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Williams’ gas
pipelines group achieved an operating profit of $614 million in 1997, a 9 percent increase
over the previous year. Lower operating costs, expansions and new rates contributed to
this performance. Financial results from this group of pipelines should again improve in
1998, primarily by controlling operating costs, putting expansions into service, settling
rate cases with customers and maximizing throughput. We are leveraging our collective size and talents by implementing common information systems and best practices en route to acting as one national pipeline — as opposed to a series of good pipelines with varying ways of operating and doing business. We also have begun to share services and combine functions, when doing so allows us to increase customer service while minimizing expenses. These changes, which will make Williams’ gas pipelines better, are on aggressive, date-specific deadlines. For example, we are implementing new, common information systems in all five of our pipelines. Williams’ gas pipelines already are the low-cost providers in nearly all of their markets. By becoming more efficient, reliable and responsive, we are creating a performance gap that will be difficult for competitors to bridge. As supply dynamics continue to evolve among Canadian, traditional and new deep-water Gulf gas, Williams’ gas pipelines are well-positioned to capture growth opportunities. We expect price differences between the major gas basins to lessen as bottlenecks are eliminated in the national pipeline grid, creating new access to markets and greater choice. Never has choice been greater — at both ends of the pipeline. Because choice brings with it increased levels of competition, our investment dollars in new equipment, technology and expansions take on greater risks than in the past. Consequently, we are strongly advocating that the FERC should allow pipelines appropriate rates of return to compensate them for these greater risks. Gas utilization is expected to rise steadily over the next decade, due to economic growth and environmental sensitivity, with growth being greatest in the East and the West. Our goal is to achieve overall earnings growth on our pipelines that is at least three times greater than the current 2 percent growth in national gas demand. Our planned capital expenditures and investments for 1998 are $556 million, mostly for expansions. At day’s end, the race is going to be won by pipelines that provide the highest level of reliable, responsive service at the lowest price. Williams’ gas pipelines are committed to continue winning the race. |
