Williams to Create New MLP for Gas Pipeline Assets

Williams (NYSE: WMB) reports actions designed to further build on the company's record of value creation.

- Williams will create a new, publicly traded master limited partnership that will own interstate natural gas pipeline assets.

- The company plans to repurchase up to $1 billion of Williams common stock.

"Williams has a solid record of value creation, and these actions are part of our ongoing efforts to continue delivering superior returns," said Steve Malcolm, the company's chairman, president and chief executive officer.

"In the past 12 months alone, Williams shareholders have enjoyed a nearly 50 percent increase in the value of their shares -- more than double the performance of the S&P 500 during the same time period and outperforming our peer group," Malcolm said. "The increase reflects our strategy of actively managing Williams' portfolio of businesses to best optimize the company's assets. With the agreed sale of our power business and plans for a new pipeline MLP, Williams is seizing the opportunity to build on that success.

"As we move forward, we will continue to pursue high-return opportunities as part of our plan for sustained value creation," Malcolm said. "The repurchase of our stock reflects the great confidence we have in the future of our company and our expectations that we will continue our strong record of creating value for Williams' shareholders."

New MLP for Gas Pipelines

The company will begin the process necessary to create the new, gas-pipeline-focused partnership. A Williams subsidiary will serve as the general partner of the new pipeline MLP. Williams serves in a like capacity with the midstream-focused MLP, Williams Partners L.P. (NYSE: WPZ - News), which completed its initial public offering in August 2005.

The initial asset in the new pipeline partnership will be an interest in Williams' Northwest Pipeline, a 3,900-mile bi-directional transmission system that accesses natural gas supplies in the Rocky Mountains, Canada and the San Juan Basin and serves key markets in the Pacific Northwest. Williams will continue to own the remaining interest and will continue to operate Northwest Pipeline.

Williams' gas pipeline business includes Northwest Pipeline, a 50 percent interest in Gulfstream Pipeline and the wholly owned Transco system.

Continuing Focus on Midstream MLP Strategy

"The new, gas pipeline MLP is complementary to our existing, very successful midstream MLP," Malcolm said. "We remain focused on our commitment to drive growth in Williams Partners through a combination of drop-downs, third-party acquisitions and organic growth."

In the period since Williams Partners' initial public offering through yesterday, unitholders have realized a 137 percent total return on their investment.

Stock-Repurchase Program

Williams also announced that its board of directors has authorized the repurchase of up to $1 billion of the company's common stock. The stock-repurchase program has no expiration date.

Williams intends to purchase shares of its stock from time to time in open market transactions or through privately negotiated or structured transactions at the company's discretion, subject to market conditions and other factors. As of June 30, Williams had approximately 600 million shares outstanding.

Funding Sources and Uses

Williams plans to fund the stock-repurchase program with cash on hand. The repurchase program has been structured to ensure that Williams maintains the financial strength necessary to pursue high-return investment opportunities.

Williams intends to use equity proceeds from the MLP transaction for previously announced growth projects and for general corporate purposes. MLP debt is consolidated and reported on Williams' balance sheet; to the extent transactions are partially capitalized with debt proceeds, the company anticipates retiring an approximate amount of Williams debt so that consolidated balances remain constant.