CONSOLIDATED FINANCIAL STATEMENTS

    Consolidated Statement of Income
    Consolidated Balance Sheet
    Consolidated Statement of Stockholders Equity
    Consolidated Statement of Cash Flows


    CONSOLIDATED STATEMENT OF INCOME

    Years Ended December 31,
    (Millions, except per-share amounts) 1995 1994* 1993*
    REVENUES
    Williams Interstate Natural Gas Systems (Note 4) $1,431.1 $469.80 $570.60
    Williams Field Services Group 591.8 375.7 432.2
    Williams Energy Services (Note 15) 85.8 263.7 360.8
    Williams Pipe Line 350.2 310.7 180.5
    WilTel 494.9 396.6 302.8
    WilTech Group 44 20 13.5
    Other 17.4 - -
    Intercompany eliminations (Note 16) -159.5 -85.4 -67
    Total revenues 2,855.70 1,751.10 1,793.40
    PROFIT-CENTER COSTS AND EXPENSES
    Costs and operating expenses 1,700.70 1,187.70 1,283.90
    Selling, general and administrative expenses 488.8 229.2 203.2
    Other income - net -4.5 -8.1 -7.8
    Total profit-center costs and expenses 2,185.00 1,408.80 1,479.30
    OPERATING PROFIT (LOSS)
    Williams Interstate Natural Gas Systems (Note 4) 389.7 152.9 139.8
    Williams Field Services Group 157.6 129.3 126.7
    Williams Energy Services 30 0.5 7.9
    Williams Pipe Line 69.8 52 47.2
    WilTel 28.3 18.9 9.5
    WilTech Group -3.3 -11.3 -17
    Other -1.4 - -
    Total operating profit 670.7 342.3 314.1
    General corporate expenses -37.7 -28 -38.4
    Interest accrued -277.9 -145.8 -151.2
    Interest capitalized 14.5 6 10.4
    Investing income (Note 5) 93.9 49.6 65.2
    Gain (loss) on sales of assets (Notes 5 and 6) -12.6 22.7 97.5
    Write-off of project costs (Note 6) -41.4 - -
    Other income (expense) - net -8.1 -0.2 0.4
    Income from continuing operations before income taxes 401.4 246.6 298
    Provision for income taxes (Note 7) 102 81.7 112.6
    Income from continuing operations 299.4 164.9 185.4
    Income from discontinued operations (Note 3) 1,018.80 94 46.4
    Income before extraordinary loss 1,318.20 258.9 231.8
    Extraordinary loss (Note 8) - -12.2 -
    Net income 1,318.20 246.7 231.8
    Preferred stock dividends (Note 14) 15.3 8.8 11.8
    Income applicable to common stock $1,302.9 $237.90 $220.00
    EARNINGS PER SHARE
    Primary earnings per common and common-equivalent share
    (Notes 1, 3 and 8):
    Income from continuing operations $2.78 $1.52 $1.74
    Income from discontinued operations 9.99 0.92 0.46
    Income before extraordinary loss 12.77 2.44 2.2
    Extraordinary loss - -0.12 -
    Net income $12.77 $2.32 $2.20
    Fully diluted earnings per common and common-equivalent share
    (Notes 1, 3 and 8):
    Income from continuing operations $2.76 $1.52 $1.71
    Income from discontinued operations 9.72 0.92 0.45
    Income before extraordinary loss 12.48 2.44 2.16
    Extraordinary loss - -0.12 -
    Net income $12.48 $2.32 $2.16
    *Reclassified as described in Note 1.
    See accompanying notes.


    CONSOLIDATED BALANCE SHEET

    December 31,
    (Dollars in millions, except per-share amounts) 1995 1994
    ASSETS
    Current assets:
    Cash and cash equivalents $90.40 $36.10
    Receivables less allowance of $11.3 ($7.9 in 1994) 525 443.1
    Transportation and exchange gas receivable 152.3 9.2
    Inventories (Note 10) 189 112.3
    Net assets of discontinued operations (Note 3) - 743.6
    Deferred income taxes (Note 7) 213.9 57.1
    Other 173.2 55.4
    Total current assets 1,343.80 1,456.80
    Investments (Note 5) 307.6 379.1
    Property, plant and equipment - net (Note 11) 8,014.70 3,124.00
    Other assets and deferred charges 828.7 266.2
    Total assets $10,494.8 $5,226.1
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current liabilities:
    Notes payable (Note 13) $ - $507.00
    Accounts payable (Note 12) 472 205.8
    Transportation and exchange gas payable 127.8 16.7
    Accrued liabilities (Note 12) 1,130.20 361.4
    Long-term debt due within one year (Note 13) 319.9 383
    Total current liabilities 2,049.90 1,473.90
    Long-term debt (Note 13) 2,874.00 1,307.80
    Deferred income taxes (Note 7) 1,568.20 662.9
    Other liabilities 815.6 276
    Contingent liabilities and commitments (Note 17)
    Stockholders' equity (Note 14):
    Preferred stock, $1 par value, 30,000,000 shares authorized,
    3,739,452 shares issued in 1995 and 4,000,000 shares issued in 1994 173.5 100
    Common stock, $1 par value, 240,000,000 shares authorized,
    105,337,948 shares issued in 1995 and 104,401,819 shares issued in 1994 105.3 104.4
    Capital in excess of par value 1,051.10 991
    Retained earnings (Note 13) 1,915.60 716.5
    Unamortized deferred compensation -2.3 -1.3
    3,243.20 1,910.60
    Less treasury stock (at cost), 1,573,203 shares of common stock in 1995
    and 13,516,994 shares of common stock in 1994, 401,600 shares of
    preferred stock in 1995 and 258,800 shares of preferred stock in 1994 -56.1 -405.1
    Total stockholders' equity 3,187.10 1,505.50
    Total liabilities and stockholders' equity $10,494.8 $5,226.1
    See accompanying notes.


    CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY

    (Dollars in millions, except per-share amounts)
    Preferred Stock Common Stock Capital in Excess of Par Value Retained Earnings Unamortized Deferred Compensation Treasury Stock Total
    Balance, December 31, 1992 $250.00 $92.30 $755.40 $421.30 ($0.70) $ - $1,518.3
    Net income - 1993 - - - 231.8 - - 231.8
    Cash dividends -
    Common stock ($.78 per share) - - - -77.6 - - -77.6
    Preferred stock (Note 14) - - - -11.8 - - -11.8
    Issuance of shares - 3,174,439 common - 3.2 55.2 - -1.7 - 56.7
    Conversion of preferred stock (Note 14) -150 7.6 141.8 - - - -0.6
    Tax benefit of non-qualified stock
    option exercises - - 6.7 - - - 6.7
    Amortization of deferred compensation - - - - 0.5 - 0.5
    Balance, December 31, 1993 100 103.1 959.1 563.7 -1.9 - 1,724.00
    Net income - 1994 - - - 246.7 - - 246.7
    Cash dividends -
    Common stock ($.84 per share) - - - -85.1 - - -85.1
    Preferred stock (Note 14) - - - -8.8 - - -8.8
    Issuance of shares - 1,596,409 common - 1.3 30.1 - -1.3 8.1 38.2
    Purchase of treasury stock -
    Common 13,790,089 - - - - - -406.8 -406.8
    Preferred 258,800 - - - - - -6.4 -6.4
    Tax benefit of non-qualified stock
    option exercises - - 1.8 - - - 1.8
    Amortization of deferred compensation - - - - 1.9 - 1.9
    Balance, December 31, 1994 100 104.4 991 716.5 -1.3 -405.1 1,505.50
    Net income - 1995 - - - 1,318.20 - - 1,318.20
    Cash dividends -
    Common stock ($1.08 per share) - - - -107.2 - - -107.2
    Preferred stock (Note 14) - - - -11.9 - - -11.9
    Issuance of shares -
    12,879,920 common - 0.9 58.8 - -1.7 352.7 410.7
    2,500,000 preferred 142.5 - - - - - 142.5
    Exchange of shares for debentures -
    2,760,548 preferred (Note 14) -69 - -3.5 - - - -72.5
    Purchase of treasury stock -
    142,800 preferred - - - - - -3.7 -3.7
    Tax benefit of non-qualified stock
    option exercises - - 4.8 - - - 4.8
    Amortization of deferred compensation - - - - 0.7 - 0.7
    Balance, December 31, 1995 $173.50 $105.30 $1,051.1 $1915.6 ($2.30) ($56.10) $3,187.1
    See accompanying notes.


    CONSOLIDATED STATEMENT OF CASH FLOWS

    Years Ended December 31,
    (Millions) 1995 1994 1993
    OPERATING ACTIVITIES
    Net income $1,318.2 $246.70 $231.80
    Adjustments to reconcile to cash provided from operations:
    Discontinued operations -1,018.80 -94 -46.4
    Extraordinary loss - 12.2 -
    Depreciation and depletion 369.4 150.3 137.8
    Provision for deferred income taxes 125.4 25.8 8.1
    Write-off of project costs 41.4 - -
    (Gain) loss on sales of property, plant and equipment -2.1 0.9 -102
    (Gain) loss on sale of investments 12.6 -22.7 -
    Changes in receivables sold 55.9 - -94.7
    Changes in receivables 33.2 -175 99.9
    Changes in inventories 11.9 10.2 -0.8
    Changes in other current assets -10.2 -2.8 -16.9
    Changes in accounts payable -6.5 20.7 -37.6
    Changes in accrued liabilities -3.3 8.1 -43.2
    Net change in non-current unrealized trading assets and liabilities -72.9 -2.4 -
    Other, including changes in non-current assets and liabilities -25.5 1.6* 50.9
    Net cash provided by continuing operations 828.7 179.6 186.9
    Net cash provided by discontinued operations - 169.4* 162.6
    Net cash provided by operating activities 828.7 349 349.5
    FINANCING ACTIVITIES
    Proceeds from notes payable 116.8 507 -
    Payments of notes payable -623.8 - -
    Proceeds from long-term debt 399 480 -
    Payments of long-term debt -1,009.40 -456.5 -192.2
    Proceeds from issuance of common stock 78.1 26.4 63.4
    Purchases of treasury stock -3.7 -413.2 -
    Dividends paid -119.1 -93.9 -89.4
    Subsidiary preferred stock redemptions -193.7 - -1.9
    Other - net -3.5 - -0.2
    Net cash provided (used) by financing activities -1,359.30 49.8* -220.3
    INVESTING ACTIVITIES
    Property, plant and equipment:
    Capital expenditures:
    Continuing operations -827.5 -325.5 -428.3
    Discontinued operations - -142.8 -100.8
    Proceeds from sales 28.2 1.6 295.4
    Changes in accounts payable and accrued liabilities -5.2 19.1 -48.4
    Acquisition of businesses, net of cash acquired -858.9 -56.5 -
    Proceeds from sales of businesses 2,588.30 - -
    Income tax and other payments related to discontinued operations -350.4 -1.5 -1.9
    Proceeds from sales of investments 125.1 80.6 8.8
    Purchase of investments -49.7 -3.3 -
    Purchase of note receivable -75.1 - -
    Other - net 10.1 1.3 -2
    Net cash provided (used) by investing activities 584.9 -427 -277.2
    Increase (decrease) in cash and cash equivalents 54.3 -28.2 -148
    Cash and cash equivalents at beginning of year 36.1 64.3 212.3
    Cash and cash equivalents at end of year $90.40 $36.10 $64.30
    *Reclassified to conform to current classification.
    See accompanying notes.

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    ANNUAL REPORT
    CONTENTS

    NOTES TO CONSOLIDATED
    FINANCIAL STATEMENTS