REPORTS OF MANAGEMENT AND INDEPENDENT AUDITORS

Financial Statements

Management is responsible for the information presented in this annual report. The financial statements have been prepared in accor d ance with generally accepted accounting princi ples. Certain estimated amounts are included in the financial statements, and these amounts are based on currently available information and management's judgment of current conditions and circumstances. Management also prepared the other information in the annual report and is responsible for its accuracy and consistency with the financial statements.

Ernst & Young LLP; independent auditors, have rendered an opinion on the financial statements based upon an audit conducted in accordance with generally accepted auditing standards.

Internal Control

The Company maintains a system of internal control over financial reporting, which is designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation of reliable financial statements. The system includes a documented organizational structure with division of responsibility and established policies and procedures, including a code of conduct, which are communicated throughout the Company. Internal auditors monitor the operation of the internal control system and report findings and recommendations to management and the board of directors. Actions are taken by management to correct control deficiencies as they are identified. The board of directors, through an audit committee composed of directors who are not officers or employees of the Company, provides oversight to the financial reporting process, the adequacy of the internal control system and the internal audit function.

Even an effective internal control system has inherent limitations and can, therefore, provide only reasonable assurance regarding the preparation of financial statements. Further, the effectiveness of an internal control system over time can vary with changes in conditions.

As of December 31, 1995, the Company assessed its system of internal control, including the Company's control environment, risk-assessment processes, control policies and procedures, information systems, and monitoring programs. Based on this assessment, the Company believes that its system of internal control provided reasonable assurance for the preparation of reliable annual financial statements as of December 31, 1995.

To the Stockholders of The Williams Companies, Inc

We have audited the accompanying consolidated balance sheet of The Williams Companies, Inc. as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Williams Companies, Inc. at December 31, 1995 and 1994, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Tulsa, Oklahoma

February 9, 1996