~~expected~~required to be funded with capital contributions from us and the other equity partner on a proportional basis.


~~Notes (Continued)~~			~~Table of Contents~~

The following table presents amounts included in ~~the~~our Consolidated Balance Sheet that are only for the use or obligation of our consolidated VIEs:


		September 30, 2021		December 31, 2020			March 31, 2022		December 31, 2021
		(Millions)					(Millions)
Assets (liabilities):	Assets (liabilities):					Assets (liabilities):
Cash and cash equivalents	Cash and cash equivalents	$	147	$	107	Cash and cash equivalents	$	116	$	78
Trade accounts and other receivables – net	Trade accounts and other receivables – net	134		148		Trade accounts and other receivables – net	104		132

Inventories						Inventories	3		3

Other current assets and deferred charges	Other current assets and deferred charges	6		7		Other current assets and deferred charges	4		7

Property, plant, and equipment – net	Property, plant, and equipment – net	5,364		5,514		Property, plant, and equipment – net	5,237		5,295
Intangible assets – net of accumulated amortization	Intangible assets – net of accumulated amortization	2,295		2,376		Intangible assets – net of accumulated amortization	2,240		2,267
Regulatory assets, deferred charges, and other	Regulatory assets, deferred charges, and other	15		15		Regulatory assets, deferred charges, and other	23		20
Accounts payable	Accounts payable	(85)		(42)		Accounts payable	(50)		(61)

Accrued liabilities	Accrued liabilities	(26)		(34)		Accrued liabilities	(32)		(29)

Regulatory liabilities, deferred income, and other	Regulatory liabilities, deferred income, and other	(289)		(289)		Regulatory liabilities, deferred income, and other	(286)		(287)

Nonconsolidated VIEs

Targa Train 7

We own a 20 percent interest in Targa Train 7, which provides fractionation services at Mt. Belvieu and is a VIE due primarily to our limited participating rights as the minority equity holder. At ~~September 30, 2021,~~March 31, 2022, the carrying value of our investment in Targa Train 7 was ~~$48~~$47 million. ~~Our maximum exposure to loss is limited to the carrying value of our investment.~~

~~Brazos Permian II~~

We own a 15 percent interest in Brazos Permian II, which provides gathering and processing services in the Delaware basin and is a VIE due primarily to our limited participating rights as the minority equity holder. During the first quarter of 2020, we recorded an impairment of our equity-method investment in Brazos Permian II. Our maximum exposure to loss is limited to the carrying value of our investment.

Note 3 – Acquisitions

Sequent Acquisition

On July 1, 2021, we completed the acquisition of 100 percent of ~~Sequent.~~Sequent Energy Management, L.P. and Sequent Energy Canada, Corp (Sequent Acquisition). Total consideration for this acquisition was $159 million, which included $109 million related to working capital. ~~Of the total consideration, $134 million of cash was paid in the third quarter of 2021 and $25 million was accrued in the same period for post-closing working capital adjustments.~~

Sequent focuses on risk management and the marketing, trading, storage, and transportation of natural gas for a diverse set of natural gas utilities and producers, and moves gas to markets through transportation and storage agreements on strategically positioned assets, including along our Transco system. The purpose of the ~~acquisition~~Sequent Acquisition was to expand our natural gas marketing activities as well as optimize our pipeline and storage capabilities with expansions into new markets to reach incremental gas-fired power generation, liquified natural gas exports, and future renewable natural gas and other emerging opportunities.

The ~~acquisition of Sequent was accounted~~following unaudited pro forma Revenues and Net income (loss) attributable to The Williams Companies, Inc. for ~~as a business combination, which requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their acquisition date fair values.~~

~~Pro forma revenues and earnings~~the three months ended March 31, 2021, are presented as if the Sequent ~~acquisition~~Acquisition had been completed on January 1, ~~2020,~~2020. These pro forma amounts are not ~~materially different from our historical~~necessarily indicative of what the actual results would have been if the Sequent Acquisition had in fact occurred on the date or for the ~~three~~periods indicated, nor do they purport to project Revenues or Net income (loss) attributable to The Williams Companies, Inc. for any future periods or as of any date. These amounts do not give effect to any potential cost savings, operating synergies, or revenue enhancements to result from the transaction or the potential costs to achieve these cost savings, operating synergies, and ~~nine months ended September 30, 2021 and 2020.~~revenue enhancements.

1413


Notes (Continued)			Table of Contents


	Three Months Ended March 31,
	2021
	(Millions)
Revenues	$	2,910
Net income (loss) attributable to The Williams Companies, Inc.	547

Seasonality can impact natural gas usage and operating results; thus, the results for the operations acquired in the Sequent Acquisition for interim periods are not necessarily indicative of annual results and can vary significantly from quarter to quarter. The results for the operations acquired in the Sequent Acquisition for the three months ended March 31, 2021, were favorably impacted by Winter Storm Uri.

During the period from the acquisition date of July 1, 2021 to ~~September 30,~~December 31, 2021, results for the operations acquired in the Sequent ~~contributed~~Acquisition included net product sales of ~~$54~~$(43) million (including $80 million of purchases from affiliates), net loss on commodity derivatives of ~~$322~~$43 million, and unfavorable Modified EBITDA (as defined in Note 1413 – Segment Disclosures) of ~~$281~~$112 million. Both the ~~net loss on commodity derivatives~~Revenues and Modified EBITDA amounts reflect a net unrealized loss on commodity derivatives of ~~$277~~$109 million for the period.

Costs related to ~~this~~the Sequent Acquisition for the period from the acquisition ~~are~~date of July 1, 2021 to December 31, 2021 were approximately $3$5 million and ~~are~~were included in Selling, general, and administrative expenses in our Consolidated Statement of ~~Income.~~Income for the year ended December 31, 2021.

The Sequent Acquisition was accounted for as a business combination, which requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their acquisition date fair values.

The following table presents the allocation of the acquisition date fair value of the major classes of the assets acquired, which are presented in the ~~Sequent~~Gas & NGL Marketing Services segment, and liabilities assumed at July 1, 2021. The fair value of accounts receivable acquired equals contractual amounts receivable. Preliminary fair value measurements were made for certain acquired assets and liabilities, primarily intangible assets; however, adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as new information related to facts and circumstances as of the acquisition date may be identified. The fair value of the intangible assets were measured using an income approach. The inventory acquired relates to natural gas in underground storage. The fair value of this inventory was based on the market price of the underlying commodity at the acquisition date. See Note 1110 – Fair Value Measurements and Guarantees for the valuation techniques used to measure fair value of derivative assets and liabilities.


	(Millions)
Cash and cash equivalents	$	8
Trade accounts and other receivables – net	498
Inventories	121
Other current assets and deferred charges	4
Commodity derivatives included in other current assets and deferred charges	57
Property, plant, and equipment – net	5
Intangible assets	306
Regulatory assets, deferred charges, and other	3
Commodity derivatives included in regulatory assets, deferred charges, and other	49
Total assets acquired	$	1,051

Accounts payable	$	514
Accrued liabilities	46
Commodity derivatives included in accrued liabilities	116
Regulatory liabilities, deferred income, and other	1
Commodity derivatives included in regulatory liabilities, deferred income, and other	215
Total liabilities assumed	$	892

Net assets acquired	$	159

~~Accounts Receivable and Accounts Payable~~

Sequent provides services to retail and wholesale gas marketers, utility companies, upstream producers, and industrial customers. These counterparties utilize netting agreements that enable Sequent to net receivables and payables by counterparty upon settlement. Sequent also nets across product lines and against cash collateral, provided the netting and cash collateral agreements include such provisions. While the amounts due from, or owed to, Sequent’s counterparties are settled net, they are recorded on a gross basis in the Consolidated Balance Sheet as accounts receivable and accounts payable.

1514


Notes (Continued)			Table of Contents

Intangible ~~Assets~~assets

Intangible assets are primarily related to transportation and storage capacity contracts. The basis for determining the value of these intangible assets was estimated future net cash flows to be derived from acquired transportation and storage capacity contracts that provide future economic benefits due to their market location, discounted using an industry weighted-average cost of capital. This intangible asset is being amortized based on the expected benefit period over which the underlying contracts are expected to contribute to our cash flows ranging from 1 year to 108 years. As a result, we expect a significant portion of the amortization to be recognized within the first few years of this range. ~~We recognized $21 million of amortization expense during the third quarter of 2021.~~

~~Commodity Derivatives~~

Sequent purchases natural gas for storage when the current market price paid to buy and transport natural gas plus the cost to store and finance the natural gas is less than an estimated, forward market price that can be received in the future, resulting in positive net product sales. Commodity-based exchange-traded futures contracts and over-the-counter (OTC) contracts are used to sell natural gas at that future price to substantially protect the natural gas revenues that will ultimately be realized when the stored natural gas is sold. Additionally, Sequent enters into transactions to secure transportation capacity between delivery points in order to serve its customers and various markets. Commodity-based exchange-traded futures contracts and OTC contracts are used to capture the price differential or spread between the locations served by the capacity in order to substantially protect the natural gas revenues that will ultimately be realized when the physical flow of natural gas between delivery points occurs. Some commodity-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the natural gas marketing operations. These contracts generally meet the definition of derivatives and are carried at fair value in the Consolidated Balance Sheet, with changes in fair value recorded in ~~Net gain (loss) on commodity derivatives~~ ~~in the Consolidated Statement of Income in the period of change. These contracts are not designated as hedges for accounting purposes.~~

The physical purchase, transportation, storage, and sale of natural gas are accounted for on a weighted-average cost or accrual basis, as appropriate, rather than on the fair value basis utilized for the derivatives used to mitigate the natural gas price risk associated with the storage and transportation portfolio. Monthly demand charges are incurred for the contracted storage and transportation capacity and payments associated with asset management agreements, and these demand charges and payments are recognized on the Consolidated Statement of Income in the period they are incurred. Sequent experiences significant earnings volatility from the fair value accounting required for the derivatives used to hedge a portion of the economic value of the underlying transportation and storage portfolio. However, the unrealized fair value measurement gains and losses are offset by valuation changes in the economic value of the underlying transportation and storage portfolio, which is not accounted for on a fair value basis. (see Note 12 – Derivatives).

~~Concentration of Credit Risk~~

~~Sequent has a concentration of credit risk as its top 20 counterparties represented 54 percent, or $267 million, of the total counterparty exposure as of September 30, 2021.~~

Sequent uses established credit policies to determine and monitor the creditworthiness of counterparties, including requirements to post collateral or other credit security, as well as the quality of pledged collateral. Collateral or credit security is most often in the form of cash or letters of credit from an investment-grade financial institution, but may also include U.S. government securities. Sequent also utilizes netting agreements whenever possible to mitigate exposure to counterparty credit risk. When more than one derivative transaction with the same counterparty is outstanding and a legally enforceable netting agreement exists with that counterparty, the “net” mark-to-market exposure represents a reasonable measure of Sequent’s credit risk with that counterparty.

1615


Notes (Continued)			Table of Contents

Note 4 – Revenue Recognition

Revenue by Category

The following table presents our revenue disaggregated by major service line:

Transco Northwest Pipeline Gulf of Mexico Midstream Northeast Midstream West Midstream Sequent Other Eliminations Total
(Millions)
Three Months Ended September 30, 2021
Revenues from contracts with customers:
Service revenues:
Regulated interstate natural gas transportation and storage $ 642 $ 107 $ — $ — $ — $ — $ — $ (12) $ 737
Gathering, processing, transportation, fractionation, and storage:
Monetary consideration — — 74 340 298 — — (29) 683
Commodity consideration — — 13 (1) 52 — — — 64
Other 3 — 5 52 10 — — (4) 66
Total service revenues 645 107 92 391 360 — — (45) 1,550
Product sales 20 — 72 19 1,177 960 116 (166) 2,198
Total revenues from contracts with customers 665 107 164 410 1,537 960 116 (211) 3,748
Other revenues (1) 1 1 3 7 (51) 903 (18) (5) 841
Other adjustments (2) — — — — — (2,131) — 17 (2,114)
Total revenues $ 666 $ 108 $ 167 $ 417 $ 1,486 $ (268) $ 98 $ (199) $ 2,475
Three Months Ended September 30, 2020
Revenues from contracts with customers:
Service revenues:
Regulated interstate natural gas transportation and storage $ 600 $ 111 $ — $ — $ — $ — $ — $ (3) $ 708
Gathering, processing, transportation, fractionation, and storage:
Monetary consideration — — 85 332 288 — — (17) 688
Commodity consideration — — 6 2 32 — — — 40
Other 3 — 3 41 20 — — (2) 65
Total service revenues 603 111 94 375 340 — — (22) 1,501
Product sales 21 — 26 12 394 — — (36) 417
Total revenues from contracts with customers 624 111 120 387 734 — — (58) 1,918
Other revenues (1) 2 — 3 6 — — 8 (4) 15
Total revenues $ 626 $ 111 $ 123 $ 393 $ 734 $ — $ 8 $ (62) $ 1,933


~~Notes (Continued)~~			~~Table of Contents~~


		Transco		Northwest Pipeline		Gulf of Mexico Midstream		Northeast Midstream		West Midstream		Sequent		Other		Eliminations		Total			Transco		Northwest Pipeline		Gulf of Mexico Midstream		Northeast Midstream		West Midstream		Gas & NGL Marketing Services		Other		Eliminations		Total
		(Millions)																			(Millions)
Nine Months Ended September 30, 2021
Three Months Ended March 31, 2022																				Three Months Ended March 31, 2022
Revenues from contracts with customers:	Revenues from contracts with customers:																			Revenues from contracts with customers:
Service revenues:	Service revenues:																			Service revenues:
Regulated interstate natural gas transportation and storage	Regulated interstate natural gas transportation and storage	$	1,880	$	328	$	—	$	—	$	—	$	—	$	—	$	(17)	$	2,191	Regulated interstate natural gas transportation and storage	$	665	$	113	$	—	$	—	$	—	$	—	$	—	$	(18)	$	760
Gathering, processing, transportation, fractionation, and storage:	Gathering, processing, transportation, fractionation, and storage:																			Gathering, processing, transportation, fractionation, and storage:
Monetary consideration	Monetary consideration	—		—		250		966		838		—		—		(76)		1,978		Monetary consideration	—		—		82		323		317		—		—		(30)		692
Commodity consideration	Commodity consideration	—		—		34		4		126		—		—		—		164		Commodity consideration	—		—		21		7		49		—		—		—		77
Other	Other	8		—		15		145		39		—		—		(12)		195		Other	2		—		6		51		12		1		—		(6)		66
Total service revenues	Total service revenues	1,888		328		299		1,115		1,003		—		—		(105)		4,528		Total service revenues	667		113		109		381		378		1		—		(54)		1,595
Product sales	Product sales	50		—		178		75		2,983		960		216		(343)		4,119		Product sales	16		—		87		36		187		2,470		104		(393)		2,507
Total revenues from contracts with customers	Total revenues from contracts with customers	1,938		328		477		1,190		3,986		960		216		(448)		8,647		Total revenues from contracts with customers	683		113		196		417		565		2,471		104		(447)		4,102
Other revenues (1)	Other revenues (1)	3		1		8		19		(83)		903		(3)		(11)		837		Other revenues (1)	3		1		2		6		(3)		1,615		(65)		(3)		1,556
Other adjustments (2)	Other adjustments (2)	—		—		—		—		—		(2,131)		—		17		(2,114)		Other adjustments (2)	—		—		—		—		—		(3,232)		—		98		(3,134)
Total revenues	Total revenues	$	1,941	$	329	$	485	$	1,209	$	3,903	$	(268)	$	213	$	(442)	$	7,370	Total revenues	$	686	$	114	$	198	$	423	$	562	$	854	$	39	$	(352)	$	2,524

Nine Months Ended September 30, 2020
Three Months Ended March 31, 2021																				Three Months Ended March 31, 2021
Revenues from contracts with customers:	Revenues from contracts with customers:																			Revenues from contracts with customers:
Service revenues:	Service revenues:																			Service revenues:
Regulated interstate natural gas transportation and storage	Regulated interstate natural gas transportation and storage	$	1,796	$	336	$	—	$	—	$	—	$	—	$	—	$	(6)	$	2,126	Regulated interstate natural gas transportation and storage	$	625	$	113	$	—	$	—	$	—	$	—	$	—	$	(3)	$	735
Gathering, processing, transportation, fractionation, and storage:	Gathering, processing, transportation, fractionation, and storage:																			Gathering, processing, transportation, fractionation, and storage:
Monetary consideration	Monetary consideration	—		—		262		952		884		—		—		(58)		2,040		Monetary consideration	—		—		86		311		269		—		—		(28)		638
Commodity consideration	Commodity consideration	—		—		14		5		74		—		—		—		93		Commodity consideration	—		—		11		3		35		—		—		—		49
Other	Other	8		—		19		123		46		—		—		(11)		185		Other	3		—		3		41		19		1		—		(5)		62
Total service revenues	Total service revenues	1,804		336		295		1,080		1,004		—		—		(75)		4,444		Total service revenues	628		113		100		355		323		1		—		(36)		1,484
Product sales	Product sales	61		—		75		42		1,056		—		—		(96)		1,138		Product sales	14		—		53		32		150		1,088		56		(248)		1,145
Total revenues from contracts with customers	Total revenues from contracts with customers	1,865		336		370		1,122		2,060		—		—		(171)		5,582		Total revenues from contracts with customers	642		113		153		387		473		1,089		56		(284)		2,629
Other revenues (1)	Other revenues (1)	4		—		6		16		5		—		25		(11)		45		Other revenues (1)	2		—		2		6		3		(34)		7		(3)		(17)
Total revenues	Total revenues	$	1,869	$	336	$	376	$	1,138	$	2,065	$	—	$	25	$	(182)	$	5,627	Total revenues	$	644	$	113	$	155	$	393	$	476	$	1,055	$	63	$	(287)	$	2,612

(1)Revenues not derived from contracts with customers consist of leasing revenues associated with our headquarters building and management fees that we receive for certain services we provide to operated equity-method investments, which are reported in Service revenues in ~~the~~our Consolidated Statement of Income, and realized and unrealized gains and losses associated with our derivative contracts, ~~(except for those requiring physical delivery),~~ which are reported in Net gain (loss) on commodity derivatives in ~~the~~our Consolidated Statement of Income.

~~(2)~~Other adjustments relate to costs of Sequent’s risk management activities. As Sequent is acting as an agent for its customers, its revenues are presented net of the related costs of those activities in the Consolidated Statement of Income.

1816


Notes (Continued)			Table of Contents

(2)Other adjustments reflect certain costs of Gas & NGL Marketing Services’ risk management activities. As we are acting as agent for natural gas marketing customers, the resulting revenues are presented net of the related costs of those activities in our Consolidated Statement of Income. In addition, the related derivatives qualify as held for trading purposes, which requires net presentation. (See Note 1 – General, Description of Business, and Basis of Presentation.)

Contract Assets

The following table presents a reconciliation of our contract assets:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(Millions)										(Millions)
Balance at beginning of period	Balance at beginning of period	$	38	$	30	$	12	$	8	Balance at beginning of period		$	22	$	12
Revenue recognized in excess of amounts invoiced	Revenue recognized in excess of amounts invoiced	51		36		134		105		Revenue recognized in excess of amounts invoiced		55		45
Minimum volume commitments invoiced	Minimum volume commitments invoiced	(39)		(24)		(96)		(71)		Minimum volume commitments invoiced		(41)		(32)
Balance at end of period	Balance at end of period	$	50	$	42	$	50	$	42	Balance at end of period		$	36	$	25

Contract Liabilities

The following table presents a reconciliation of our contract liabilities:


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(Millions)										(Millions)
Balance at beginning of period	Balance at beginning of period	$	1,193	$	1,203	$	1,209	$	1,215	Balance at beginning of period		$	1,126	$	1,209
Payments received and deferred	Payments received and deferred	14		14		99		116		Payments received and deferred		29		13
Significant financing component	Significant financing component	3		3		8		8		Significant financing component		2		3
Contract liability acquired		1		—		1		—

Recognized in revenue	Recognized in revenue	(48)		(50)		(154)		(169)		Recognized in revenue		(64)		(54)
Balance at end of period	Balance at end of period	$	1,163	$	1,170	$	1,163	$	1,170	Balance at end of period		$	1,093	$	1,171

Remaining Performance Obligations

Remaining performance obligations primarily include reservation charges on contracted capacity for our gas pipeline firm transportation contracts with customers, storage capacity contracts, long-term contracts containing minimum volume commitments (MVC) associated with our midstream businesses, and fixed payments associated with offshore production handling. For our interstate natural gas pipeline businesses, remaining performance obligations reflect the rates for such services in our current Federal Energy Regulatory Commission (FERC) tariffs for the life of the related contracts; however, these rates may change based on future tariffs approved by the FERC and the amount and timing of these changes are not currently known.

Our remaining performance obligations exclude variable consideration, including contracts with variable consideration for which we have elected the practical expedient for consideration recognized in revenue as billed. Certain of our contracts contain evergreen and other renewal provisions for periods beyond the initial term of the contract. The remaining performance obligation amounts as of ~~September 30, 2021,~~March 31, 2022, do not consider potential future performance obligations for which the renewal has not been exercised and exclude contracts with customers for which the underlying facilities have not received FERC authorization to be placed into service. Consideration received prior to ~~September 30, 2021,~~March 31, 2022, that will be recognized in future periods is also excluded from our remaining performance obligations and is instead reflected in contract liabilities.

1917


Notes (Continued)			Table of Contents

The following table presents the amount of the contract liabilities balance expected to be recognized as revenue when performance obligations are satisfied and the transaction price allocated to the remaining performance obligations under certain contracts as of ~~September 30, 2021.~~March 31, 2022.


		Contract Liabilities		Remaining Performance Obligations			Contract Liabilities		Remaining Performance Obligations
		(Millions)					(Millions)
2021 (three months)		$	45	$	875
2022 (one year)		139		3,465
2022 (nine months)						2022 (nine months)	$	98	$	2,683
2023 (one year)	2023 (one year)	124		3,184		2023 (one year)	120		3,386
2024 (one year)	2024 (one year)	120		2,870		2024 (one year)	119		3,152
2025 (one year)	2025 (one year)	105		2,367		2025 (one year)	114		2,623
2026 (one year)						2026 (one year)	110		2,395

Thereafter 00	Thereafter 00	630		18,326		Thereafter 00	532		17,027
Total	Total	$	1,163	$	31,087	Total	$	1,093	$	31,266

Accounts Receivable

The following is a summary of our Trade accounts and other receivables – net:

September 30, 2021 December 31, 2020
(Millions)
Accounts receivable related to revenues from contracts with customers (1) $ 1,472 $ 892
Other accounts receivable (2) 514 107
Trade accounts and other receivables – net
$ 1,986 $ 999

~~(1)Includes $298 million related to our Sequent segment as of September 30, 2021.~~

~~(2)Includes $441 million related to our Sequent segment as of September 30, 2021.~~


	March 31, 2022		December 31, 2021
	(Millions)
Accounts receivable related to revenues from contracts with customers	$	1,426	$	1,451
Receivables from derivatives	489		462
Other accounts receivable	58		65
Trade accounts and other receivables – net	$	1,973	$	1,978

Note 5 – ~~Investing Activities~~

~~Equity Earnings (Losses)~~Provision (Benefit) for Income Taxes

~~Equity earnings (losses)~~The Provision (benefit) for income taxes includes:


	Three Months Ended March 31,
		2022		2021
		(Millions)
Current:
Federal		$	1	$	(2)
State		2		(1)
		3		(3)
Deferred:
Federal		94		115
State		21		29

		115		144
Provision (benefit) for income taxes		$	118	$	141

The effective income tax rates for the ~~nine~~total provision (benefit) for both the three months ended ~~September 30, 2020, includes a $78 million loss associated with~~March 31, 2022 and 2021 are greater than the ~~first-quarter 2020 full impairment~~federal statutory rate, primarily due to the effect of ~~goodwill recognized~~state income taxes.

It is reasonably possible that the total amount of unrecognized tax benefits will significantly decrease by ~~our investee RMM, which was allocated entirely~~the end of 2022 due to ~~our member interest per~~ the ~~terms~~resolution of ~~the membership agreement.~~

~~Impairment of Equity-Method Investments~~

~~Impairment of equity-method investments~~ for the nine months ended September 30, 2020, includes $938 million associated with the first-quarter 2020 impairment of certain equity-method investments (see Note 11 – Fair Value Measurements and Guarantees).audits related to U.S. federal tax positions.

2018


Notes (Continued)			Table of Contents

Note 6 – ~~Provision (Benefit) for Income Taxes~~

~~The~~ ~~Provision (benefit) for income taxes~~ ~~includes:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(Millions)
Current:
Federal $ 1 $ — $ (1) $ (28)
State 1 — 1 —
2 — — (28)
Deferred:
Federal 40 97 240 56
State 11 14 73 (4)
51 111 313 52
Provision (benefit) for income taxes $ 53 $ 111 $ 313 $ 24

The effective income tax rates for the total provision (benefit) for both the three and nine months ended September 30, 2021 and 2020 are greater than the federal statutory rate, primarily due to the effect of state income taxes.

During the next 12 months, we do not expect ultimate resolution of any unrecognized tax benefit associated with domestic or international matters to have a material impact on our unrecognized tax benefit position.

~~Note 7 –~~ Earnings (Loss) Per Common Share

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(Dollars in millions, except per-share
amounts; shares in thousands)
Net income (loss) available to common stockholders $ 164 $ 308 $ 893 $ 93
Basic weighted-average shares 1,215,434 1,213,912 1,215,113 1,213,512
Effect of dilutive securities:
Nonvested restricted stock units 2,539 1,423 2,437 1,241
Stock options 6 — 8 4
Diluted weighted-average shares 1,217,979 1,215,335 1,217,558 1,214,757
Earnings (loss) per common share:
Basic $ .14 $ .25 $ .74 $ .08
Diluted $ .13 $ .25 $ .73 $ .08


	Three Months Ended March 31,
		2022		2021
		(Dollars in millions, except per-share amounts; shares in thousands)
Net income (loss) available to common stockholders		$	379	$	425
Basic weighted-average shares		1,216,940		1,214,646
Effect of dilutive securities:
Nonvested restricted stock units		4,128		2,565
Stock options		211		—
Diluted weighted-average shares		1,221,279		1,217,211
Earnings (loss) per common share:
Basic		$	.31	$	.35
Diluted		$	.31	$	.35


~~Notes (Continued)~~			~~Table of Contents~~

Note 87 – Employee Benefit Plans

Net periodic benefit cost (credit) is as follows:


		Pension Benefits										Pension Benefits
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(Millions)										(Millions)
Components of net periodic benefit cost (credit):	Components of net periodic benefit cost (credit):									Components of net periodic benefit cost (credit):
Service cost	Service cost	$	8	$	8	$	23	$	23	Service cost		$	7	$	8
Interest cost	Interest cost	7		9		21		28		Interest cost		7		7
Expected return on plan assets	Expected return on plan assets	(11)		(13)		(33)		(40)		Expected return on plan assets		(11)		(11)

Amortization of net actuarial loss	Amortization of net actuarial loss	4		5		11		16		Amortization of net actuarial loss		3		4
Net actuarial loss from settlements		—		1		1		9

Net periodic benefit cost (credit)	Net periodic benefit cost (credit)	$	8	$	10	$	23	$	36	Net periodic benefit cost (credit)		$	6	$	8


		Other Postretirement Benefits										Other Postretirement Benefits
		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(Millions)										(Millions)
Components of net periodic benefit cost (credit):	Components of net periodic benefit cost (credit):									Components of net periodic benefit cost (credit):
Service cost		$	1	$	1	$	1	$	1

Interest cost	Interest cost	1		2		4		5		Interest cost		$	1	$	1
Expected return on plan assets	Expected return on plan assets	(2)		(3)		(7)		(8)		Expected return on plan assets		(2)		(2)

Reclassification to regulatory liability	Reclassification to regulatory liability	—		—		1		1		Reclassification to regulatory liability		—		1
Net periodic benefit cost (credit)	Net periodic benefit cost (credit)	$	—	$	—	$	(1)	$	(1)	Net periodic benefit cost (credit)		$	(1)	$	—

The components of Net periodic benefit cost (credit) other than the Service cost component are included in Other income (expense) – net below Operating income (loss) in ~~the~~our Consolidated Statement of Income.

During the nine months ended September 30, 2021, we contributed $4 million to our pension plans and $4 million to our other postretirement benefit plans. We presently anticipate making additional contributions of approximately $1 million to our other postretirement benefit plans and no further contributions to our pension plans in the remainder of 2021.


Notes (Continued)			Table of Contents

Note 98 – Debt and Banking Arrangements

Long-Term Debt

Issuances and retirements

On ~~October 8, 2021,~~January 18, 2022, we ~~completed a public offering~~early retired $1.25 billion of ~~$600 million of 2.6~~3.6 percent senior unsecured notes due ~~2031. The new 2031 notes are an additional issuance of the $900 million of 2.6 percent senior unsecured notes due 2031 issued on~~ March ~~2, 2021 and will trade interchangeably with such notes. Also, on October 8, 2021, we completed a public offering of $650 million of 3.5 percent senior unsecured notes due 2051.~~

~~On September 1, 2021, we retired $371 million of 7.875 percent senior unsecured notes due 2021.~~

~~On August 16, 2021, we retired $500 million of 4.0 percent senior unsecured notes due 2021.~~


~~Notes (Continued)~~			~~Table of Contents~~

15, 2022.

Commercial Paper Program

At ~~September 30, 2021,~~March 31, 2022, no ~~Commercial~~commercial paper was outstanding under our $4$3.5 billion commercial paper program. ~~In connection with our amended and restated credit agreement described below, we reduced the size of our commercial paper program to $3.5 billion.~~

Credit ~~Facilities~~Facility


	~~September 30, 2021~~March 31, 2022
	Stated Capacity		Outstanding
	(Millions)

Long-term credit facility (1)	$	~~4,500~~3,750	$	—
Letters of credit under certain bilateral bank agreements			1716

~~Revolving credit facility~~

In October 2021, we along with Transco and Northwest Pipeline, the lenders named therein, and an administrative agent entered into an amended and restated credit agreement (Credit Agreement) that reduced aggregate commitments available from $4.5 billion to $3.75 billion, with up to an additional $500 million increase in aggregate commitments available under certain circumstances. The Credit Agreement was effective on October 8, 2021. The maturity date of the credit facility is October 8, 2026. However, the co-borrowers may request up to two extensions of the maturity date each for an additional one-year period to allow a maturity date as late as October 8, 2028, under certain circumstances. The Credit Agreement allows for swing line loans up to an aggregate of $200 million, subject to available capacity under the credit facility, and letters of credit commitments of $500 million. Transco and Northwest Pipeline are each able to borrow up to $500 million under this credit facility to the extent not otherwise utilized by the other co-borrowers. At September 30, 2021, and as of October 8, 2021, the effective date of the amended and restated Credit Agreement, no letters of credit have been issued and no loans were outstanding under the credit facility.

~~The Credit Agreement contains the following terms and conditions:~~

•Various covenants may limit, among other things, a borrower’s and its material subsidiaries’ ability to grant certain liens supporting indebtedness, merge or consolidate, sell all or substantially all of its assets in certain circumstances, make certain distributions during an event of default, and each borrower and each borrower’s respective material subsidiaries’ ability to enter into certain restrictive agreements.

•If an event of default with respect to a borrower occurs under the credit facility, the lenders will be able to terminate the commitments for the respective borrowers and accelerate the maturity of the loans of the defaulting borrower under the credit facility and exercise other rights and remedies.

•Other than swing line loans, each time funds are borrowed, the applicable borrower may choose from two methods of calculating interest: a fluctuating base rate equal to an alternative base rate as defined in the Credit Agreement plus an applicable margin or a periodic fixed rate equal to the London Interbank Offered Rate (LIBOR) plus an applicable margin. We are required to pay a commitment fee based on the unused portion of the credit facility. The applicable margin is determined by reference to a pricing schedule based on the applicable borrower’s senior unsecured long-term debt ratings and the commitment fee is determined by reference to a pricing schedule based on Williams’ senior unsecured long-term debt ratings. The Credit Agreement also includes customary provisions to provide for replacement of LIBOR with an alternative benchmark rate when LIBOR ceases to be available.

Significant financial covenants under the Credit Agreement require the ratio of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization), each as defined in the Credit Agreement, to be no greater than 5.0 to 1.0, except that for any fiscal quarter in which the funding of the purchase price for an acquisition (whether


~~Notes (Continued)~~			~~Table of Contents~~

effectuated as one or a series of related transactions) with an aggregate purchase price of $25 million or more has been effected, and the following two fiscal quarters (in each case subject to certain limitations), the ratio of debt to EBITDA is to be no greater than 5.5 to 1.

~~The ratio of debt to capitalization (defined as net worth plus debt), each as defined in the Credit Agreement, must be no greater than 65 percent for each of Transco and Northwest Pipeline.~~

~~At September 30, 2021, we are in compliance with these covenants.~~

Note 109 – Stockholders’ Equity

~~Share Repurchase Program~~

On September 3, 2021, our Board of Directors authorized a new share repurchase program with a maximum dollar limit of $1.5 billion. Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions or in such other manner as determined by our management. Our management will also determine the timing and amount of any repurchases based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or discontinued at any time. This share repurchase program does not have an expiration date. There were no repurchases under the program through September 30, 2021.

~~Stockholder Rights Agreement~~

As disclosed in our Annual Report on Form 10-K filed February 24, 2021, a purported shareholder filed a putative class action lawsuit in the Delaware Court of Chancery challenging our stockholder rights agreement (Rights Agreement). On February 26, 2021, the Delaware Court of Chancery issued a decision which declared the Rights Agreement unenforceable and permanently enjoined the continued operation of the Rights Agreement, which otherwise would have expired on March 20, 2021.

AOCI

The following table presents the changes in AOCI by component, net of income taxes:

Cash
Flow
Hedges Foreign
Currency
Translation Pension and
Other Postretirement
Benefits Total
(Millions)
Balance at December 31, 2020 $ (3) $ (1) $ (92) $ (96)
Other comprehensive income (loss) before reclassifications
(43) — — (43)
Amounts reclassified from accumulated other comprehensive income (loss)
21 — 9 30
Other comprehensive income (loss) (22) — 9 (13)
Balance at September 30, 2021 $ (25) $ (1) $ (83) $ (109)


~~Notes (Continued)~~			~~Table of Contents~~


	Cash Flow Hedges		Foreign Currency Translation		Pension and Other Postretirement Benefits		Total
	(Millions)
Balance at December 31, 2021	$	(2)	$	(1)	$	(30)	$	(33)

Other comprehensive income (loss) before reclassifications	3		—		—		3
Amounts reclassified from accumulated other comprehensive income (loss)	—		—		2		2
Other comprehensive income (loss)	3		—		2		5

Balance at March 31, 2022	$	1	$	(1)	$	(28)	$	(28)

Reclassifications out of AOCI are presented in the following table by component for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

Component

Reclassifications

Classification

(Millions)

~~Cash flow hedges:~~

~~Energy commodity contracts~~

~~Net gain (loss) on commodity derivatives~~

Pension and other postretirement benefits:

Amortization of actuarial (gain) loss and net actuarial loss from settlements included in net periodic benefit cost (credit)

12$

Other income (expense) – net below Operating income (loss)

Income tax benefit

~~(10)~~(1)

Provision (benefit) for income taxes

Reclassifications during the period

302

2520


Notes (Continued)			Table of Contents

Note 1110 – Fair Value Measurements and Guarantees

The following table presents, by level within the fair value hierarchy, certain of our significant financial assets and liabilities. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value because of the short-term nature of these instruments. Therefore, these assets and liabilities are not presented in the following table.


						Fair Value Measurements Using											Fair Value Measurements Using
		Carrying Amount		Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)			Carrying Amount		Fair Value		Quoted Prices In Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
		(Millions)											(Millions)
Assets (liabilities) at September 30, 2021:
Assets (liabilities) at March 31, 2022:												Assets (liabilities) at March 31, 2022:
Measured on a recurring basis:	Measured on a recurring basis:											Measured on a recurring basis:
ARO Trust investments	ARO Trust investments	$	248	$	248	$	248	$	—	$	—	ARO Trust investments	$	250	$	250	$	250	$	—	$	—
Commodity derivative assets (1)	Commodity derivative assets (1)	131		131		38		83		10		Commodity derivative assets (1)	81		81		33		47		1

Commodity derivative liabilities (1)	Commodity derivative liabilities (1)	(773)		(773)		(285)		(470)		(18)		Commodity derivative liabilities (1)	(600)		(600)		(127)		(461)		(12)

Additional disclosures:	Additional disclosures:											Additional disclosures:

Long-term debt, including current portion	Long-term debt, including current portion	(22,362)		(26,614)		—		(26,614)		—		Long-term debt, including current portion	(22,426)		(24,301)		—		(24,301)		—
Guarantees	Guarantees	(40)		(26)		—		(10)		(16)		Guarantees	(39)		(26)		—		(10)		(16)

Assets (liabilities) at December 31, 2020:
Assets (liabilities) at December 31, 2021:												Assets (liabilities) at December 31, 2021:
Measured on a recurring basis:	Measured on a recurring basis:											Measured on a recurring basis:
ARO Trust investments	ARO Trust investments	$	235	$	235	$	235	$	—	$	—	ARO Trust investments	$	260	$	260	$	260	$	—	$	—
Commodity derivative assets(2)	Commodity derivative assets(2)	3		3		1		2		—		Commodity derivative assets(2)	84		84		2		81		1

Commodity derivative liabilities(2)	Commodity derivative liabilities(2)	(6)		(6)		(3)		(1)		(2)		Commodity derivative liabilities(2)	(488)		(488)		(69)		(403)		(16)

Additional disclosures:	Additional disclosures:											Additional disclosures:
Long-term debt, including current portion	Long-term debt, including current portion	(22,344)		(27,043)		—		(27,043)		—		Long-term debt, including current portion	(23,675)		(27,768)		—		(27,768)		—
Guarantees	Guarantees	(40)		(27)		—		(11)		(16)		Guarantees	(39)		(26)		—		(10)		(16)

(1)Excludes approximately ~~$313~~$187 million of net cash ~~collateral.~~collateral in Level 1.

(2)Excludes approximately $296 million of net cash collateral in Level 1.

Fair Value Methods

We use the following methods and assumptions in estimating the fair value of our financial instruments:

Assets measured at fair value on a recurring basis

ARO Trust investments: Transco deposits a portion of its collected rates, pursuant to its rate case settlement, into an external trust (ARO Trust) that is specifically designated to fund future asset retirement obligations (ARO). The ARO Trust invests in a portfolio of actively traded mutual funds that are measured at fair value on a recurring basis based on quoted prices in an active market and is reported in Regulatory assets, deferred charges, and other in ~~the~~our Consolidated Balance Sheet. Both realized and unrealized gains and losses are ultimately recorded as regulatory assets or liabilities.

Commodity derivatives: Commodity derivatives include ~~commodity-based~~ exchange-traded contracts and ~~OTC~~over-the-counter (OTC) contracts, which consist of physical forwards, futures, and swaps that are measured at fair value on a recurring basis. We also have other derivatives related to asset management agreements and other contracts that require physical delivery. Derivatives classified as Level 1 are valued using NYMEX futures prices. Derivatives classified as Level 2

2621


Notes (Continued)			Table of Contents

We also have other derivatives related to asset management agreements and other contracts that require physical delivery. Derivatives classified as Level 1 are valued using New York Mercantile Exchange (NYMEX) futures prices. Derivatives classified as Level 2 are valued using basis transactions that represent the cost to transport natural gas from a NYMEX delivery point to the contract delivery point. These transactions are based on quotes obtained either through electronic trading platforms or directly from brokers. Derivatives classified as Level 3 are valued using a combination of observable and unobservable inputs. Beginning in the third quarter of 2021 the fair value amounts are presented on a net basis and reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements and cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions. Commodity derivative assets are reported in Other current assets and deferred charges and Regulatory assets, deferred charges, and other in ~~the~~our Consolidated Balance Sheet. Commodity derivative liabilities are reported in Accrued liabilities and Regulatory liabilities, deferred income, and other in ~~the~~our Consolidated Balance Sheet. See Note 11 – Derivatives for additional information on our derivatives.

Additional fair value disclosures

Long-term debt, including current portion: The disclosed fair value of our long-term debt is determined primarily by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. The fair values of the financing obligations associated with our Dalton, ~~lateral~~Leidy South, and Atlantic Sunrise projects, which are included within long-term debt, were determined using an income approach.

Guarantees: Guarantees primarily consist of a guarantee we have provided in the event of nonpayment by our previously owned communications subsidiary, Williams Communications Group (WilTel), on a lease performance obligation that extends through 2042. Guarantees also include an indemnification related to a disposed operation.

To estimate the fair value of the WilTel guarantee, an estimated default rate is applied to the sum of the future contractual lease payments using an income approach. The estimated default rate is determined by obtaining the average cumulative issuer-weighted corporate default rate based on the credit rating of WilTel’s current owner and the term of the underlying obligation. The default rate is published by Moody’s Investors Service. The carrying value of the WilTel guarantee is reported in Accrued liabilities in ~~the~~our Consolidated Balance Sheet. The maximum potential undiscounted exposure is approximately ~~$26~~$25 million at ~~September 30, 2021.~~March 31, 2022. Our exposure declines systematically through the remaining term of WilTel’s obligation.

The fair value of the guarantee associated with the indemnification related to a disposed operation was estimated using an income approach that considered probability-weighted scenarios of potential levels of future performance. The terms of the indemnification do not limit the maximum potential future payments associated with the guarantee. The carrying value of this guarantee is reported in Regulatory liabilities, deferred income, and other in ~~the~~our Consolidated Balance Sheet.

We are required by our revolving credit agreement to indemnify lenders for certain taxes required to be withheld from payments due to the lenders and for certain tax payments made by the lenders. The maximum potential amount of future payments under these indemnifications is based on the related borrowings and such future payments cannot currently be determined. These indemnifications generally continue indefinitely unless limited by the underlying tax regulations and have no carrying value. We have never been called upon to perform under these indemnifications and have no current expectation of a future claim.

~~Nonrecurring fair value measurements~~

During the first quarter of 2020, we observed a significant decline in the publicly traded price of our common stock (NYSE: WMB), which declined 40 percent during the quarter, including a 26 percent decline in the month of March. These changes were generally attributed to macroeconomic and geopolitical conditions, including significant declines in crude oil prices driven by both surplus supply and a decrease in demand caused by the coronavirus (COVID-19) pandemic. As a result of these conditions, we performed an interim assessment of the goodwill associated with our Northeast G&P reporting unit as of March 31, 2020.

The assessment considered the total fair value of the businesses within the Northeast G&P reporting unit, which was determined using income and market approaches. We utilized internally developed industry weighted-average discount rates and estimates of valuation multiples of comparable publicly traded gathering and processing


~~Notes (Continued)~~			~~Table of Contents~~

companies. In assessing the fair value as of the March 31, 2020 measurement date, we were required to consider recent publicly available indications of value, which included lower observed publicly traded EBITDA market multiples as compared with recent history and significantly higher industry weighted-average discount rates. The fair value of the reporting unit was further reconciled to our estimated total enterprise value as of March 31, 2020, which considered observable valuation multiples of comparable publicly traded companies applied to each distinct business including the Northeast G&P reporting unit. This assessment indicated that the estimated fair value of the Northeast G&P reporting unit was below its carrying value, including goodwill. As a result of this Level 3 measurement, we recognized a full impairment charge of $187 million as of March 31, 2020, in ~~Impairment of goodwill~~ ~~in the Consolidated Statement of Income. Our partner’s $65 million share of this impairment is reflected within~~ ~~Net income (loss) attributable to noncontrolling interests~~ ~~in the Consolidated Statement of Income.~~

~~The following table presents impairments of equity-method investments associated with certain nonrecurring fair value measurements within Level 3 of the fair value hierarchy.~~

Impairments
Nine Months Ended
September 30,
Segment Date of Measurement Fair Value 2021 2020
(Millions)
Impairment of equity-method investments:
RMM (1) West March 31, 2020 $ 557 $ — $ 243
Brazos Permian II (1) West March 31, 2020 — — 193
Caiman II (2) Northeast G&P March 31, 2020 191 — 229
Appalachia Midstream Investments (2) Northeast G&P March 31, 2020 2,700 — 127
Aux Sable (2) Northeast G&P March 31, 2020 7 — 39
Laurel Mountain (2) Northeast G&P March 31, 2020 236 — 10
Discovery (2) Transmission & Gulf of Mexico March 31, 2020 367 — 97
Impairment of equity-method investments $ — $ 938

~~_______________~~

~~(1)~~Following the previously described declining market conditions during the first quarter of 2020, we evaluated these investments for other-than-temporary impairment. The fair value was measured using an income approach. Both investees operate in primarily oil-driven basins where significant expected reductions in producer activities led to reduced estimates of expected future cash flows. Our fair value estimates also reflected discount rates of approximately 17 percent for these investments. We also considered any debt held at the investee level, and its impact to fair value. The industry weighted-average discount rates utilized were significantly influenced by the market declines previously discussed.

~~(2)~~Following the previously described declining market conditions during the first quarter of 2020, we evaluated these investments for other-than-temporary impairment. The impairments within our Northeast G&P segment are primarily associated with operations in wet-gas areas where producer drilling activities are influenced by NGL prices which historically trend with crude oil prices. The fair values of our investments in Caiman II and Aux Sable Liquid Products LP (Aux Sable) were estimated using a market approach, reflecting valuation multiples ranging from 5.0x to 6.2x EBITDA (weighted-average 6.0x). The fair values of the other investments, including gathering systems that are part of Appalachia Midstream Investments, were estimated using an income approach, with discount rates ranging from 9.7 percent to 13.5 percent (weighted-average 12.6 percent). We also considered any debt held at the investee level, and its impact to fair value. The assumed valuation multiples and industry weighted-average discount rates utilized were both significantly influenced by the market declines previously discussed.


~~Notes (Continued)~~			~~Table of Contents~~

Note 1211 – Derivatives

Commodity-Related Derivatives

We are exposed to commodity price risk. To manage this volatility, we use various contracts in our marketing and trading activities that generally meet the definition of derivatives. Derivative positions are monitored using techniques including, but not limited to value at risk. Derivative instruments are recognized at fair value in ~~the~~our Consolidated Balance Sheet as either assets or liabilities and are presented on a net basis by counterparty, net of margin deposits. See Note 1110 – Fair Value Measurements and Guarantees for additional fair value information. In ~~the~~


Notes (Continued)			Table of Contents

our Consolidated Statement of Cash Flows, any cash impacts of settled commodity-related derivatives are recorded as operating activities.

We enter into commodity-related derivatives to economically hedge exposures to natural gas, NGLs, and crude oil and retain exposure to price changes that can, in a volatile energy market, be material and can adversely affect our results of operations.

Our commodity-related derivative contracts are primarily not designated as hedging instruments. Realized and unrealized gains and losses on these non-designated commodity-related derivative contracts are recognized in ~~Net gain (loss) on commodity derivatives~~ in the Consolidated Statement of Income as incurred. Unrealized gains and losses on commodity-related derivative contracts that are designated as hedging instruments are initially reported in AOCI in the Consolidated Balance Sheet and later reclassified as realized gains and losses into ~~Net gain (loss) on commodity derivatives~~ ~~in the Consolidated Statement of Income in the period in which the hedged item affects earnings.~~

Some commodity-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the natural gas marketing operations. When a commodity-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed and the contract price is recognized in the respective line item in the Consolidated Statement of Income representing the actual price of the underlying goods being delivered.

At ~~September 30, 2021,~~March 31, 2022, the notional volume of the net long (short) positions for our commodity derivative contracts were as follows:

~~Segment~~

Commodity

Unit of Measure

Net Long (Short) Position

~~Designated as Hedging Instruments~~

~~West -~~ Sequent Acquisition (1)

Natural Gas

MMBtu

661,224,762

Central Hub Risk - Mont Belvieu

Natural Gas Liquids

Barrels

~~(261,000)~~(2,205,000)

~~West - Central Hub Risk~~

~~Natural Gas~~

~~MMBtu~~

~~(7,217,500)~~

~~West - Basis Risk~~

~~Natural Gas~~

~~MMBtu~~

~~(3,542,000)~~

~~Not Designated as Hedging Instruments~~

~~Sequent (1)~~

~~Natural Gas~~

~~MMBtu~~

~~591,732,203~~

~~West - Central Hub Risk~~

~~Natural Gas Liquids~~

~~Barrels~~

~~(515,000)~~

~~West -~~ Basis Risk

Natural Gas Liquids

Barrels

~~(22,449,000)~~(17,504,000)

~~West -~~ Central Hub Risk - Henry Hub

Natural Gas

MMBtu

~~(25,281,500)~~49,036,730

~~West -~~ Basis Risk

Natural Gas

MMBtu

~~(51,362,500)~~43,098,730

~~West -~~ Central Hub Risk - WTI

Crude Oil

Barrels

~~(96,000)~~(459,000)

_______________

(1)Derivative instruments include both long and short natural gas positions. The volume represents the net of long natural gas positions of ~~4.3~~3.7 billion MMBtu (million British thermal units) and short natural gas positions of ~~3.7~~3.1 billion MMBtu.

Derivative Financial Statement Presentation

The fair value of commodity-related derivatives, which are not designated as hedging instruments for accounting purposes, was reflected in our Consolidated Balance Sheet as follows:


	March 31, 2022				December 31, 2021
Derivative Category	Assets		(Liabilities)		Assets		(Liabilities)
	(Millions)





Current	$	657	$	(954)	$	619	$	(760)
Noncurrent	204		(426)		166		(429)
Total derivatives	$	861	$	(1,380)	$	785	$	(1,189)

Gross amounts recognized	$	861	$	(1,380)	$	785	$	(1,189)
Counterparty and collateral netting offset	(716)		903		(476)		772
Amounts recognized in our Consolidated Balance Sheet	$	145	$	(477)	$	309	$	(417)


Notes (Continued)			Table of Contents

~~Derivative Financial Statement Presentation~~

~~The fair value of commodity-related derivatives was reflected in the Consolidated Balance Sheet as follows:~~

September 30,
2021 December 31,
2020
Derivative Category Assets (Liabilities) Assets (Liabilities)
(Millions)
Derivatives designated as hedging instruments
Current $ 1 $ (31) $ 1 $ (2)
Noncurrent — — — —
Total derivatives designated as hedging instruments $ 1 $ (31) $ 1 $ (2)
Derivatives not designated as hedging instruments
Current $ 1,832 $ (2,203) $ 2 $ (3)
Noncurrent 240 (481) — (1)
Total derivatives not designated as hedging instruments $ 2,072 $ (2,684) $ 2 $ (4)
Gross amounts recognized $ 2,073 $ (2,715) $ 3 $ (6)
Counterparty and collateral netting offset (1,939) 2,252 — —
Amounts recognized in the Consolidated Balance Sheet $ 134 $ (463) $ 3 $ (6)

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ the pre-tax effects of commodity-related derivatives instrumentsin ~~the~~Net gain (loss) on commodity derivatives in our Consolidated Statement of Income were as follows:


			Gain (Loss)										Gain (Loss)
			Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		Income Statement Location	2021		2020		2021		2020				2022		2021
			(Millions)										(Millions)
Realized commodity-related derivatives designated as hedging instruments	Realized commodity-related derivatives designated as hedging instruments	Net gain (loss) on commodity derivatives	$	(20)	$	(1)	$	(28)	$	(1)	Realized commodity-related derivatives designated as hedging instruments		$	—	$	(2)
Realized commodity-related derivatives not designated as hedging instruments	Realized commodity-related derivatives not designated as hedging instruments	Net gain (loss) on commodity derivatives	(57)		—		(96)		(1)		Realized commodity-related derivatives not designated as hedging instruments		(69)		(34)
Unrealized commodity-related derivatives not designated as hedging instruments		Net gain (loss) on commodity derivatives	(314)		(3)		(317)		(2)
Total		Net gain (loss) on commodity derivatives	$	(391)	$	(4)	$	(441)	$	(4)
Unrealized commodity-related derivative instruments not designated as hedging instruments (1)											Unrealized commodity-related derivative instruments not designated as hedging instruments (1)		(125)		—
Net gain (loss) on commodity derivatives											Net gain (loss) on commodity derivatives		$	(194)	$	(36)

_______________

(1)Amounts for the three months ended March 31, 2022 include $59 million related to our Gas & NGL Marketing Services segment and $66 million related to our Other segment.

Contingent Features

Generally, collateral may be provided by a parent guaranty, letter of credit, or cash. If collateral is required, fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are offset against fair value amounts recognized for derivatives executed with the same counterparty.

We have specific trade and credit contracts that contain minimum credit rating requirements. These credit rating requirements typically give counterparties the right to suspend or terminate credit if our credit ratings are downgraded to non-investment grade status. Under such circumstances, we would need to post collateral to continue transacting business with ~~some of our~~these counterparties. As of ~~September 30, 2021~~March 31, 2022 the contractually required collateral in the event of a credit rating downgrade to non-investment grade status was ~~$33~~$32 million.


~~Notes (Continued)~~			~~Table of Contents~~

We maintain accounts with brokers or the clearing houses of certain exchanges to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, we may be required to deposit cash into these accounts. At ~~September 30, 2021,~~March 31, 2022, net cash collateral held on deposit in broker margin accounts was ~~$313~~$187 million.

Note 1312 – Contingent Liabilities ~~and Commitments~~

Reporting of Natural Gas-Related Information to Trade Publications

Direct and indirect purchasers of natural gas in various states filed individual and putative class actions against us, our former affiliate WPX Energy, Inc. (WPX) and its subsidiaries, and others alleging the manipulation of published gas price indices in 2000 and 2002 and seeking unspecified amounts of damages. Such actions were transferred to the Nevada federal district court for consolidation of discovery and pre-trial issues. We have agreed to indemnify WPX and its subsidiaries related to this matter.

In the individual action, filed by Farmland Industries Inc. (Farmland), the court issued an order on May 24, 2016, granting one of our co-defendant’s motion for summary judgment as to Farmland’s claims. On January 5, 2017, the court extended such ruling to us, entering final judgment in our favor. Farmland appealed. On March 27, 2018, the appellate court reversed the district court’s grant of summary judgment, and on April 10, 2018, the defendants filed a petition for rehearing with the appellate court, which was denied on May 9, 2018. The case was remanded to the Nevada federal district court and subsequently remanded to its originally filed court, the Kansas federal district court where we re-urged our motion for summary judgment. The district court denied the motion but granted our request to seek permission for an immediate appeal to the appellate court. Oral argument occurred before the appellate court on January 19, 2021. On June 22, 2021, the appellate court ruled that we are not entitled to summary judgment and remanded the case to the Kansas federal district court. The court has scheduled trial to begin May 9, 2022.

In the putative class actions, on March 30, 2017, the court issued an order denying the plaintiffs’ motions for class certification. On June 13, 2017, the United States Court of Appeals for the Ninth Circuit granted the plaintiffs’ petition for permission to appeal the order. On August 6, 2018, the Ninth Circuit reversed the order denying class certification and remanded the case to the Nevada federal district court.

We reached an agreement to settle two of the class actions, and on April 22, 2019, the Nevada federal district court preliminarily approved the settlements, which are on behalf of Kansas and Missouri class members. The final fairness hearing on the settlement occurred August 5, 2019, ~~and a~~the final judgment of dismissal with prejudice was ~~entered~~entered. We also reached an agreement to settle the ~~same day.~~individual action and on January 18, 2022, it was dismissed.

Two putative class actions remain unresolved, and they have been remanded to their originally filed court, the Wisconsin federal district court where the plaintiffs have re-urged their motion for class certification. On March 30, 2017, the Nevada federal district court issued an order denying the plaintiffs’ motions for class certification. On June 13, 2017, the United States Court of Appeals for the Ninth Circuit granted the plaintiff’s petition for permission to appeal the order. On August 6, 2018, the Ninth Circuit reversed the order denying class certification and remanded the case to the Nevada federal district court, where the plaintiffs re-urged their motion for class certification.


Notes (Continued)			Table of Contents

Trial was scheduled to begin June 14, 2021, but the court struck the setting and has not reset ~~it.~~it due to the pending motion for class certification.

Because of the uncertainty around the remaining unresolved issues, we cannot reasonably estimate a range of potential exposure at this time. However, it is reasonably possible that the ultimate resolution of these actions and our related indemnification obligation could result in a potential loss that may be material to our results of operations. In connection with this indemnification, we have an accrued liability balance associated with this matter and have exposure to future developments.

Alaska Refinery Contamination Litigation

We are involved in litigation arising from our ownership and operation of the North Pole Refinery in North Pole, Alaska, from 1980 until 2004, through our wholly owned subsidiaries Williams Alaska Petroleum Inc. (WAPI) and MAPCO Inc. We sold the refinery to Flint Hills Resources Alaska, LLC (FHRA), a subsidiary of Koch Industries, Inc., in 2004. The litigation involves three cases, with filing dates ranging from 2010 to 2014. The actions primarily arise from sulfolane contamination allegedly emanating from the refinery. A putative class action lawsuit was filed by James West in 2010 naming us, WAPI, and FHRA as defendants. We and FHRA filed claims against


~~Notes (Continued)~~			~~Table of Contents~~

each other seeking, among other things, contractual indemnification alleging that the other party caused the sulfolane contamination. In 2011, we and FHRA settled the claim with James West. Certain claims by FHRA against us were resolved by the Alaska Supreme Court in our favor. FHRA’s claims against us for contractual indemnification and statutory claims for damages related to off-site sulfolane were remanded to the Alaska Superior Court. The State of Alaska filed its action in March 2014, seeking damages. The City of North Pole (North Pole) filed its lawsuit in November 2014, seeking past and future damages, as well as punitive damages. Both we and WAPI asserted counterclaims against the State of Alaska and North Pole, and cross-claims against FHRA. FHRA has also filed cross-claims against us.

The underlying factual basis and claims in the cases are similar and may duplicate exposure. As such, in February 2017, the three cases were consolidated into one action in state court containing the remaining claims from the James West case and those of the State of Alaska and North Pole. The State of Alaska later announced the discovery of additional contaminants per- and polyfluoralkyl (PFOS and PFOA) offsite of the refinery, and the court permitted the State of Alaska to amend its complaint to add a claim for offsite PFOS/PFOA contamination. The court subsequently remanded the offsite PFOS/PFOA claims to the Alaska Department of Environmental Conservation for investigation and stayed the claims pending their potential resolution at the administrative agency. Several trial dates encompassing all three cases have been scheduled and stricken. In the summer of 2019, the court deconsolidated the cases for purposes of trial. A bench trial on all claims except North Pole’s claims began in October 2019.

In January 2020, the Alaska Superior Court issued its Memorandum of Decision finding in favor of the State of Alaska and FHRA, with the total incurred and potential future damages estimated to be $86 million. The court found that FHRA is not entitled to contractual indemnification from us because FHRA contributed to the sulfolane contamination. On March 23, 2020, the court entered final judgment in the case. Filing deadlines were stayed until May 1, 2020. However, on April 21, 2020, we filed a Notice of Appeal. We also filed post-judgment motions including a Motion for New Trial and a Motion to Alter or Amend the Judgment. These post-trial motions were resolved with the court’s denial of the last motion on June 11, 2020. Our Statement of Points on Appeal was filed on July 13, 2020. On June 22, 2020, the court stayed the North Pole’s case pending resolution of the appeal in the State of Alaska and FHRA case. On December 23, 2020, we filed our opening brief on appeal. ~~The court set oral~~Oral argument ~~for~~was held on December 15, 2021. We have recorded an accrued liability in the amount of our estimate of the probable loss. It is reasonably possible that we may not be successful on appeal and could ultimately pay up to the amount of judgment.

Royalty Matters

Certain of our customers, including Chesapeake Energy Corporation (Chesapeake), have been named in various lawsuits alleging underpayment of royalties and claiming, among other things, violations of anti-trust laws and the Racketeer Influenced and Corrupt Organizations Act. We have also been named as a defendant in certain of these cases filed in Pennsylvania based on allegations that we improperly participated with Chesapeake in causing the


Notes (Continued)			Table of Contents

alleged royalty underpayments. We believe that the claims asserted are subject to indemnity obligations owed to us by Chesapeake. Chesapeake has reached a settlement to resolve substantially all Pennsylvania royalty cases pending, which settlement applies to both Chesapeake and us. The settlement does not require any contribution from us. On August 23, 2021, the court approved the settlement, but two objectors filed an appeal with the United States Court of Appeals for the Fifth Circuit.

Litigation Against Energy Transfer and Related Parties

On April 6, 2016, we filed suit in Delaware Chancery Court against Energy Transfer Equity, L.P. (Energy Transfer) and LE GP, LLC (the general partner for Energy Transfer) alleging willful and material breaches of the Agreement and Plan of Merger (ETE Merger Agreement) with Energy Transfer resulting from the private offering by Energy Transfer on March 8, 2016, of Series A Convertible Preferred Units (Special Offering) to certain Energy Transfer insiders and other accredited investors. The suit seeks, among other things, an injunction ordering the defendants to unwind the Special Offering and to specifically perform their obligations under the ETE Merger Agreement. On April 19, 2016, we filed an amended complaint seeking the same relief. On May 3, 2016, Energy Transfer and LE GP, LLC filed an answer and counterclaims.


~~Notes (Continued)~~			~~Table of Contents~~

On May 13, 2016, we filed a separate complaint in Delaware Chancery Court against Energy Transfer, LE GP, LLC and the other Energy Transfer affiliates that are parties to the ETE Merger Agreement, alleging material breaches of the ETE Merger Agreement for failing to cooperate and use necessary efforts to obtain a tax opinion required under the ETE Merger Agreement (Tax Opinion) and for otherwise failing to use necessary efforts to consummate the merger under the ETE Merger Agreement wherein we would be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger). The suit sought, among other things, a declaratory judgment and injunction preventing Energy Transfer from terminating or otherwise avoiding its obligations under the ETE Merger Agreement due to any failure to obtain the Tax Opinion.

The Court of Chancery coordinated the Special Offering and Tax Opinion suits. On May 20, 2016, the Energy Transfer defendants filed amended affirmative defenses and verified counterclaims in the Special Offering and Tax Opinion suits, alleging certain breaches of the ETE Merger Agreement by us and seeking, among other things, a declaration that we were not entitled to specific performance, that Energy Transfer could terminate the ETC Merger, and that Energy Transfer is entitled to a $1.48 billion termination fee. On June 24, 2016, following a two-day trial, the court issued a Memorandum Opinion and Order denying our requested relief in the Tax Opinion suit. The court did not rule on the substance of our claims related to the Special Offering or on the substance of Energy Transfer’s counterclaims. On June 27, 2016, we filed an appeal of the court’s decision with the Supreme Court of Delaware, seeking reversal and remand to pursue damages. On March 23, 2017, the Supreme Court of Delaware affirmed the Court of Chancery’s ruling. On March 30, 2017, we filed a motion for reargument with the Supreme Court of Delaware, which was denied on April 5, 2017.

On September 16, 2016, we filed an amended complaint with the Court of Chancery seeking damages for breaches of the ETE Merger Agreement by defendants. On September 23, 2016, Energy Transfer filed a second amended and supplemental affirmative defenses and verified counterclaim with the Court of Chancery seeking, among other things, payment of the $1.48 billion termination fee due to our alleged breaches of the ETE Merger Agreement. On December 1, 2017, the court granted our motion to dismiss certain of Energy Transfer’s counterclaims, including its claim seeking payment of the $1.48 billion termination fee. On December 8, 2017, Energy Transfer filed a motion for reargument, which the Court of Chancery denied on April 16, 2018. The Court of Chancery originally scheduled trial for May 20 through May 24, 2019; the court struck that setting and reset trial to occur in 2020. All 2020 trial settings were struck due to COVID-19. Trial was held May 10 through May 17, 2021. Post-trial argument occurred September 16, 2021. On December 29, 2021, the court entered judgment in our favor in the amount of $410 million, plus interest at the contractual rate, and our reasonable attorneys’ fees and expenses. The judgment may be appealed to the Delaware Supreme Court.

Environmental Matters

We are a participant in certain environmental activities in various stages including assessment studies, cleanup operations, and/or remedial processes at certain sites, some of which we currently do not own. We are monitoring


Notes (Continued)			Table of Contents

these sites in a coordinated effort with other potentially responsible parties, the U.S. Environmental Protection Agency (EPA), or other governmental authorities. We are jointly and severally liable along with unrelated third parties in some of these activities and solely responsible in others. Certain of our subsidiaries have been identified as potentially responsible parties at various Superfund and state waste disposal sites. In addition, these subsidiaries have incurred, or are alleged to have incurred, various other hazardous materials removal or remediation obligations under environmental laws. As of ~~September 30, 2021,~~March 31, 2022, we have accrued liabilities totaling ~~$32~~$30 million for these matters, as discussed below. Estimates of the most likely costs of cleanup are generally based on completed assessment studies, preliminary results of studies, or our experience with other similar cleanup operations. At ~~September 30, 2021,~~March 31, 2022, certain assessment studies were still in process for which the ultimate outcome may yield different estimates of most likely costs. Therefore, the actual costs incurred will depend on the final amount, type, and extent of contamination discovered at these sites, the final cleanup standards mandated by the EPA or other governmental authorities, and other factors.

The EPA and various state regulatory agencies routinely ~~promulgate~~propose and ~~propose~~promulgate new rules and issue updated guidance to existing rules. These rulemakings include, but are not limited to, rules for reciprocating internal combustion engine and combustion turbine maximum achievable control technology, ~~air quality standards for one-hour nitrogen dioxide emissions,~~reviews and volatile organic compound and methane new source performance standards impacting design and operation of storage vessels, pressure valves, and compressors. The EPA previously issued its rule regardingupdates to the National Ambient Air Quality Standards, and rules for ~~ground-level ozone.~~new and existing source performance standards for volatile organic compound and methane. We ~~are monitoring the rule’s~~


~~Notes (Continued)~~			~~Table of Contents~~

~~implementation as it will trigger additional federal~~continuously monitor these regulatory changes and ~~state regulatory actions that~~how they may impact our operations. Implementation of ~~the~~new or modified regulations ~~is expected to~~may result in impacts to our operations and increase the cost of additions to Property, plant, and equipment – net in ~~the~~our Consolidated Balance Sheet for both new and existing facilities in affected ~~areas. We~~areas; however, due to regulatory uncertainty on final rule content and applicability timeframes, we are unable to reasonably estimate the cost of ~~additions that may be required to meet the regulations~~these regulatory impacts at this ~~time due to uncertainty created by various legal challenges to these regulations and the need for further specific regulatory guidance.~~time.

Continuing operations

Our interstate gas pipelines are involved in remediation activities related to certain facilities and locations for polychlorinated biphenyls, mercury, and other hazardous substances. These activities have involved the EPA and various state environmental authorities, resulting in our identification as a potentially responsible party at various Superfund waste sites. At ~~September 30, 2021,~~March 31, 2022, we have accrued liabilities of $4 million for these costs. We expect that these costs will be recoverable through rates.

We also accrue environmental remediation costs for natural gas underground storage facilities, primarily related to soil and groundwater contamination. At ~~September 30, 2021,~~March 31, 2022, we have accrued liabilities totaling $8 million for these costs.

Former operations

We have potential obligations in connection with assets and businesses we no longer operate. These potential obligations include remediation activities at the direction of federal and state environmental authorities and the indemnification of the purchasers of certain of these assets and businesses for environmental and other liabilities existing at the time the sale was consummated. Our responsibilities relate to the operations of the assets and businesses described below.

•Former agricultural fertilizer and chemical operations and former retail petroleum and refining operations;

•Former petroleum products and natural gas pipelines;

•Former petroleum refining facilities;

•Former exploration and production and mining operations;

•Former electricity and natural gas marketing and trading operations.

At ~~September 30, 2021,~~March 31, 2022, we have accrued environmental liabilities of ~~$20~~$18 million related to these matters.


Notes (Continued)			Table of Contents

Other Divestiture Indemnifications

Pursuant to various purchase and sale agreements relating to divested businesses and assets, we have indemnified certain purchasers against liabilities that they may incur with respect to the businesses and assets acquired from us. The indemnities provided to the purchasers are customary in sale transactions and are contingent upon the purchasers incurring liabilities that are not otherwise recoverable from third parties. The indemnities generally relate to breach of warranties, tax, historic litigation, personal injury, property damage, environmental matters, right of way, and other representations that we have provided.

At ~~September 30, 2021,~~March 31, 2022, other than as previously disclosed, we are not aware of any material claims against us involving the above-described indemnities; thus, we do not expect any of the indemnities provided pursuant to the sales agreements to have a material impact on our future financial position. Any claim for indemnity brought against us in the future may have a material adverse effect on our results of operations in the period in which the claim is made.

In addition to the foregoing, various other proceedings are pending against us that are incidental to our operations, none of which are expected to be material to our expected future annual results of operations, liquidity, and financial position.


~~Notes (Continued)~~			~~Table of Contents~~

Summary

We have disclosed our estimated range of reasonably possible losses for certain matters above, as well as all significant matters for which we are unable to reasonably estimate a range of possible loss. We estimate that for all other matters for which we are able to reasonably estimate a range of loss, our aggregate reasonably possible losses beyond amounts accrued are immaterial to our expected future annual results of operations, liquidity, and financial position. These calculations have been made without consideration of any potential recovery from third parties.

~~Commitments~~

~~Commitments for Sequent pipeline transportation capacity, storage capacity, and gas supply are approximately $424 million at September 30, 2021.~~

Note 1413 – Segment Disclosures

Our reportable segments are Transmission & Gulf of Mexico, Northeast G&P, West, and ~~Sequent.~~Gas & NGL Marketing Services. All remaining business activities are included in Other. (See Note 1 – General, Description of Business, and Basis of Presentation.)

Performance Measurement

We evaluate segment operating performance based upon Modified EBITDA. This measure represents the basis of our internal financial reporting and is the primary performance measure used by our chief operating decision maker in measuring performance and allocating resources among our reportable segments. Intersegment Service revenues primarily represent transportation services provided to our marketing business and gathering services provided to our oil and gas properties. Intersegment Product sales primarily represent the sale of NGLs from our natural gas processing plants and our oil and gas properties to our marketing business.

We define Modified EBITDA as follows:

•Net income (loss) before:

◦Provision (benefit) for income taxes;

◦Interest incurred, net of interest capitalized;

◦Equity earnings (losses);

◦~~Impairment of equity-method investments;~~

◦Other investing income (loss) – net;

◦~~Impairment of goodwill;~~

◦Depreciation and amortization expenses;

◦Accretion expense associated with asset retirement obligations for nonregulated operations.


Notes (Continued)			Table of Contents

•This measure is further adjusted to include our proportionate share (based on ownership interest) of Modified EBITDA from our equity-method investments calculated consistently with the definition described above.

The following table reflects the reconciliation of Modified EBITDA to Net income (loss) as reported in our Consolidated Statement of Income.


	Three Months Ended March 31,
		2022		2021
		(Millions)
Modified EBITDA by segment:
Transmission & Gulf of Mexico		$	697	$	660
Northeast G&P		418		402
West		260		222
Gas & NGL Marketing Services		13		93
Other		5		33
		1,393		1,410
Accretion expense associated with asset retirement obligations for nonregulated operations		(11)		(10)
Depreciation and amortization expenses		(498)		(438)

Equity earnings (losses)		136		131

Other investing income (loss) – net		1		2
Proportional Modified EBITDA of equity-method investments		(225)		(225)
Interest expense		(286)		(294)
(Provision) benefit for income taxes		(118)		(141)

Net income (loss)		$	392	$	435


Notes (Continued)			Table of Contents

The following table reflects the reconciliation of Segment revenues to Total revenues as reported in ~~the~~our Consolidated Statement of Income and Total assets by reportable segment.

Transmission & Gulf of Mexico Northeast G&P West Sequent (1) Other Eliminations Total
(Millions)
Three Months Ended September 30, 2021
Segment revenues:
Service revenues
External $ 812 $ 390 $ 300 $ — $ 4 $ — $ 1,506
Internal 24 9 12 — 4 (49) —
Total service revenues 836 399 312 — 8 (49) 1,506
Total service revenues – commodity consideration 13 (1) 52 — — — 64
Product sales
External 54 (1) 1,126 70 47 — 1,296
Internal 34 20 44 (16) 64 (146) —
Total product sales 88 19 1,170 54 111 (146) 1,296
Net gain (loss) on commodity derivatives — — (48) (322) (21) — (391)
Total revenues $ 937 $ 417 $ 1,486 $ (268) $ 98 $ (195) $ 2,475
Three Months Ended September 30, 2020
Segment revenues:
Service revenues
External $ 797 $ 366 $ 311 $ — $ 5 $ — $ 1,479
Internal 10 13 — — 3 (26) —
Total service revenues 807 379 311 — 8 (26) 1,479
Total service revenues – commodity consideration 6 2 32 — — — 40
Product sales
External 34 2 382 — — — 418
Internal 12 10 13 — — (35) —
Total product sales 46 12 395 — — (35) 418
Net gain (loss) on commodity derivatives — — (4) — — — (4)
Total revenues $ 859 $ 393 $ 734 $ — $ 8 $ (61) $ 1,933


~~Notes (Continued)~~			~~Table of Contents~~


		Transmission & Gulf of Mexico		Northeast G&P		West		Sequent (1)		Other		Eliminations		Total			Transmission & Gulf of Mexico		Northeast G&P		West		Gas & NGL Marketing Services (1)		Other		Eliminations		Total
		(Millions)															(Millions)
Nine Months Ended September 30, 2021
Segment revenues:
Service revenues
External		$	2,445	$	1,101	$	859	$	—	$	13	$	—	$	4,418
Internal		48		29		28		—		10		(115)		—
Total service revenues		2,493		1,130		887		—		23		(115)		4,418
Total service revenues – commodity consideration		34		4		126		—		—		—		164

Product sales
External		141		11		2,885		70		122		—		3,229
Internal		81		64		98		(16)		94		(321)		—
Total product sales		222		75		2,983		54		216		(321)		3,229
Net gain (loss) on commodity derivatives		—		—		(93)		(322)		(26)		—		(441)
Total revenues		$	2,749	$	1,209	$	3,903	$	(268)	$	213	$	(436)	$	7,370

Nine Months Ended September 30, 2020

Three Months Ended March 31, 2022																Three Months Ended March 31, 2022
Segment revenues:	Segment revenues:															Segment revenues:
Service revenues	Service revenues															Service revenues
External	External	$	2,394	$	1,052	$	938	$	—	$	15	$	—	$	4,399	External	$	845	$	370	$	316	$	1	$	5	$	—	$	1,537
Internal	Internal	37		39		—		—		10		(86)		—		Internal	29		10		15		—		4		(58)		—
Total service revenues	Total service revenues	2,431		1,091		938		—		25		(86)		4,399		Total service revenues	874		380		331		1		9		(58)		1,537
Total service revenues – commodity consideration	Total service revenues – commodity consideration	14		5		74		—		—		—		93		Total service revenues – commodity consideration	21		7		49		—		—		—		77
Product sales	Product sales															Product sales
External	External	104		17		1,018		—		—		—		1,139		External	51		5		11		1,015		22		—		1,104
Internal	Internal	30		25		39		—		—		(94)		—		Internal	49		31		176		(47)		82		(291)		—
Total product sales	Total product sales	134		42		1,057		—		—		(94)		1,139		Total product sales	100		36		187		968		104		(291)		1,104
Net gain (loss) on commodity derivatives		—		—		(4)		—		—		—		(4)
Net gain (loss) on commodity derivatives (2)																Net gain (loss) on commodity derivatives (2)	—		—		(5)		(115)		(74)		—		(194)
Total revenues	Total revenues	$	2,579	$	1,138	$	2,065	$	—	$	25	$	(180)	$	5,627	Total revenues	$	995	$	423	$	562	$	854	$	39	$	(349)	$	2,524

September 30, 2021
Total assets (2)		$	20,095	$	14,249	$	10,718	$	1,357	$	1,681	$	(2,115)	$	45,985
December 31, 2020
Three Months Ended March 31, 2021																Three Months Ended March 31, 2021
Segment revenues:																Segment revenues:
Service revenues																Service revenues
External																External	$	822	$	347	$	278	$	1	$	4	$	—	$	1,452
Internal																Internal	12		11		13		—		3		(39)		—
Total service revenues																Total service revenues	834		358		291		1		7		(39)		1,452
Total service revenues – commodity consideration																Total service revenues – commodity consideration	11		3		35		—		—		—		49
Product sales																Product sales
External																External	40		4		15		1,039		49		—		1,147
Internal																Internal	27		28		137		49		7		(248)		—
Total product sales																Total product sales	67		32		152		1,088		56		(248)		1,147
Net gain (loss) on commodity derivatives (2)																Net gain (loss) on commodity derivatives (2)	—		—		(2)		(34)		—		—		(36)
Total revenues																Total revenues	$	912	$	393	$	476	$	1,055	$	63	$	(287)	$	2,612

March 31, 2022																March 31, 2022
Total assets	Total assets	$	19,110	$	14,569	$	10,558	$	—	$	927	$	(999)	$	44,165	Total assets	$	20,698	$	15,145	$	10,479	$	2,258	$	2,009	$	(4,540)	$	46,049
December 31, 2021																December 31, 2021
Total assets																Total assets	$	20,394	$	14,939	$	10,330	$	2,127	$	2,991	$	(3,169)	$	47,612

______________

(1) ~~Sequent nets revenues from marketing~~See Note 1 – General, Description of Business, and ~~trading activities with the associated costs. Sequent records~~Basis of Presentation.

(2) We record transactions that qualify as derivatives at fair value with changes in fair value recognized in earnings in the period of change and characterized as unrealized gains or losses. Gains and losses on derivatives held for energy trading purposes are presented on a net basis in revenue.

(2) The increase at our Other segment is primarily due to the acquisitions of oil and gas properties in 2021. In February 2021, we acquired properties in the Wamsutter field in Wyoming from a supermajor oil and gas


Notes (Continued)			Table of Contents

~~company~~Note 14 – Subsequent Event

Trace Acquisition

In April 2022, we completed the acquisition of 100 percent of Gemini Arklatex, LLC through which we acquired the gas gathering and related assets of Trace Midstream, located in the Haynesville Shale region (Trace Acquisition), for approximately ~~$79~~$950 million ~~a portion~~funded with available sources of ~~which~~short-term liquidity, subject to working capital and post-closing adjustments. The purpose of the Trace Acquisition was ~~paid~~to expand our footprint into the East Texas region of the Haynesville Shale region, increasing in-basin scale in one of the largest growth basins in the ~~prior year. We recorded $290 million~~country, and to advance our clean energy strategy. The transaction closed on April 29, 2022. Due to the timing, the initial purchase price accounting for the transaction was not yet complete at the time of property, plant, and equipment and $207 million of ARO related to this transaction. In June 2021, we acquired additional properties also in the Wamsutter field in Wyoming from an oil and gas company for approximately $86 million in cash, which is net of approximately $48 million reflecting the full settlement of outstanding receivables. We recorded $257 million of property, plant, and equipment and $125 million of ARO related to this transaction. Our oil and gas exploration and production activities are accounted for under the successful efforts method.

~~The following table reflects the reconciliation of~~ ~~Modified EBITDA~~ to ~~Net income (loss)~~ ~~as reported in the Consolidated Statement of Income.~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(Millions)
Modified EBITDA by segment:
Transmission & Gulf of Mexico $ 630 $ 616 $ 1,936 $ 1,893
Northeast G&P 442 387 1,253 1,126
West 276 247 822 715
Sequent (281) — (281) —
Other 38 (7) 91 8
1,105 1,243 3,821 3,742
Accretion expense associated with asset retirement obligations for nonregulated operations (12) (10) (33) (27)
Depreciation and amortization expenses (487) (426) (1,388) (1,285)
Impairment of goodwill — — — (187)
Equity earnings (losses) 157 106 423 236
Impairment of equity-method investments — — — (938)
Other investing income (loss) – net 2 2 6 6
Proportional Modified EBITDA of equity-method investments (247) (189) (702) (573)
Interest expense (292) (292) (884) (882)
(Provision) benefit for income taxes (53) (111) (313) (24)
Net income (loss) $ 173 $ 323 $ 930 $ 68

filing.

3831

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

We are an energy company committed to being the leader in providing infrastructure ~~company focused on connecting North America’s significant hydrocarbon resource plays to growing markets for~~that safely delivers natural gas ~~and NGLs through our gas pipeline and midstream business.~~products to reliably fuel the clean energy economy. Our operations are located in the United States.

Our interstate natural gas pipeline strategy is to create value by maximizing the utilization of our pipeline capacity by providing high quality, low cost transportation of natural gas to large and growing markets. Our gas pipeline businesses’ interstate transmission and storage activities are subject to regulation by the FERC and as such, our rates and charges for the transportation of natural gas in interstate commerce, and the extension, expansion or abandonment of jurisdictional facilities and accounting, among other things, are subject to regulation. ~~Rates~~The rates are established ~~in accordance with~~primarily through the FERC’s ratemaking ~~process.~~process, but we also may negotiate rates with our customers pursuant to the terms of our tariffs and FERC policy. Changes in commodity prices and volumes transported have limited near-term impact on these revenues because the majority of cost of service is recovered through firm capacity reservation charges in transportation rates.

The ongoing strategy of our midstream operations is to safely and reliably operate large-scale midstream infrastructure where our assets can be fully utilized and drive low per-unit costs. We focus on consistently attracting new business by providing highly reliable service to our customers. These services include natural gas gathering, processing, treating, and compression, NGL fractionation and transportation, crude oil production handling and transportation, marketing services for NGL, crude oil and natural gas, as well as storage facilities.

Consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources, our operations are conducted, managed, and presented within the following reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West, and ~~Sequent.~~Gas & NGL Marketing Services. All remaining business ~~activities, including our recently acquired upstream operations, as well as corporate~~ activities are included in Other. Our reportable segments are comprised of the following businesses:

•Transmission & Gulf of Mexico is comprised of our interstate natural gas pipelines, Transco and Northwest Pipeline, as well as natural gas gathering and processing and crude oil production handling and transportation assets in the Gulf Coast region, including a 51 percent interest in Gulfstar One (a consolidated VIE), which is a proprietary floating production system, a 50 percent equity-method investment in Gulfstream, and a 60 percent equity-method investment in Discovery.

•Northeast G&P is comprised of our midstream gathering, processing, and fractionation businesses in the Marcellus Shale region primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio, as well as a 65 percent interest in our Northeast JV (a consolidated VIE) which operates in West Virginia, Ohio, and Pennsylvania, a 66 percent interest in Cardinal (a consolidated VIE) which operates in Ohio, a 69 percent equity-method investment in Laurel Mountain, a 50 percent equity-method investment in Blue Racer, (we previously effectively owned a 29 percent indirect interest in Blue Racer through our 58 percent equity-method investment in Caiman II until acquiring a controlling interest of Caiman II in November 2020 and the remaining interest in September 2021), and Appalachia Midstream Investments, a wholly owned subsidiary that owns equity-method investments with an approximate average 66 percent interest in multiple gas gathering systems in the Marcellus Shale region.

•West is comprised of our gas gathering, processing, and treating operations in the Rocky Mountain region of Colorado and Wyoming, the Barnett Shale region of north-central Texas, the Eagle Ford Shale region of south Texas, the Haynesville Shale region of northwest Louisiana, and the Mid-Continent region which includes the Anadarko and Permian basins. This segment also includes our NGL ~~and natural gas marketing business (excluding the activities within the Sequent segment described below),~~ storage facilities, an undivided 50 percent interest in an NGL fractionator near Conway, Kansas, a 50 percent equity-method investment in OPPL, a 50 percent equity-method investment in RMM, a 20 percent equity-method investment in Targa Train 7, and a 15 percent interest in Brazos Permian ~~II.~~II, LLC.

•Gas & NGL Marketing Services includes our NGL and natural gas marketing and trading operations previously reported within the West segment prior to January 1, 2022, as well as the operations acquired in the Sequent Acquisition in 2021. This segment includes risk management and the storage and transportation of natural gas on strategically positioned assets, including our Transco system.

3932


Management’s Discussion and Analysis (Continued)			T ~~able~~Table of Contents

•Sequent includes the operations of Sequent Energy Management, L.P. and Sequent Energy Canada, Corp. (collectively, Sequent) acquired on July 1, 2021. Sequent focuses on risk management and the marketing, trading, storage, and transportation of natural gas for a diverse set of natural gas utilities, municipalities, power generators, and producers, and moves gas to markets through transportation and storage agreements on strategically positioned assets, including along our Transco system.

Dividends

In ~~September 2021,~~March 2022, we paid a regular quarterly dividend of ~~$0.41~~$0.425 per share.

Overview of ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

Net income (loss) attributable to The Williams Companies, Inc., for the ~~nine~~three months ended ~~September 30, 2021, increased $800~~March 31, 2022, decreased $46 million compared to the ~~nine~~three months ended ~~September 30, 2020, reflecting:~~

•~~The absence~~March 31, 2021, reflecting the benefit of ~~$938 million of~~ ~~Impairment of equity-method investments~~higher service revenues from commodity-based gathering and processing rates in the ~~first quarter~~West and Transco’s Leidy South project placed in service during the second half of ~~2020;~~

•~~A $190 million favorable change in our~~2021, higher commodity margins, ~~primarily due to increases in net realized sales prices~~ and ~~volumes. Our commodity margins are comprised of the net sum of~~ ~~Service revenues – commodity consideration~~, ~~Product sales,~~ ~~net realized gains and losses on~~higher results from our ~~commodity derivatives,~~ ~~Product costs,~~ ~~and~~ ~~Processing commodity expenses; however,~~ ~~Product sales~~ ~~at our Other segment reflect sales related to our recently acquired~~ upstream operations ~~and are excluded from our~~associated with increased scale of operations, more than offset by a $123 million net unrealized loss on commodity ~~margins;~~

•~~A $210 million increase in~~ ~~Product sales~~ ~~net of realized losses on our commodity~~ derivatives, ~~at our Other segment reflecting net realized sales related to our recently acquired upstream operations;~~

•~~The absence of $187 million of~~ ~~Impairment of goodwill~~ ~~in 2020, of which $65 million was attributable to noncontrolling interests;~~

•~~A $187 million increase in equity earnings, primarily due to~~ the absence of ~~our $78~~a $77 million ~~share of an impairment of goodwill recorded by an equity-method investee~~favorable impact in ~~2020~~2021 from Winter Storm Uri, and ~~higher volumes~~increased intangible asset amortization and selling, general, and administrative expenses, primarily resulting from ~~certain of our Northeast G&P investments.~~the Sequent Acquisition.

~~These favorable changes were partially offset by:~~

•~~$315~~Our results include $123 million ~~change in~~of net unrealized losses onfrom commodity derivatives ~~discussed below;~~

•~~A $289 million unfavorable change in provision for income taxes, driven by higher pre-tax earnings;~~

•~~$155 million of higher~~ ~~Operating and maintenance expensesprimarily due to the inclusion of our recently acquired upstream operations at our Other segment and higher employee-related expenses;~~

•~~A $103 million unfavorable change in~~ ~~Depreciation and amortization expenses.~~

~~The net unrealized losses on commodity derivatives include $277 million related to derivative contracts within the Sequent segment that are~~ not designated as hedges for accounting purposes. ~~Sequent~~We can experience significant earnings volatility from the fair value accounting required for the derivatives used to hedge a portion of the economic value of the underlying transportation and storage ~~portfolio.~~marketing portfolio as well as upstream related production. However, the unrealized fair value measurement gains and losses are generally offset by valuation changes in the economic value of the underlying ~~transportation and storage portfolio,~~production or contracts, which is not ~~accounted for on a fair value basis.~~

~~The net unrealized losses on commodity derivatives also includes~~recognized until the ~~impact from derivative contracts from certain of our other businesses that are not designated as hedges for accounting purposes.~~underlying transaction occurs.

The following discussion and analysis of results of operations and financial condition and liquidity should be read in conjunction with ~~the~~our consolidated financial statements and notes thereto of this Form 10‑Q and our Annual Report on Form 10-K dated February ~~24, 2021.~~


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

28, 2022.

Recent Developments

~~Share Repurchase Program~~

In September 2021, our Board of Directors authorized a new share repurchase program with a maximum dollar limit of $1.5 billion. Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions or in such other manner as determined by our management. Our management will also determine the timing and amount of any repurchases based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or discontinued at any time. This stock repurchase program does not have an expiration date. There were no repurchases under the program through September 30, 2021.

~~Sequent~~Trace Acquisition

In ~~July 2021,~~April 2022, we completed the acquisition of 100 percent of ~~Sequent Energy Management, L.P.~~Gemini Arklatex, LLC through which we acquired the gas gathering and ~~Sequent Energy Canada, Corp. (collectively, Sequent). Total consideration~~related assets of Trace Midstream, located in the Haynesville Shale region (Trace Acquisition), for ~~this acquisition was $159~~approximately $950 million, ~~which included $109 million related~~subject to working ~~capital. Of the total consideration, $134 million of cash was paid in the third quarter of 2021~~capital and ~~$25 million was accrued in the same period for~~ post-closing ~~working capital~~ adjustments. Sequent focuses on risk management and the marketing, trading, storage, and transportation of natural gas for a diverse set of natural gas utilities, municipalities, power generators, and producers, and moves gas to markets through transportation and storage agreements on strategically positioned assets, including along our Transco system. The addition of Sequent complements the current geographic footprint of our core pipeline transportation and storage business and is expected to enhance our gas marketing capabilities and expand the suite of services we can provide to our existing midstream customers.

~~Upstream Joint Ventures~~

In the third quarter of 2021, we cross-conveyed certain of our oil and gas properties in the Wamsutter field (see Note 14 – Segment Disclosures of Notes to Consolidated Financial Statements) to a venture along with certain oil and gas properties cross-conveyed by a third-party operator in the region. The combined properties consist of over 1.2 million net acres and an interest in over 3,500 wells. Under the termspurpose of the ~~agreement,~~Trace Acquisition was to expand our ~~partner owns a 25 percent undivided interest in each well’s working interest percentage, and we own a 75 percent undivided interest in each well’s working interest percentage.~~

~~In August 2021, we agreed to sell 50 percent of certain of our existing wells and wellbore rights in~~footprint into the ~~South Mansfield area~~East Texas region of the Haynesville Shale region, ~~to a third party (see Note 14 – Segment Disclosures~~increasing in-basin scale in one of ~~Notes to Consolidated Financial Statements), in a strategic effort to develop~~ the acreage, thereby enhancing the value of our midstream natural gas infrastructure. Under the agreement, the third party will operate the upstream position and develop the undeveloped acreage, and we will continue to operate and retain full ownership of our midstream assets. We will additionally retain ownershiplargest growth basins in the undeveloped acreage until certain acreage earning and carried interest hurdles are met, at which time remaining undeveloped acreage will be conveyed to the third party resulting in their 75 percent and our 25 percent ownership.

~~Expansion Project Update~~

~~Transmission & Gulf of Mexico~~

~~Southeastern Trail~~

In October 2019, we received approval from the FERC to expand Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from the Pleasant Valley interconnect with Dominion’s Cove Point Pipeline in Virginia to the Station 65 pooling point in Louisiana. We placed 230 Mdth/d of capacity under the project into service in the fourth quarter of 2020, and the project was fully in service on January 1, 2021. In total, the project increased capacity by 296 Mdth/d.


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

~~COVID-19~~

The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. We continue to monitor the COVID-19 pandemic and have taken steps intended to protect the safety of our customers, employees, and communities,country, and to ~~support the continued delivery of safe and reliable service to~~advance our ~~customers and the communities we serve. Our financial condition, results of operations, and liquidity have not been materially impacted by direct effects of COVID-19.~~clean energy strategy. The transaction closed on April 29, 2022.

Company Outlook

Our strategy is to provide a large-scale, reliable, and clean energy infrastructure designed to maximize the opportunities created by the vast supply of natural gas and natural gas products that exists in the United States. We accomplish this by connecting the growing demand for cleaner fuels and feedstocks with our major positions in the premier natural gas and natural gas products supply basins. We continue to maintain a strong commitment to safety, environmental stewardship including seeking opportunities for renewable energy ventures, operational excellence, and customer satisfaction. We believe that accomplishing these goals will position us to deliver safe, ~~and~~ reliable, ~~service~~clean energy services to our customers and an attractive return to our shareholders. Our business plan for ~~2021~~2022 includes a continued focus on earnings and cash flow ~~growth, while continuing to improve leverage metrics and control operating costs.~~growth.

In ~~2021,~~2022, our operating results are expected to benefit from higher commodity prices and volume growth in our ~~Northeast G&P gathering~~Haynesville, Ohio Valley Midstream, and ~~processing volumes.~~Cardinal areas. We also anticipate increases resulting from recently completed Transco expansion projects, development of our upstream oil and ~~higher Gulf~~gas properties, and our recently completed Trace Acquisition. These increases are partially offset by the absence of ~~Mexico~~favorable results ~~despite recent hurricane related shut-ins. Our results also benefited from the overall net favorable impact of unusually high natural gas prices in the first quarter associated with~~captured during Winter Storm Uri in 2021 by our Gas & NGL Marketing Services business and ~~more recently~~lower expected results in the Bradford Supply Hub primarily due to lower gathering rates resulting from annual cost of service contract redetermination.


Management’s Discussion and Analysis (Continued)			Table of Contents

We seek to maintain a strong ~~commodity price environment, including contributions from our upstream properties. These increases will be partially offset by decreases~~financial position and liquidity, as well as manage a diversified portfolio of safe, clean, and reliable energy infrastructure assets that continue to serve key growth markets and supply basins in the West, including a reduction in NGL transportation volumes on OPPL and certain fee reductions in the Haynesville area in exchange for future value in upstream natural gas properties. We also expect an increase in expenses, including higher incentive compensation costs and operating taxes.

United States. Our growth capital and investment expenditures in ~~2021~~2022 are expected to be in a range from ~~$1.0~~$2.25 billion to ~~$1.2~~$2.35 billion. Growth capital spending in ~~2021~~2022 primarily includes Transco expansions, all of which are fully contracted with firm transportation agreements, projects supporting the Northeast G&P business, ~~midstream opportunities~~the Trace Acquisition, and an expansion in the ~~Haynesville area~~Western Gulf area. We also expect to invest capital in the ~~West segment,~~development of our upstream oil and ~~the recent acquisitions of certain upstream operations and Sequent.~~gas properties. In addition to growth capital and investment expenditures, we also remain committed to projects that maintain our assets for safe and reliable operations, as well as projects that meet legal, regulatory, and/or contractual commitments.

Potential risks and obstacles that could impact the execution of our plan include:

•Continued negative impacts of COVID-19 driving a global recession, which could result in ~~further~~ downturns in financial markets and commodity prices, as well as impact demand for natural gas and related products;

•Opposition to, and ~~legal~~ regulations affecting, our infrastructure projects, including the risk of delay or denial in permits and approvals needed for our projects;

•Counterparty credit and performance risk;

•Unexpected significant increases in capital expenditures or delays in capital project execution;

•Unexpected changes in customer drilling and production activities, which could negatively impact gathering and processing volumes;

•Lower than anticipated demand for natural gas and natural gas products which could result in lower than expected volumes, energy commodity prices, and margins;

•General economic, financial markets, or ~~further~~ industry downturns, including increased inflation and interest rates;


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

•Physical damages to facilities, including damage to offshore facilities by weather-related events;

•Other risks set forth under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, as filed with the SEC on February ~~24, 2021,~~28, 2022, as supplemented by the ~~disclosures~~disclosure in Part II, Item 1A. ofRisk Factors in this Quarterly Report on Form ~~10-Q for the quarter ended September 30, 2021.~~10-Q.

We seek to maintain a strong financial position and liquidity, as well as manage a diversified portfolio of energy infrastructure assets that continue to serve key growth markets and supply basins in the United States.

Expansion Projects

Our ongoing major expansion projects include the following:

Transmission & Gulf of Mexico

~~Leidy South~~

In July 2020, we received approval from the FERC for the project to expand Transco’s existing natural gas transmission system and also extend its system through a capacity lease with National Fuel Gas Supply Corporation that will enable us to provide incremental firm transportation from Clermont, Pennsylvania and from the Zick interconnection on Transco’s Leidy Line to the River Road regulating station in Lancaster County, Pennsylvania. We placed 125 Mdth/d of capacity under the project into service in the fourth quarter of 2020, and in September and October of 2021, we placed approximately 382 Mdth/d of additional capacity into service. We plan to place the remainder of the project into service by year-end 2021. The project is expected to increase capacity by 582 Mdth/d.

Regional Energy Access

In March 2021, we filed an application with the FERC for the project to expand Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from receipt points in northeastern Pennsylvania to multiple delivery points in Pennsylvania, New Jersey, and Maryland. We plan to place the project into service as early as the fourth quarter of ~~2023,~~2024, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 829 Mdth/d.

4334


Management’s Discussion and Analysis (Continued)			T ~~able~~Table of Contents

Results of Operations

Consolidated Overview

The following table and discussion is a summary of our consolidated results of operations for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, compared to the three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021. The results of operations by segment are discussed in further detail following this consolidated overview discussion.


		Three Months Ended September 30,							Nine Months Ended September 30,								Three Months Ended March 31,
		2021		2020		$ Change*	% Change*		2021		2020		$ Change*	% Change*				2022		2021		$ Change*	% Change*
		(Millions)							(Millions)								(Millions)
Revenues:	Revenues:															Revenues:
Service revenues	Service revenues	$	1,506	$	1,479	+27	+2	%	$	4,418	$	4,399	+19	—	%	Service revenues		$	1,537	$	1,452	+85	+6	%
Service revenues – commodity consideration	Service revenues – commodity consideration	64		40		+24	+60	%	164		93		+71	+76	%	Service revenues – commodity consideration		77		49		+28	+57	%
Product sales	Product sales	1,296		418		+878	NM		3,229		1,139		+2,090	+183	%	Product sales		1,104		1,147		-43	-4	%
Net gain (loss) on commodity derivatives	Net gain (loss) on commodity derivatives	(391)		(4)		-387	NM		(441)		(4)		-437	NM		Net gain (loss) on commodity derivatives		(194)		(36)		-158	NM
Total revenues	Total revenues	2,475		1,933					7,370		5,627					Total revenues		2,524		2,612
Costs and expenses:	Costs and expenses:															Costs and expenses:
Product costs	Product costs	1,043		380		-663	-174	%	2,672		1,047		-1,625	-155	%	Product costs		803		932		+129	+14	%
Processing commodity expenses	Processing commodity expenses	28		21		-7	-33	%	67		49		-18	-37	%	Processing commodity expenses		30		21		-9	-43	%
Operating and maintenance expenses	Operating and maintenance expenses	409		336		-73	-22	%	1,148		993		-155	-16	%	Operating and maintenance expenses		394		360		-34	-9	%
Depreciation and amortization expenses	Depreciation and amortization expenses	487		426		-61	-14	%	1,388		1,285		-103	-8	%	Depreciation and amortization expenses		498		438		-60	-14	%
Selling, general, and administrative expenses	Selling, general, and administrative expenses	152		114		-38	-33	%	389		354		-35	-10	%	Selling, general, and administrative expenses		154		123		-31	-25	%

Impairment of goodwill		—		—		—	—	%	—		187		+187	+100	%

Other (income) expense – net	Other (income) expense – net	1		15		+14	+93	%	12		28		+16	+57	%	Other (income) expense – net		(9)		(1)		+8	NM
Total costs and expenses	Total costs and expenses	2,120		1,292					5,676		3,943					Total costs and expenses		1,870		1,873
Operating income (loss)	Operating income (loss)	355		641					1,694		1,684					Operating income (loss)		654		739
Equity earnings (losses)	Equity earnings (losses)	157		106		+51	+48	%	423		236		+187	+79	%	Equity earnings (losses)		136		131		+5	+4	%
Impairment of equity-method investments		—		—		—	—	%	—		(938)		+938	+100	%

Other investing income (loss) – net	Other investing income (loss) – net	2		2		—	—	%	6		6		—	—	%	Other investing income (loss) – net		1		2		-1	-50	%
Interest expense	Interest expense	(292)		(292)		—	—	%	(884)		(882)		-2	—	%	Interest expense		(286)		(294)		+8	+3	%
Other income (expense) – net	Other income (expense) – net	4		(23)		+27	NM		4		(14)		+18	NM		Other income (expense) – net		5		(2)		+7	NM
Income (loss) before income taxes	Income (loss) before income taxes	226		434					1,243		92					Income (loss) before income taxes		510		576
Less: Provision (benefit) for income taxes	Less: Provision (benefit) for income taxes	53		111		+58	+52	%	313		24		-289	NM		Less: Provision (benefit) for income taxes		118		141		+23	+16	%

Net income (loss)	Net income (loss)	173		323					930		68					Net income (loss)		392		435
Less: Net income (loss) attributable to noncontrolling interests	Less: Net income (loss) attributable to noncontrolling interests	8		14		+6	+43	%	35		(27)		-62	NM		Less: Net income (loss) attributable to noncontrolling interests		12		9		-3	-33	%
Net income (loss) attributable to The Williams Companies, Inc.	Net income (loss) attributable to The Williams Companies, Inc.	$	165	$	309				$	895	$	95				Net income (loss) attributable to The Williams Companies, Inc.		$	380	$	426

* + = Favorable change; - = Unfavorable change; NM = A percentage calculation is not meaningful due to a change in signs, a zero-value denominator, or a percentage change greater than 200.


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

Three months ended ~~September 30, 2021~~March 31, 2022 vs. three months ended ~~September 30, 2020~~March 31, 2021

Service revenues increased primarily due to higher gathering and processing rates driven by favorable commodity prices and annual contractual rate escalations for certain of our West and Northeast operations as well as higher transportation fee revenues associated with the Leidy South expansion ~~projects~~project placed in service at Transco in ~~2020 and~~the second half of 2021.

Service revenues – commodity consideration increased primarily due to higher NGL prices. These revenues represent consideration we receive in the form of commodities as full or partial payment for processing services


Management’s Discussion and Analysis (Continued)			Table of Contents

provided. Most of these NGL volumes are sold during the month processed and therefore are offset within Product costs below.

Product sales ~~increased~~decreased primarily due to the impact of netting the 2022 legacy natural gas marketing revenues with the associated costs (see Note 1 – General, Description of Business, and Basis of Presentation of Notes to Consolidated Financial Statements) and lower gas marketing sales prices related to the absence of severe winter weather in 2022 as compared to the first quarter of 2021. These decreases were partially offset by higher ~~prices~~marketing sales volumes of NGLs and ~~volumes~~natural gas, including the increase associated with the Sequent Acquisition in third-quarter 2021, higher sales associated with our ~~marketing activities,~~upstream operations presented in our Other segment, and higher sales prices ~~partially offset by lower volumes~~ related to our equity NGL sales activities. ~~This increase also includes~~As we are acting as agent for natural gas marketing customers of our ~~recently acquired upstream operations, as well as~~Gas & NGL Marketing Services segment, our ~~Sequent segment. Marketing~~natural gas marketing product sales ~~for Sequent~~ are ~~netted with its product~~presented net of the related costs ~~within~~ ~~Product sales.~~of those activities.

Net gain (loss) on commodity derivatives includes realized and unrealized gains and losses from derivative instruments. The unfavorable change primarily reflects net realized and unrealized losses in our ~~Sequent segment, as well as the impact from derivative contracts from certain of our other businesses.~~Other and Gas & NGL Marketing Services segments.

Product costs ~~increased~~decreased primarily due to the impact of netting the 2022 legacy natural gas marketing revenues with the associated costs. These decreases were partially offset by higher prices and volumes for our NGL marketing activities, as well as higher NGL prices associated with volumes acquired as commodity consideration related to our equity NGL production activities.

The net sum of Service revenues – commodity consideration, Product sales, Product costs, Processing commodity expenses, and net realized gains and losses on commodity derivatives related to sales of product comprise our commodity margins. However, Product sales at our Other segment reflect sales related to our ~~oil and gas producing properties~~upstream operations and are excluded from our commodity margins.

Operating and maintenance expenses increased primarily due to ~~the inclusion of our recently acquired upstream operations,~~increased costs associated with Transco's Leidy South expansion project placed in service in 2021 and higher ~~employee-related~~ expenses ~~which include increased incentive compensation costs and the absence of a 2020 favorable impact of a change in an employee benefit policy.~~associated with our upstream operations.

Depreciation and amortization expensesincreased primarily due to ~~the~~ amortization of ~~intangible assets~~intangibles acquired in the Sequent Acquisition and an increase in depreciation at Transco related to ARO revisions (offset in Other (income) expense – net within Operating income (loss) resulting ~~from Sequent business combination accounting, the inclusion~~in no net impact on our results of ~~our recently acquired upstream operations, as well as reduced estimated useful lives for certain facilities in our West segment expected to be decommissioned during 2021.~~operations).

Selling, general, and administrative expenses increased primarily due to higher employee-related expenses ~~which include increased incentive compensation costs and expenses~~ associated with the Sequent ~~acquisition, as well as higher expenses for various corporate costs.~~Acquisition.

~~Equity earnings (losses)~~Other (income) expense – net within Operating income (loss) changed favorably primarily due to ~~increases at Appalachia Midstream Investments, Laurel Mountain, and Aux Sable.~~

~~The favorable change~~the deferral of ARO depreciation (offset in ~~Other income (expense) –~~Depreciation and amortization expenses resulting in no net ~~below~~ ~~Operating income (loss)~~ ~~includes higher allowance for equity funds used during construction (equity AFUDC) and the absence~~impact on our results of ~~a 2020 write-off of a regulatory asset related to a cancelled project.~~operations).

Provision (benefit) for income taxes changed favorably primarily due to lower pre-tax income. See Note 65 – Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods.

~~Nine months ended September 30, 2021 vs. nine months ended September 30, 2020~~

~~Service revenues~~ increased primarily due to higher transportation fee revenues associated with expansion projects placed in service at Transco in 2020 and 2021, higher revenue associated with reimbursable electricity expenses, higher processing and fractionation revenues in our Northeast G&P segment, and an increase associated


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

with Norphlet. This increase was partially offset by lower volumes driven by production declines, the impact of which is substantially offset by higher MVC revenue, and lower deferred revenue amortization, as well as the absence of a temporary volume deficiency fee from a customer in our West segment. Additional offsets include lower deferred revenue amortization and lower volumes primarily from producer operational issues, both in the Transmission & Gulf of Mexico segment.

~~Service revenues – commodity consideration~~ increased primarily due to higher NGL prices. These revenues represent consideration we receive in the form of commodities as full or partial payment for processing services provided. Most of these NGL volumes are sold during the month processed and therefore are offset within ~~Product costs~~ ~~below.~~

~~Product sales~~ increased primarily due to higher prices and volumes associated with our marketing activities, and the inclusion of our recently acquired upstream operations, as well as our Sequent segment. This increase also includes higher prices related to our equity NGL sales activities. Marketing sales for Sequent are netted with its product costs within ~~Product sales.~~

~~Net gain (loss) on commodity derivatives~~ includes realized and unrealized gains and losses from derivative instruments. The unfavorable change primarily reflects unrealized losses in our Sequent segment, as well as the impact from derivative contracts from certain of our other businesses.

~~Product costs~~ increased primarily due to higher prices and volumes associated with our marketing activities, as well as higher NGL prices associated with volumes acquired as commodity consideration related to our equity NGL production activities.

~~Processing commodity expenses~~ ~~increased primarily due to higher prices for natural gas purchases associated with our equity NGL production activities, partially offset by lower volumes.~~

~~Operating and maintenance expenses~~ increased primarily due to the inclusion of our recently acquired upstream operations and higher employee-related expenses, which include increased incentive compensation costs and the absence of a 2020 favorable impact of a change in an employee benefit policy, as well as higher reimbursable electricity expenses.

~~Depreciation and amortization expenses~~ increased primarily due to the inclusion of our recently acquired upstream operations, reduced estimated useful lives for certain facilities in our West segment expected to be decommissioned during 2021, the amortization of intangible assets resulting from Sequent business combination accounting, and new assets placed in-service at Transco.

~~Selling, general, and administrative expenses~~ increased primarily due to higher employee-related expenses, which include increased incentive compensation costs and expenses at Sequent and the absence of 2020 favorable impact of a change in an employee benefit policy, and were partially offset by lower expenses for various corporate costs.

~~Impairment of goodwill~~ ~~reflects the 2020 charge at the Northeast reporting unit (see Note 11 – Fair Value Measurements and Guarantees of Notes to Consolidated Financial Statements).~~

~~The favorable change in~~ ~~Other (income) expense – net~~ ~~within~~ ~~Operating income (loss)~~ ~~was due to the gains on the sales of certain assets in our West segment, offset by a Transco cashout surcharge.~~

~~Equity earnings (losses)~~ changed favorably primarily due to the absence of the 2020 impairment of goodwill at RMM, increases at Appalachia Midstream Investments, Discovery, Aux Sable and Laurel Mountain, partially offset by a decrease at OPPL.

~~The change in~~ ~~Impairment of equity-method investments~~ ~~reflects the absence of 2020 impairments to various equity-method investments (see Note 11 – Fair Value Measurements and Guarantees of Notes to Consolidated Financial Statements).~~


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

~~The favorable change in~~ ~~Other income (expense) – net~~ ~~below~~ ~~Operating income (loss)~~ ~~includes higher equity AFUDC and the write-off of a regulatory asset related to a 2020 cancelled project, offset by the unfavorable impact of a 2021 accrual for a loss contingency.~~

~~Provision (benefit) for income taxes~~ changed unfavorably primarily due to higher pre-tax income. See Note 6 – Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods.

~~The unfavorable change in~~ ~~Net income (loss) attributable to noncontrolling interests~~ ~~is primarily due to the absence of our partner’s share of the 2020 goodwill impairment at the Northeast reporting unit.~~

Period-Over-Period Operating Results - Segments

We evaluate segment operating performance based upon Modified EBITDA. Note 1413 – Segment Disclosures of Notes to Consolidated Financial Statements includes a reconciliation of this non-GAAP measure to Net income (loss). Management uses Modified EBITDA because it is an accepted financial indicator used by investors to compare company performance. In addition, management believes that this measure provides investors an enhanced perspective of the operating performance of our assets. Modified EBITDA should not be considered in isolation or as a substitute for a measure of performance prepared in accordance with GAAP.

~~Transmission & Gulf of Mexico~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(Millions)
Service revenues $ 836 $ 807 $ 2,493 $ 2,431
Service revenues – commodity consideration
13 6 34 14
Product sales 88 46 222 134
Segment revenues 937 859 2,749 2,579
Product costs (89) (47) (223) (136)
Processing commodity expenses (4) (1) (10) (4)
Other segment costs and expenses (259) (233) (718) (670)
Proportional Modified EBITDA of equity-method investments 45 38 138 124
Transmission & Gulf of Mexico Modified EBITDA $ 630 $ 616 $ 1,936 $ 1,893
Commodity margins $ 8 $ 4 $ 23 $ 8

~~Three months ended September 30, 2021 vs. three months ended September 30, 2020~~

~~Transmission & Gulf of Mexico Modified EBITDA~~ ~~increased primarily due to favorable changes to~~ ~~Service revenues~~ ~~and~~ ~~Proportional Modified EBITDA of equity-method investments, partially offset by higher~~ ~~Other segment costs and expenses.~~

~~Service revenues~~ ~~increased primarily due to:~~

•A $43 million increase in Transco’s natural gas transportation revenues primarily associated with expansion projects placed in service in 2020 and 2021, higher reimbursable electric power costs and a cash out surcharge, which are offset by similar changes in electricity and cash out charges, reflected in ~~Other segment costs and expenses; partially offset by~~

•A $20 million decrease in the Eastern Gulf Coast region primarily due to lower volumes associated with temporary shut-ins due to ongoing producer operational issues and weather-related events and lower deferred revenue recognition.


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

~~Other segment costs and expenses~~ increased primarily due to higher incentive and benefit employee-related costs, higher operating costs, including higher reimbursable electric power costs, and a cash out surcharge, which are offset by similar changes in electricity and cash out reimbursements, reflected in ~~Service revenues. These increases are partially offset by a favorable change in allowance for equity funds used during construction.~~

~~Proportional Modified EBITDA of equity-method investments~~ ~~increased at Discovery driven by higher volumes due to the absence of prior year scheduled maintenance and NGL sales prices.~~

~~Nine months ended September 30, 2021 vs. nine months ended September 30, 2020~~

~~Transmission & Gulf of Mexico Modified EBITDA~~ ~~increased primarily due to favorable changes to~~ ~~Service revenues,Commodity margins~~ ~~and~~ ~~Proportional Modified EBITDA of equity-method investments, partially offset by higher~~ ~~Other segment costs and expenses.~~

~~Service revenues~~ ~~increased primarily due to:~~

•A $78 million increase in Transco’s natural gas transportation revenues primarily associated with expansion projects placed in service in 2020 and 2021, higher reimbursable electric power costs and a cash out surcharge, which are offset by similar changes in electricity and cash out charges, reflected in ~~Other segment costs and expenses; partially offset by one less billing day;~~

•~~A $13 million increase in the Western Gulf Coast region primarily driven by higher volumes due to the absence of temporary shut-ins in 2020 related to scheduled maintenance; partially offset by~~

•~~A decrease in the Eastern Gulf Coast region operations primarily due to:~~

◦A $23 million decrease due to lower volumes primarily from certain operations due to ongoing producer operational issues, partially offset by the absence of temporary shut-ins related to pricing in 2020;

◦~~A $19 million decrease at Gulfstar One for the Tubular Bells field primarily due to lower deferred revenue amortization; partially offset by~~

◦~~A $17 million increase associated with the Norphlet pipeline.~~

~~Commodity margins~~ ~~associated with our equity NGLs increased $14 million primarily driven by favorable NGL sales prices.~~

~~Proportional Modified EBITDA of equity-method investments~~ ~~increased at Discovery driven by higher NGL sales prices and higher volumes due to the absence of prior year scheduled maintenance.~~

4836


Management’s Discussion and Analysis (Continued)			T ~~able~~Table of Contents

~~Northeast G&P~~Transmission & Gulf of Mexico


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended March 31,
		2021		2020		2021		2020				2022		2021
		(Millions)										(Millions)
Service revenues	Service revenues	$	399	$	379	$	1,130	$	1,091	Service revenues		$	874	$	834
Service revenues – commodity consideration	Service revenues – commodity consideration	(1)		2		4		5		Service revenues – commodity consideration		21		11
Product sales	Product sales	19		12		75		42		Product sales		100		67
Segment revenues	Segment revenues	417		393		1,209		1,138		Segment revenues		995		912

Product costs	Product costs	(19)		(12)		(77)		(41)		Product costs		(100)		(66)
Processing commodity expenses	Processing commodity expenses	(1)		(1)		(1)		(3)		Processing commodity expenses		(6)		(4)
Other segment costs and expenses	Other segment costs and expenses	(130)		(114)		(368)		(335)		Other segment costs and expenses		(240)		(229)

Proportional Modified EBITDA of equity-method investments	Proportional Modified EBITDA of equity-method investments	175		121		490		367		Proportional Modified EBITDA of equity-method investments		48		47
Northeast G&P Modified EBITDA		$	442	$	387	$	1,253	$	1,126
Transmission & Gulf of Mexico Modified EBITDA										Transmission & Gulf of Mexico Modified EBITDA		$	697	$	660

Commodity margins	Commodity margins	$	(2)	$	1	$	1	$	3	Commodity margins		$	15	$	8

Three months ended ~~September 30, 2021~~March 31, 2022 vs. three months ended ~~September 30, 2020~~March 31, 2021

Transmission & Gulf of Mexico Modified EBITDA increased primarily due to a favorable change to Service revenues, partially offset by higher Other segment costs and expenses.

Service revenues increased primarily due to a $39 million increase in Transco’s natural gas transportation revenues primarily associated with the Leidy South expansion project placed in service in the second half of 2021, and higher reimbursable electric power costs, which is offset by a similar change in electricity charges, reflected in Other segment costs and expenses.

Other segment costs and expenses increased primarily due to higher operating costs, including higher costs associated with the Leidy South expansion project and higher reimbursable electric power costs, which is offset by a similar change in electricity reimbursements, reflected in Service revenues. These increases are partially offset by a favorable change in the deferral of ARO related depreciation at Transco.

Northeast G&P


	Three Months Ended March 31,
		2022		2021
		(Millions)
Service revenues		$	380	$	358
Service revenues – commodity consideration		7		3
Product sales		36		32
Segment revenues		423		393

Product costs		(37)		(32)

Other segment costs and expenses		(118)		(112)

Proportional Modified EBITDA of equity-method investments		150		153
Northeast G&P Modified EBITDA		$	418	$	402

Commodity margins		$	6	$	3


Management’s Discussion and Analysis (Continued)			Table of Contents

Three months ended March 31, 2022 vs. three months ended March 31, 2021

Northeast G&P Modified EBITDA increased primarily due to ~~increased~~ ~~Proportional Modified EBITDA of equity-method investments~~ ~~and~~ higher Service revenues~~, partially offset by increased~~ ~~Other segment costs and expenses~~.

Service revenues increased primarily due to:

•A ~~$10~~$9 million increase in revenues at ~~the Northeast JV~~Susquehanna Supply Hub primarily related to higher ~~processing and fractionation~~gathering rates, partially offset by lower gathering volumes;

•A $6$7 million increase in revenues associated with reimbursable electricity expenses, which is offset by similar changes in electricity charges, reflected in Other segment costs and ~~expenses.~~expenses;

•A $5 million increase in revenues at the Northeast JV primarily related to higher processing volumes, partially offset by lower gathering volumes.

Other segment costs and expenses increased primarily due to higher operating expenses, including higher electricity ~~charges, and higher incentive and benefit employee-related costs.~~charges.

Proportional Modified EBITDA of equity-method investments ~~increased~~decreased at Appalachia Midstream Investments primarily driven by ~~higher volumes. There was also~~lower gathering rates resulting from annual cost of service contract redetermination, partially offset by an increase at Laurel Mountain due to higher commodity-based gathering rates as well as the absence of our $11 million share of an impairment of certain assets in the third quarter of 2020 that were subsequently sold. Additionally, there was an increase at Blue Racer/Caiman II due to the favorable impact of increased ownership, and ~~an increase at Aux Sable.~~higher MVC revenue.

~~Nine~~

West


	Three Months Ended March 31,
		2022		2021
		(Millions)
Service revenues		$	331	$	291
Service revenues – commodity consideration		49		35
Product sales		187		152
Net gain (loss) on commodity derivatives		(5)		(2)
Segment revenues		562		476

Product costs		(182)		(137)
Processing commodity expenses		(26)		(17)
Other segment costs and expenses		(121)		(125)

Proportional Modified EBITDA of equity-method investments		27		25
West Modified EBITDA		$	260	$	222

Commodity margins		$	23	$	31

Three months ended ~~September 30, 2021~~March 31, 2022 vs. ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021

~~Northeast G&P~~West Modified EBITDA increased primarily due to ~~increased~~ ~~Proportional Modified EBITDA of equity-method investments~~ ~~and~~ higher Service revenues, partially offset by ~~increased~~lower ~~Other segment costs and expenses~~Commodity margins.

Service revenues increased primarily due to:

•A ~~$19~~$50 million increase ~~in revenues at the Northeast JV~~ primarily ~~related~~due to higher processing rates in the Piceance region and ~~fractionation~~higher gathering rates in the Barnett Shale and Haynesville Shale regions, driven by favorable commodity pricing;

•A $1 million increase associated gathering volumes ~~partially~~primarily due to a production increase in the Haynesville Shale region, substantially offset by ~~lower gathering volumes;~~a production decline in the Eagle Ford Shale region (the

4938


Management’s Discussion and Analysis (Continued)			T ~~able~~Table of Contents

•~~A $17 million increase in revenues associated with reimbursable electricity expenses, which is offset by similar changes in electricity charges, reflected in~~ ~~Other segment costs and expenses; partially offset by~~

•~~A $6 million decrease in revenues at Susquehanna Supply Hub primarily related to lower gathering volumes, partially offset by higher gathering rates.~~

~~Other segment costs and expenses~~ ~~increased primarily due to higher maintenance and operating expenses, including higher electricity charges, as well as higher incentive and benefit employee-related costs.~~

~~Proportional Modified EBITDA of equity-method investments~~ ~~increased at Appalachia Midstream Investments primarily driven by higher volumes. Additionally, there was an increase at Blue Racer/Caiman II primarily due to the favorable~~ impact of increased ownership, partially offset by the absence of a gain on early debt retirement at Blue Racer in the second quarter of 2020. There was also an increase at Laurel Mountain due to higher commodity-based gathering rates as well as the absence of our $11 million share of an impairment of certain assets in the third quarter of 2020 that were subsequently sold, and an increase at Aux Sable.

~~Total Northeast G&P gathering volumes, including our operated equity-method investments, increased 8 percent over the prior year.~~

~~West~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
(Millions)
Service revenues $ 312 $ 311 $ 887 $ 938
Service revenues – commodity consideration
52 32 126 74
Product sales 1,170 395 2,983 1,057
Net gain (loss) on commodity derivatives (48) (4) (93) (4)
Segment revenues 1,486 734 3,903 2,065
Product costs (1,108) (377) (2,748) (1,026)
Processing commodity expenses (24) (18) (57) (41)
Other segment costs and expenses (105) (122) (350) (365)
Proportional Modified EBITDA of equity-method investments 27 30 74 82
West Modified EBITDA $ 276 $ 247 $ 822 $ 715
Commodity margins $ 63 $ 30 $ 235 $ 62
Net unrealized gain (loss) from derivative instruments (17) (2) (20) (2)

~~Three months ended September 30, 2021 vs. three months ended September 30, 2020~~

~~West Modified EBITDA~~ ~~increased primarily due to higher~~ ~~Commodity margins~~ ~~and lower~~ ~~Other segment costs and expenses,~~ ~~partially offset by an unfavorable change in~~ ~~Net unrealized gain (loss) from derivative instruments~~.

~~Service revenues~~ ~~increased primarily due to:~~

•~~A $16 million increase related to higher MVC revenue primarily in the Eagle Ford Shale region;~~

•An $11 million increase primarily due to higher gathering rates in the Barnett Shale region and higher processing rates in the Piceance region, both driven by favorable commodity pricing, were partially offset by lower gathering rates in the Haynesville Shale region due to a customer contract change; partially offset by


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

•~~A $15 million decrease associated with lower volumes, primarily in the Eagle Ford Shale region~~ which ~~impact~~ is substantially offset by the recognition of higher MVC revenue ~~(see above)~~described below); partially offset by

•A $7 million decrease in revenues associated with reimbursable compressor power and fuel purchases primarily due to lower prices related to the impact of the absence of severe winter weather in the first quarter of 2022 as compared to the first quarter of 2021, which are offset by similar changes in Other segment costs and expenses;

•~~An $11~~A $3 million decrease ~~due to~~associated with lower MVC revenue in the ~~absence of a temporary volume deficiency fee from a customer~~Wamsutter region, partially offset by higher MVC revenue in ~~2020.~~the Eagle Ford Shale region.

The net sum of Service revenues – commodity consideration, Product sales, Product costs, Processing commodity expenses, and net realized gains and losses on commodity derivatives related to sales of product comprise our Commodity margins. We further segregate our ~~commodity~~Commodity margins into product margins associated with our equity NGLs and marketing margins. ~~The change~~Marketing margins decreased $12 million, primarily due to the absence of severe winter weather in ~~product~~the first quarter of 2022 as compared to the first quarter of 2021. Product margins from our equity NGLs ~~was zero, primarily due to favorable net realized commodity price changes, offset by lower sales volumes. Marketing margins~~ increased ~~$30~~$1 million, primarily due to higher net realized ~~NGL~~commodity sales prices, offset by lower non-ethane sales volumes and ~~natural gas prices. The~~ higher net realized prices ~~were partially offset by an unfavorable change in net unrealized losses from derivatives~~for natural gas purchases associated with our ~~marketing~~equity NGL production activities.

Other segment costs and expenses changed favorably primarily due to ~~a gain on an asset sale in 2021.~~

~~Nine months ended September 30, 2021 vs. nine months ended September 30, 2020~~

~~West Modified EBITDA~~ ~~increased primarily due to higher~~ ~~Commodity margins, partially offset by~~ lower~~Service revenues~~.

~~Service revenues~~ ~~decreased primarily due to:~~

•A $64 million decrease associated with lower volumes, primarily due to production declines in the Eagle Ford Shale region which impact is substantially offset by the recognition of higher MVC revenue (see below). Additionally, lower volumes in the Haynesville Shale region were impacted by production declines;

•~~A $23 million decrease related to lower deferred revenue amortization primarily in the Barnett Shale region;~~

•~~A $20 million decrease due to the absence of a temporary volume deficiency fee from a customer in 2020;~~

•A $9 million decrease associated with lower gathering rates, primarily in the Haynesville Shale region due to a customer contract change, partially offset by an increase in gathering rates in the Barnett Shale region associated with favorable commodity pricing and escalated rates in the Eagle Ford Shale region; partially offset by

•~~A $52 million increase associated with higher MVC revenue, primarily in the Eagle Ford Shale region;~~

•A $14 million increase in revenues associated primarily with reimbursable compressor power and fuel purchases due to higher prices related to the impact of severe winter weather, which are offset by similar changes in ~~Other segment costs and expenses~~.

Product margins from our equity NGLs increased by $10 million, primarily due to favorable net realized commodity price changes, partially offset by lower sales volumes. Marketing margins increased by $155 million primarily due to favorable changes in net realized natural gas and NGL prices, including the impact of severe winter weather in the first quarter of 2021. The higher net realized prices were partially offset by an unfavorable change in net unrealized losses from derivatives associated with our marketing activities.

~~Other segment costs and expenses~~ ~~decreased primarily due to gains on asset sales in 2021 and lower leased compressor expenses, partially offset by higher~~ reimbursable compressor power and fuel purchases which are offset in Service revenues~~and higher incentive and benefit employee-related expenses.~~.

Gas & NGL Marketing Services


	Three Months Ended March 31,
		2022		2021
		(Millions)
Service revenues		$	1	$	1
Product sales		968		1,088

Net realized gain (loss) from derivative instruments		(56)		(34)
Net unrealized gain (loss) from derivative instruments		(59)		—
Net gain (loss) on commodity derivatives		(115)		(34)

Segment revenues		854		1,055

Product costs		(812)		(959)
Other segment costs and expenses		(29)		(3)
Gas & NGL Marketing Services Modified EBITDA		$	13	$	93

Commodity margins		$	100	$	95

Three months ended March 31, 2022 vs. three months ended March 31, 2021

~~Proportional~~Gas & NGL Marketing Services Modified EBITDA ~~of equity-method investments~~decreased primarily due to ~~lower volumes at OPPL,~~higher net unrealized loss from derivative instruments and higher Other segment costs and expenses, partially offset by higher ~~volumes~~Commodity margins.

The net sum of Product sales, Product costs, and ~~commodity prices at Brazos Permian II.~~ Net realized gain (loss) from derivative instruments related to sales of product comprise our Commodity margins. Commodity margins increased $5 million primarily due to:

•A $63 million increase associated with the operations acquired in the Sequent Acquisition in the third quarter of 2021 primarily related to favorable pricing spreads on transportation capacity reflecting gains on physical transactions, partially offset by net realized losses on derivatives and a $15 million charge related

5139


Management’s Discussion and Analysis (Continued)			T ~~able~~Table of Contents

~~Sequent~~

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(Millions)
Product sales $ 54 $ — $ 54 $ —
Net gain (loss) on commodity derivatives (322) — (322) —
Segment revenues (268) — (268) —
Other segment costs and expenses (13) — (13) —
Sequent Modified EBITDA $ (281) $ — $ (281) $ —
Commodity margins $ 9 $ — $ 9 $ —
Net unrealized gain (loss) from derivative instruments (277) — (277) —

~~Three and nine months ended September 30, 2021 vs. three and nine months ended September 30, 2020~~to the remaining recognition of a purchase accounting inventory fair value adjustment which increased the weighted-average cost of inventory. This increase was substantially offset by

~~Commodity margins~~• ~~were~~A $58 million decrease associated with our legacy natural gas marketing operations primarily due to ~~storage withdrawals driven by strong pricing.~~lower net realized natural gas prices from the absence of severe winter weather in the first quarter of 2022 as compared to the first quarter of 2021.

~~The net~~Net unrealized ~~loss on commodity derivatives~~gain (loss) from derivative instruments relates to derivative contracts ~~within the Sequent segment~~ that are not designated as hedges for accounting purposes. ~~Sequent~~We can experience significant earnings volatility from the fair value accounting required for the derivatives used to hedge a portion of the economic value of the underlying transportation and storage portfolio. However, the unrealized fair value measurement gains and losses are offset by valuation changes in the economic value of the underlying transportation and storage portfolio, which is not accounted for on a fair value basis.

Other segment costs and expenses increased primarily ~~include~~due to higher employee-related ~~costs.~~costs related to the Sequent Acquisition.

Other

Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
(Millions)
Other Modified EBITDA $ 38 $ (7) $ 91 $ 8


	Three Months Ended March 31,
		2022		2021
		(Millions)
Service revenues		$	9	$	7
Product sales		104		56

Net realized gain (loss) from derivative instruments		(8)		—
Net unrealized gain (loss) from derivative instruments		(66)		—
Net gain (loss) on commodity derivatives		(74)		—

Segment revenues		39		63

Other segment costs and expenses		(34)		(30)
Other Modified EBITDA		$	5	$	33

Three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 vs. three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021

Other Modified EBITDA ~~increased~~decreased primarily due to $32 million lower results from our ~~recently acquired~~ upstream operations ~~including~~which included the ~~favorable~~following:

•A $66 million net unrealized loss on commodity ~~price impact~~derivatives in the first quarter of 2022 related to hedges of future upstream production; partially offset by

•A $40 million increase in realized product sales primarily due to higher volumes associated with acquisitions of additional ownership interests in the second and third quarters of 2021. This volume increase was partially offset by lower average realized commodity prices due to the absence of severe winter weather in the first quarter of ~~2021. See Note 14 – Segment Disclosures~~2022 as compared to the first quarter of Notes to Consolidated Financial Statements. The year-to-date comparative period also includes the impact of a $10 million accrual for a loss contingency in 2021 and the absence of a third-quarter 2020 charge of $8 million for the write-off of a regulatory asset associated with a cancelled project.2021.

5240


Management’s Discussion and Analysis (Continued)			T ~~able~~Table of Contents

Management’s Discussion and Analysis of Financial Condition and Liquidity

Outlook

~~As previously discussed in Company Outlook, our~~Our growth capital and investment expenditures in ~~2021~~2022 are currently expected to be in a range from ~~$1.0~~$2.25 billion to ~~$1.2~~$2.35 billion. Growth capital spending in ~~2021~~2022 primarily includes Transco expansions, all of which are fully contracted with firm transportation agreements, projects supporting the Northeast G&P business, ~~midstream opportunities~~the Trace Acquisition, and an expansion in the ~~Haynesville area~~Western Gulf area. We also expect to invest capital in the ~~West segment,~~development of our upstream oil and ~~the recent acquisitions of certain upstream operations and Sequent.~~gas properties. In addition to growth capital and investment expenditures, we also remain committed to projects that maintain our assets for safe and reliable operations, as well as projects that meet legal, regulatory, and/or contractual commitments. We funded the Trace Acquisition with available sources of short-term liquidity and intend to fund substantially all ~~of our~~additional planned ~~2021~~2022 capital spending with cash available after paying dividends. We retain the flexibility to adjust planned levels of growth capital and investment expenditures in response to changes in economic conditions or business opportunities including the repurchase of our common ~~stock as previously discussed in Recent Developments.~~

In the first half of 2021, we acquired various oil and gas properties in the Wamsutter field in Wyoming, funding the $165 million paid with cash on hand (see Note 14 – Segment Disclosures of Notes to Consolidated Financial Statements). In July 2021, we acquired Sequent, funding the $134 million paid with cash on hand (see Note 3 – Acquisitions of Notes to Consolidated Financial Statements).stock.

During the first quarter of ~~2021,~~2022, we ~~issued $900 million~~early retired of ~~new long-term debt to fund the third quarter 2021 repayment~~$1.25 billion of ~~$500 million of 4.0~~3.6 percent senior unsecured notes that were scheduled to mature in November 2021 as well as $371 million of 7.875 percent senior unsecured notes that were due September 2021, and for general corporate purposes. In October 2021, we issued an additional $1.25 billion of new long-term debt to fund the repayment of debt maturing in 2022 and for general corporate purposes.March 2022. As of ~~September 30, 2021,~~March 31, 2022, we have approximately ~~$2.0~~$1.6 billion of long-term debt due within one year. Our potential sources of liquidity available to address these maturities include cash on hand, proceeds from refinancing ~~at attractive long-term rates~~ or from our credit facility, as well as proceeds from asset monetizations.


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

In May 2022, we expect to early retire our $750 million of 3.35 percent senior unsecured notes that are scheduled to mature in August 2022.

Liquidity

Based on our forecasted levels of cash flow from operations and other sources of liquidity, we expect to have sufficient liquidity to manage our businesses in ~~2021.~~2022. Our potential material internal and external sources and uses of liquidity are as follows:


Sources:
			Cash and cash equivalents on hand
			Cash generated from operations
			Distributions from our equity-method investees
			Utilization of our credit facility and/or commercial paper program
			Cash proceeds from issuance of debt and/or equity securities
			Proceeds from asset monetizations

Uses:
			Working capital requirements
			Capital and investment expenditures
			Product costs
			Other operating costs including human capital expenses
			Quarterly dividends to our shareholders
			Debt service payments, including payments of long-term debt
			Distributions to noncontrolling interests
			Share repurchase program

As of ~~September 30, 2021,~~March 31, 2022, we have approximately ~~$20.3~~$20.8 billion of long-term debt due after one year. Our potential sources of liquidity available to address these maturities include cash generated from operations, proceeds from refinancing ~~at attractive long-term rates~~ or from our credit facility, as well as proceeds from asset monetizations.


Management’s Discussion and Analysis (Continued)			Table of Contents

Potential risks associated with our planned levels of liquidity discussed above include those previously discussed in Company Outlook.

As of ~~September 30, 2021,~~March 31, 2022, we had a working capital deficit of ~~$2.055~~$1.154 billion, including cash and cash equivalents and long-term debt due within one year. Our available liquidity is as follows:


Available Liquidity	~~September 30, 2021~~March 31, 2022
	(Millions)
Cash and cash equivalents	$	~~214~~604
Capacity available under our ~~$4.5~~$3.75 billion credit facility, less amounts outstanding under our $4$3.5 billion commercial paper program (1)	~~4,500~~3,750
	$	~~4,714~~4,354

(1)In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of our credit facility inclusive of any outstanding amounts under our commercial paper program. We had no commercial paper outstanding as of ~~September 30, 2021.~~March 31, 2022. Through ~~September 30,~~March 31, 2022, there was no amount outstanding under our commercial paper program and credit ~~facility during 2021.~~facility. At ~~September 30, 2021,~~March 31, 2022, we were in compliance with the financial covenants associated with our credit facility. Effective October 8, 2021, we entered into a new credit agreement whereby we have $3.75 billion available under our credit facility and we reduced the size of our commercial paper program to $3.5 billion. As of October 28, 2021, we have $3.75 billion available under our new credit facility.


~~Management’s Discussion and Analysis (Continued)~~			T ~~able of Contents~~

Dividends

We increased our regular quarterly cash dividend to common stockholders by approximately ~~2.5~~3.7 percent from the ~~$0.40~~$0.41 per share paid in each quarter of ~~2020,~~2021, to ~~$0.41~~$0.425 per share paid in March ~~June, and September 2021.~~

~~Registrations~~

~~In February 2021, we filed a shelf registration statement as a well-known seasoned issuer.~~2022.

Distributions from Equity-Method Investees

The organizational documents of entities in which we have an equity-method investment generally require periodic distributions of their available cash to their members. In each case, available cash is reduced, in part, by reserves appropriate for operating their respective businesses.

Credit Ratings

The interest rates at which we are able to borrow money are impacted by our credit ratings. The current ratings are as follows:

Rating Agency

Outlook

Senior Unsecured
Debt Rating

S&P Global Ratings

Stable

BBB

Moody’s Investors Service

Stable

Baa2

Fitch Ratings

Stable

BBB

~~In June 2021, Moody’s upgraded our credit rating from Baa3 to Baa2.~~

These credit ratings are included for informational purposes and are not recommendations to buy, sell, or hold our securities, and each rating should be evaluated independently of any other rating. No assurance can be given that the credit rating agencies will continue to assign us investment-grade ratings even if we meet or exceed their current criteria for investment-grade ratios. A downgrade of our credit ratings might increase our future cost of borrowing and, if ratings were to fall below investment-grade, could require us to provide additional collateral to third parties, negatively impacting our available liquidity.

5542


Management’s Discussion and Analysis (Continued)			T ~~able~~Table of Contents

Sources (Uses) of Cash

The following table summarizes the sources (uses) of cash and cash equivalents for each of the periods presented (see Notes to Consolidated Financial Statements for the Notes referenced in the table):


		Cash Flow	Nine Months Ended September 30,					Cash Flow	Three Months Ended March 31,
		Category	2021		2020			Category	2022		2021
			(Millions)						(Millions)
Sources of cash and cash equivalents:	Sources of cash and cash equivalents:						Sources of cash and cash equivalents:
Operating activities – net	Operating activities – net	Operating	$	2,806	$	2,382	Operating activities – net	Operating	$	1,082	$	915
Proceeds from long-term debt (see Note 9)		Financing	898		2,198
Proceeds from credit-facility borrowings		Financing	—		1,700
Proceeds from commercial paper – net		Financing	—		40
Proceeds from long-term debt							Proceeds from long-term debt	Financing	3		897

Uses of cash and cash equivalents:	Uses of cash and cash equivalents:						Uses of cash and cash equivalents:
Payments of long-term debt							Payments of long-term debt	Financing	(1,256)		(5)
Common dividends paid	Common dividends paid	Financing	(1,494)		(1,456)		Common dividends paid	Financing	(518)		(498)
Capital expenditures	Capital expenditures	Investing	(957)		(938)		Capital expenditures	Investing	(291)		(260)
Payments of long-term debt		Financing	(887)		(2,136)
Payments on credit-facility borrowings		Financing	—		(1,700)
Purchases of businesses, net of cash acquired (see Note 3)		Investing	(126)		—

Dividends and distributions paid to noncontrolling interests	Dividends and distributions paid to noncontrolling interests	Financing	(135)		(147)		Dividends and distributions paid to noncontrolling interests	Financing	(37)		(54)
Purchases of and contributions to equity-method investments	Purchases of and contributions to equity-method investments	Investing	(79)		(150)		Purchases of and contributions to equity-method investments	Investing	(56)		(14)

Other sources / (uses) – net	Other sources / (uses) – net	Financing and Investing	46		(12)		Other sources / (uses) – net	Financing and Investing	(3)		3
Increase (decrease) in cash and cash equivalents	Increase (decrease) in cash and cash equivalents		$	72	$	(219)	Increase (decrease) in cash and cash equivalents		$	(1,076)	$	984

Operating activities

The factors that determine operating activities are largely the same as those that affect Net income (loss), with the exception of noncash items such as Depreciation and amortization, Provision (benefit) for deferred income taxes, Equity (earnings) losses,, ~~Impairment of goodwill~~, ~~Impairment of equity-method investments,~~ and Net unrealized (gain) loss from derivative ~~instruments~~instruments.

. Our Net cash provided (used) by operating activities for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, increased from the same period in ~~2020~~2021 primarily due to higher operating income (excluding noncash items as previously discussed) ~~and~~, favorable changes in ~~net operating working capital in 2021, partially offset by unfavorable changes in current~~margin requirements, and ~~noncurrent derivative assets and liabilities.~~higher distributions from unconsolidated affiliates.

5643

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

Our current interest rate risk exposure is related primarily to our debt portfolio and has not materially changed during the first ~~nine~~three months of ~~2021.~~2022.

Commodity Price Risk

We are exposed to commodity price risk primarily through ~~Sequent.~~the operations acquired in the Sequent Acquisition (Sequent), which routinely ~~utilizes~~utilize various types of derivative instruments to economically hedge certain commodity price risks inherent in the natural gas marketing industry. These instruments include a variety of exchange-traded and OTC energy contracts such as forward contracts, futures contracts, and basis swaps, as well as physical transactions that qualify as derivatives. These economic hedging activities are not designated and do not qualify for hedge accounting treatment.

The maturities of Sequent’s derivative contracts at ~~September 30, 2021~~March 31, 2022 were as follows:


											Total Fair Value			Maturity
Fair Value Measurements Using (1)	Fair Value Measurements Using (1)	Total Fair Value		Maturity						Fair Value Measurements Using (1)			2022			2023 - 2024			2025 - 2026+
				2021		2022 - 2023		2024 - 2025+
		(Millions)											(Millions)
Level 1	Level 1	$	(195)	$	(51)	$	(160)	$	16	Level 1	$	(32)		$	15		$	(59)		$	12
Level 2	Level 2	(373)		(18)		(195)		(160)		Level 2	(408)			(52)			(195)			(161)
Level 3	Level 3	(2)		(3)		(14)		15		Level 3	(11)			4			(14)			(1)
Fair value of contracts outstanding at end of period (2)	Fair value of contracts outstanding at end of period (2)	$	(570)	$	(72)	$	(369)	$	(129)	Fair value of contracts outstanding at end of period (2)	$	(451)		$	(33)		$	(268)		$	(150)

_______________

(1)See Note 1110 – Fair Value Measurements and Guarantees of Notes to Consolidated Financial Statements for discussion of valuation techniques by ~~level.~~level within the fair value hierarchy. See Note 11 – Derivatives for the amount of change in fair value recognized in our Consolidated Statement of Income.

(2)Excludes cash collateral of ~~$247 million.~~$107 million in Level 1.

Sequent Value at Risk (VaR)

VaR is the maximum potential loss in portfolio value over a specified time period that is not expected to be exceeded within a given degree of probability. Sequent’s VaR may not be comparable to that of other companies due to differences in the factors used to calculate VaR. Sequent’s VaR is determined onusing a parametric model with a 95 percent confidence interval and a one-day holding period, which means that 95 percent of the time, the risk of loss in a day from a portfolio of positions is expected to be less than or equal to the amount of VaR calculated. ~~The~~Sequent’s open exposure ~~of Sequent~~ is managed in accordance with established policies that limit market risk and require daily reporting of potential financial exposure to senior management. Because Sequent generally manages physical gas assets and economically protects its positions by hedging in the futures markets, Sequent’s open exposure is generally mitigated. Sequent employs daily risk testing, using both VaR and stress testing, to evaluate the risk of its positions.

Sequent actively monitors open commodity positions and the resulting VaR and maintains a relatively small risk exposure as total buy volume is close to sell volume, with minimal open natural gas price risk.

Table of Contents

Sequent had the following VaRs for the period shown:

Three Months Ended ~~September 30, 2021~~
March 31, 2022

(Millions)

Average

~~2.6~~6.2

High

~~4.4~~10.4

Low

~~1.6~~4.1

~~Table of Contents~~

Item 4. Controls and Procedures

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d - 15(e) of the Securities Exchange Act of 1934, as amended) (Disclosure Controls) or our internal control over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and conditions warrant.

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these Disclosure Controls are effective at a reasonable assurance level.

As disclosed in Note 3 – Acquisitions of Notes to Consolidated Financial Statements, we acquired Sequent on July 1, 2021, and its total revenues constituted approximately (10.8) percent of total revenues as shown on our consolidated financial statements for the three months ended September 30, 2021 (Sequent’s total revenues, excluding net gain (loss) on commodity derivatives, constituted approximately 1.9 percent of total revenues, excluding net gain (loss) on commodity derivatives during that period). Sequent’s total assets constituted approximately 3.0 percent of total assets as shown on our consolidated financial statements as of September 30, 2021. We excluded Sequent’s disclosure controls and procedures that are subsumed by its internal control over financial reporting from the scope of management’s assessment of the effectiveness of our disclosure controls and procedures. This exclusion is in accordance with the guidance issued by the Staff of the Securities and Exchange Commission that an assessment of recent business combinations may be omitted from management’s assessment of internal control over financial reporting for one year following the acquisition.

Changes in Internal Control Over Financial Reporting

~~On July 1, 2021, we implemented a new enterprise resource planning (ERP) system on a company-wide basis.~~We will continue to evaluate and test control changes in order to provide certification on the effectiveness, in all material respects, of our internal controls over financial reporting for the year ending December 31, 2021. Also, as noted above, we acquired Sequent on July 1, 2021. We are currently integrating Sequent into our operations and internal control processes. The scope of our assessment of our internal control over financial reporting as of December 31, 2021, will exclude Sequent’s internal control over financial reporting.

~~Other than as set forth above, there~~There have been no changes during the ~~third~~first quarter of ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting.

~~Table of Contents~~

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Environmental

Certain reportable legal proceedings involving governmental authorities under federal, state, and local laws regulating the discharge of materials into the environment are described below. While it is not possible for us to predict the final outcome of the proceedings that are still pending, we do not anticipate a material effect on our consolidated financial position if we receive an unfavorable outcome in any one or more of such proceedings. Our threshold for disclosing material environmental legal proceedings involving a governmental authority where potential monetary sanctions are involved is $1 million.

Table of Contents

On January 19, 2016, we received a Notice of Noncompliance with certain Leak Detection and Repair (LDAR) regulations under the Clean Air Act at our Moundsville Fractionator Facility from the EPA, Region 3. Subsequently, the EPA alleged similar violations of certain LDAR regulations at our Oak Grove Gas Plant. On March 19, 2018, we received a Notice of Violation of certain LDAR regulations at our former Ignacio Gas Plant from the EPA, Region 8, following an on-site inspection of the facility. On March 20, 2018, we also received a Notice of Violation of certain LDAR regulations at our Parachute Creek Gas Plant from the EPA, Region 8. All such notices were subsequently referred to a common attorney at the Department of Justice (DOJ). We are exploring global resolution of the claims at these facilities, as well as alleged violations at certain other facilities, with the DOJ. Global resolution would include both payment of a civil penalty and an injunctive relief component. We continue to work with the DOJ and the other agencies to resolve these claims, whether individually or globally, and negotiations are ongoing.

Other environmental matters called for by this Item are described under the caption “Environmental Matters” in Note 1312 – Contingent Liabilities ~~and Commitments~~ of Notes to Consolidated Financial Statements included under Part I, Item 1. Financial Statements of this report, which information is incorporated by reference into this Item.

Other litigation

The additional information called for by this Item is provided in Note 109 – Stockholders’ Equity and Note 1312 – Contingent Liabilities ~~and Commitments~~ of Notes to Consolidated Financial Statements included under Part I, Item 1. Financial Statements of this report, which information is incorporated by reference into this Item.

Item 1A. Risk Factors

Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, includes risk factors that could materially affect our business, financial condition, or future results. Those Risk Factors have not materially changed, except that they are supplemented or modified by the following risk ~~factor.~~factors.

~~Hedging Activities~~

~~Our hedging activities might not be effective~~Prices for natural gas, NGLs, oil, and other commodities, are volatile and this volatility has and could ~~increase the volatility of our results. In an effort~~continue to ~~manage~~adversely affect our financial exposure related to commodity price and market fluctuations, we have entered, and may in the future enter into contracts to hedge certain risks associated with our assets and operations. In these hedging activities, we have used, and may in the future use, fixed-price, forward, physical purchase, and sales contracts, futures, financial swaps, and option contracts traded in the over-the-counter markets or on exchanges. Nevertheless, no single hedging arrangement can adequately address all risks present in a given contract. For example, a forward contract that would be effective in hedging commodity price volatility risks would not hedge the contract’s counterparty credit or performance risk. Therefore, unhedged risks will always continue to exist. While we attempt to manage counterparty credit risk within guidelines established by our credit policy, we may not be able to successfully manage all credit risk and as such, future cash flows andcondition, results of operations, cash flows, access to capital, and ability to maintain or grow our businesses.

Our revenues, operating results, future rate of growth, and the value of certain components of our businesses depend primarily upon the prices of natural gas, NGLs, oil, or other commodities, and the differences between prices of these commodities and could be ~~impacted~~materially adversely affected by ~~counterparty default.~~an extended period of low commodity prices, or a decline in commodity prices. Price volatility has and could continue to impact both the amount we receive for our products and services and the volume of products and services we sell. Prices affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. Price volatility has had and could continue to have an adverse effect on our business, results of operations, financial condition, and cash flows.

The markets for natural gas, NGLs, oil, and other commodities are likely to continue to be volatile. Wide fluctuations in prices might result from one or more factors beyond our control, including:

•Imbalances in supply and demand whether rising from worldwide or domestic supplies of and demand for natural gas, NGLs, oil, and related commodities;

•Turmoil in the Middle East and other producing regions, including the Russian invasion of Ukraine;

•The activities of OPEC and other countries, whether acting independently of or informally aligned with OPEC, which have significant oil, natural gas or other commodity production capabilities, including Russia;

•The level of consumer demand;

•The price and availability of other types of fuels or feedstocks;

5946

Table of Contents

•The availability of pipeline capacity;

•Supply disruptions, including plant outages and transportation disruptions;

•The price and quantity of foreign imports and domestic exports of natural gas and oil;

•Domestic and foreign governmental regulations and taxes;

•The credit of participants in the markets where products are bought and sold.

A breach of our information technology infrastructure, including a breach caused by a cybersecurity attack on us or third parties with whom we are interconnected, may interfere with the safe operation of our assets, result in the disclosure of personal or proprietary information, and harm our reputation.

We rely on our information technology infrastructure to process, transmit, and store electronic information, including information we use to safely operate our assets. Our Board of Directors has oversight responsibility with regard to assessment of the major risks inherent in our business, including cybersecurity risks, and reviews management’s efforts to address and mitigate such risks, including the establishment and implementation of policies to address cybersecurity threats. We have invested, and expect to continue to invest, significant time, manpower and capital in our information technology infrastructure. However, the age, operating systems, or condition of our current information technology infrastructure and software assets and our ability to maintain and upgrade such assets could affect our ability to resist cybersecurity threats. While we believe that we maintain appropriate information security policies, practices, and protocols, we regularly face cybersecurity and other security threats to our information technology infrastructure, which could include threats to our operational industrial control systems and safety systems that operate our pipelines, plants, and assets. We face unlawful attempts to gain access to our information technology infrastructure, including coordinated attacks from hackers, whether state-sponsored groups, “hacktivists,” or private individuals. We face the threat of theft and misuse of sensitive data and information, including customer and employee information. We also face attempts to gain access to information related to our assets through attempts to obtain unauthorized access by targeting acts of deception against individuals with legitimate access to physical locations or information. We also are subject to cybersecurity risks arising from the fact that our business operations are interconnected with third parties, including third-party pipelines, other facilities and our contractors and vendors. In addition, the breach of certain business systems could affect our ~~recently acquired Sequent segment utilizes derivative instruments,~~ability to correctly record, process and report financial information. Breaches in our information technology infrastructure or physical facilities, or other disruptions including those arising from theft, vandalism, fraud, or unethical conduct, which may ~~not qualify~~increase as a result of the Russian invasion of Ukraine, could result in damage to or ~~be designated as hedges for accounting purposes. The difference~~destruction of our assets, unnecessary waste, safety incidents, damage to the environment, reputational damage, potential liability, the loss of contracts, the imposition of significant costs associated with remediation and litigation, heightened regulatory scrutiny, increased insurance costs, and have a material adverse effect on our operations, financial condition, results of operations, and cash flows.

Difficult conditions in ~~accounting treatment for~~ the ~~underlying position~~global financial markets and the economy in general could negatively affect our business and results of operations.

Our businesses may be negatively impacted by adverse economic conditions or future disruptions in the global financial ~~instrument used to hedge the value~~markets. Included among these potential negative impacts are industrial or economic contraction, (including as a result of the ~~contract can cause volatility~~COVID-19 pandemic) leading to reduced energy demand and lower prices for our products and services and increased difficulty in collecting amounts owed to us by our customers. The ongoing Russian invasion of Ukraine and the actions undertaken by western nations in response to Russia’s actions has had, and may continue to have, adverse impacts on global financial markets. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to implement our business plans or otherwise take advantage of business opportunities or respond to competitive pressures. In addition, financial markets have periodically been affected by concerns over U.S. fiscal and monetary policies. These concerns, as well as actions taken by the U.S. federal government in response to these concerns, could significantly and adversely impact the global and U.S. economies and financial markets, which could negatively impact us in the manner described above.

Table of Contents

Our business could be negatively impacted by acts of terrorism and related disruptions.

Given the volatile nature of the commodities we transport, process, store, and sell, our assets and the assets of our customers and others in our ~~reported net income while~~industry may be targets of terrorist activities. Uncertainty surrounding the ~~positions are open due~~Russian invasion of Ukraine, or other sustained military campaigns, may affect our operations in unpredictable ways, including the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terrorism. A terrorist attack could create significant price volatility, disrupt our business, limit our access to ~~mark-to-market accounting.~~capital markets, or cause significant harm to our operations, such as full or partial disruption to our ability to produce, process, transport, or distribute natural gas, NGLs, or other commodities. Acts of terrorism, as well as events occurring in response to or in connection with acts of terrorism, could cause environmental repercussions that could result in a significant decrease in revenues or significant reconstruction or remediation costs, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Share Repurchase Program

OnIn September 3, 2021, our Board of Directors authorized a ~~new~~ share repurchase program with a maximum dollar limit of $1.5 billion. Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions or in such other manner as determined by our management. Our management will also determine the timing and amount of any repurchases based on market conditions and other factors. The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or discontinued at any time. This share repurchase program does not have an expiration date. There were no repurchases under the program through ~~September 30, 2021.~~March 31, 2022.

6048

Table of Contents

Item 6. Exhibits


Exhibit No.		Description

2.1	—	Agreement and Plan of Merger dated as of May 16, 2018, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P., and WPZ GP LLC (filed on May 17, 2018 as Exhibit 2.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).
2.2	—	Amendment No 1. to Agreement and Plan of Merger dated as of May 1, 2016, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC, and Energy Transfer Equity GP, LLC (filed on May 3, 2016 as Exhibit 2.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).
2.3	—	Agreement and Plan of Merger dated as of September 28, 2015, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC, and Energy Transfer Equity GP, LLC (filed on October 1, 2015 as Exhibit 2.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).
3.1	—	Amended and Restated Certificate of Incorporation as supplemented (filed on May 26, 2010, as Exhibit 3.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).
3.2	—	Certificate of Designations of Series B Preferred Stock of The Williams Companies, Inc. (filed on July 17, 2018 as Exhibit 3.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).
3.3	—	Certificate of Amendment dated August 10, 2018 (filed on August 10, 2018 as Exhibit 3.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).
3.4	—	By-Laws of The Williams Companies, Inc., as last amended effective July 28, 2021 (filed on August 2, 2021 as Exhibit 3.4 to The Williams Companies, Inc.’s quarterly report on Form 10‑Q (File No. 00104174) and incorporated herein by reference).
~~3.5~~	—	Certificate of Designations of Series C Participating Preferred Stock of The Williams Companies, Inc. (filed on March 20, 2020 as Exhibit 3.1 to The Williams Companies, Inc.’s current report on Form 8‑K (File No. 001-04174) and incorporated herein by reference).
~~4.1~~	—	Fifth Supplemental Indenture, dated as of October 8, 2021 between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A. as trustee (filed on October 8, 2021 as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).
~~10.1~~	—	~~Credit Agreement dated as of October 8, 2021, between The Williams Companies, Inc., Northwest Pipeline LLC, and Transcontinental Gas Pipe Line Company, LLC, as~~ ~~borrowers, the lenders named therein, and Wells Fargo Bank, National Association, as Administrative Agent (filed on October 8, 2021 as Exhibit 10.1 to The Williams Companies, Inc.’s~~ c ~~urrent~~ r ~~eport on Form 8-K (File No. 001-04174) and incorporated herein by reference).~~
10.2§*	—	~~Form of Amended 2019 Time-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers.~~
10.3§*	—	~~Form of Amended 2019 Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers.~~
10.4§*	—	~~Form of Amended 2019 Executive Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers.~~
10.5§*	—	~~Form of Amended 2020 Time-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers.~~
10.6§*	—	~~Form of Amended 2020 Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers.~~

~~Table of Contents~~

Exhibit
No.

~~Description~~

10.7§*

—

~~Form of Amended 2021 Time-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers.~~

10.8§*

—

~~Form of Amended 2021 Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers.~~

10.9§*

—

~~The Williams Companies, Inc. 2007 Incentive Plan as amended and restated effective October 26, 2021.~~

31.1*

—

Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S‑K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

—

Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32**

—

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*

—

XBRL Instance Document. The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH*

—

XBRL Taxonomy Extension Schema.

101.CAL*

—

XBRL Taxonomy Extension Calculation Linkbase.

101.DEF*

—

XBRL Taxonomy Extension Definition Linkbase.

101.LAB*

—

XBRL Taxonomy Extension Label Linkbase.

Table of Contents

Exhibit
No.

Description

101.PRE*

—

XBRL Taxonomy Extension Presentation Linkbase.

104*

—

Cover Page Interactive Data File. The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101).

* Filed herewith.

** Furnished herewith.

~~§ Management contract or compensatory plan or arrangement.~~

6250

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


			THE WILLIAMS COMPANIES, INC.
			(Registrant)

			/s/ ~~John D. Porter~~Mary A. Hausman
			~~John D. Porter~~Mary A. Hausman
			Vice President, ~~Controller, and~~ Chief Accounting Officer and Controller (Duly Authorized Officer and Principal Accounting Officer)

~~November 1, 2021~~May 2, 2022


Balance – December 31, 2019	$	35	$	1,247	$	24,323	$	(11,002)	$	(199)	$	(1,041)	$	13,363	$	3,001	$	16,364

Net income (loss)	—		—		—		95		—		—		95		(27)		68
Other comprehensive income (loss)	—		—		—		—		39		—		39		—		39


Cash dividends – common stock ($1.20 per share)	—		—		—		(1,456)		—		—		(1,456)		—		(1,456)
Dividends and distributions to noncontrolling interests	—		—		—		—		—		—		—		(147)		(147)
Stock-based compensation and related common stock issuances, net of tax	—		1		36		—		—		—		37		—		37


Contributions from noncontrolling interests	—		—		—		—		—		—		—		5		5

Other	—		—		—		(13)		—		—		(13)		1		(12)
Net increase (decrease) in equity	—		1		36		(1,374)		39		—		(1,298)		(168)		(1,466)
Balance – September 30, 2020	$	35	$	1,248	$	24,359	$	(12,376)	$	(160)	$	(1,041)	$	12,065	$	2,833	$	14,898


					Impairments
					Nine Months Ended September 30,
	Segment	Date of Measurement	Fair Value		2021		2020
			(Millions)





Impairment of equity-method investments:
RMM (1)	West	March 31, 2020	$	557	$	—	$	243
Brazos Permian II (1)	West	March 31, 2020	—		—		193
Caiman II (2)	Northeast G&P	March 31, 2020	191		—		229
Appalachia Midstream Investments (2)	Northeast G&P	March 31, 2020	2,700		—		127
Aux Sable (2)	Northeast G&P	March 31, 2020	7		—		39
Laurel Mountain (2)	Northeast G&P	March 31, 2020	236		—		10
Discovery (2)	Transmission & Gulf of Mexico	March 31, 2020	367		—		97





Impairment of equity-method investments					$	—	$	938


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
	(Millions)
Product sales	$	54	$	—	$	54	$	—
Net gain (loss) on commodity derivatives	(322)		—		(322)		—
Segment revenues	(268)		—		(268)		—


Other segment costs and expenses	(13)		—		(13)		—
Sequent Modified EBITDA	$	(281)	$	—	$	(281)	$	—


Commodity margins	$	9	$	—	$	9	$	—
Net unrealized gain (loss) from derivative instruments	(277)		—		(277)		—