Williams Companies Slashed Dividend by 69% to Fund Plans
Shares Surge After Energy Provider’s Cost-Saving Measures
New York, NY — Williams Companies Inc (NYSE:WMB) said it plans to cut its dividend by 69% starting with the current quarter to help fund its plans to reinvest about $1.3 billion into Williams Partners through 2017.
“Williams and Williams Partners announced immediate measures designed to enhance values, strengthen their credit profile and fund the development of a significant portfolio of fee-based growth projects at Williams Partners, while maintaining flexibility as they continue to review financial and operational plans,” the company said in a statement. (Source: “Williams Reports Strong Second Quarter 2016 Financial Results,” Williams, Investor Centre, August 1, 2016.)
The Tulsa, Oklahoma-based energy provider expects the payment of a quarterly dividend of $0.20 per share to its common stockholders ($0.80 annually), reduced from its current quarterly level of $0.64 ($2.56 annually), beginning with the third-quarter 2016 dividend payable in September 2016.
“This dividend level will allow Williams to annually retain approximately $1.3 billion that can be reinvested into Williams Partners to enhance its ability to maintain its distribution and increase its distribution coverage, while providing the partnership with the flexibility to reduce debt and maintain its investment grade ratings,” the statement said. (Source: Ibid.)
The company’s shares, down 50% in the past year, gained eight percent to $24.30 in morning trade.
With the reduced dividend, to $0.20 a share from $0.64, Williams is aiming to retain about $1.3 billion a year that can be reinvested into its master-limited partnership to enhance its ability to maintain its distribution and increase its distribution coverage, while providing flexibility for the MLP to reduce debt and maintain its investment-grade rating.
Williams also swung to a second-quarter loss mostly on an asset write-down related to Canadian operations that the company is aiming to sell. Overall, Williams reported a loss of $405 million, or $0.54 a share, compared with a year-earlier profit of $114 million, or $0.15 a share. Excluding write-downs and other items, adjusted per-share earnings from continuing operations were $0.19.
Analysts polled by Thomson Reuters expected adjusted profit of $0.22 a share.
Williams said it continued to make progress on its cost-cutting efforts in the latest quarter and that additional cost-savings initiatives are planned later this year.
Williams and Williams Partners expect to complete the sale of the Canadian business in the current quarter, and anticipate combined proceeds of approximately $1.0 billion from the planned divestiture, a move they expect will further reduce the need to access capital markets to raise funds.
During May, Williams reported that it swung to a first-quarter loss and its chief executive disclosed additional cost cuts, including reducing its workforce by 10%, or about 690 employees.