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 Energy Marketing & Trading purchased and |
1997 Operating Profit — $70.6
million 1998 Capital Expenditures and Investments — $160 million Energy Marketing & Trading increased operating profit in 1997 by 6 percent over that of 1996, which was a record year. During 1997, we significantly increased our number of employees and the range of energy commodities in which we trade. We have transformed this business unit from a natural gas marketer into an “energy superstore.” Power trading, petroleum liquids trading and energy financing — three businesses that did not contribute to 1996 income — collectively provided significant income in 1997. These three business platforms aided our transformation into an energy superstore, or true national Btu merchant, and set the stage for greater growth in 1998. Key Points * We increased trading of natural gas physical volumes in 1997 by 22 percent. On the notional side, we reported a 44 percent increase. During 1997, we averaged 3.2 Bcfd in physical volumes and 19.1 Bcfd in notional volumes. Our long-term goal is to trade 6 to 11 Bcfd of physical natural gas volumes. * Our petroleum products activities leveraged Williams’ petroleum pipeline and terminaling assets into widespread commercial opportunities by filling a niche in the marketplace with risk-management services. We more than doubled our physical volumes in natural gas liquids, trading 95,500 barrels per day in 1997. In refined products, we traded 131,200 barrels per day in 1997. A 1997 acquisition expanded our wholesale marketing of propane to 35 states. * Part of our retail energy strategy is to
position ourselves in markets where state-level deregulation is occurring. By forming
alliances with local partners and by making acquisitions, we can leverage our national
expertise into regional markets. A key region is the Northeast, where we have joint
ventures with two utilities, each serving several million * In the third quarter, we purchased and reconditioned the Hazleton Power Plant in eastern Pennsylvania as a 63-megawatt generating facility that receives its fuel supply from a Williams gas pipeline. A second reconditioning phase adding 250 megawatts is planned to be online during first-quarter 2000. Our goal is to own or control 40,000 megawatts of generating capacity nationwide within three years, making us a top-tier player with the attendant benefits this brings. We increased trading volumes in 1997 to 13 million megawatt hours, placing us in the top 25 among all power marketers nationwide. In 1997, our power trading and marketing business moved from a loss to a profit. * Working through a third-party lender, we established a $100 million loan facility for producers, who utilized about 55 percent of its capacity in 1997. These producers often become customers of Williams’ energy services businesses, such as marketing, gathering and processing, and pipeline transportation. Outlook * Williams has about 6 percent market share in the wholesale trading business combining all energy commodities. Our goal is to double our overall market share in 1998. Achieving this goal will require continued investment in talent, systems and technology. In 1998, we will move into a state-of-the-art trading facility, accommodating continued expansion and providing the latest technological capabilities. * The addition of the MAPCO assets and talent would provide significant opportunities to increase our physical marketing of natural gas liquids, crude oil and refined products, which would be leveraged into financial trading opportunities. We believe we can roughly double our physical volumes traded in 1997 due to the nationwide assets this acquisition provides. * Our 1998 planned capital expenditures and investments total $160 million, with the largest portion dedicated to the Hazleton Power Plant expansion. The balance will be invested in retail alliances and acquisitions, and development of technological systems. |
 Enery Marketing & Trading leveraged Williams' |
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