General
We are an energy infrastructure company focused on connectingNorth America's significant hydrocarbon resource plays to growing markets for natural gas and NGLs through our gas pipeline and midstream business. Our operations are located inthe United States . Our interstate natural gas pipeline strategy is to create value by maximizing the utilization of our pipeline capacity by providing high quality, low cost transportation of natural gas to large and growing markets. Our gas pipeline businesses' interstate transmission and storage activities are subject to regulation by theFERC and as such, our rates and charges for the transportation of natural gas in interstate commerce, and the extension, expansion or abandonment of jurisdictional facilities and accounting, among other things, are subject to regulation. The rates are established through theFERC's ratemaking process. Changes in commodity prices and volumes transported have limited near-term impact on these revenues because the majority of cost of service is recovered through firm capacity reservation charges in transportation rates. The ongoing strategy of our midstream operations is to safely and reliably operate large-scale midstream infrastructure where our assets can be fully utilized and drive low per-unit costs. We focus on consistently attracting new business by providing highly reliable service to our customers. These services include natural gas gathering, processing, treating, and compression, NGL fractionation and transportation, crude oil production handling and transportation, marketing services for NGL, crude oil and natural gas, as well as storage facilities. EffectiveJanuary 1, 2020 , following an organizational realignment, our interstate natural gas pipeline Northwest Pipeline, which was reported within the West reporting segment throughout 2019, is now managed within the Transmission &Gulf of Mexico reporting segment (previously identified as the Atlantic-Gulf reporting segment). Consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources, our operations are conducted, managed, and presented within the following reportable segments: Transmission &Gulf of Mexico , Northeast G&P, and West. All remaining business activities as well as corporate activities are included in Other. Our reportable segments are comprised of the following businesses: • Transmission &Gulf of Mexico is comprised of our interstate natural gas
pipelines,
gathering and processing and crude oil production handling and
transportation assets in the
interest in Gulfstar One (a consolidated variable interest entity), which
is a proprietary floating production system, a 50 percent equity-method
investment in Gulfstream, and a 60 percent equity-method investment in Discovery. • Northeast G&P is comprised of our midstream gathering, processing, and fractionation businesses in theMarcellus Shale region primarily inPennsylvania ,New York , and theUtica Shale region of easternOhio , as
well as a 65 percent interest in our Northeast JV (a consolidated variable
interest entity) which operates in West
a 66 percent interest in Cardinal (a consolidated variable interest
entity) which operates in
with an approximate average 66 percent interest in multiple gas gathering
systems in theMarcellus Shale (Appalachia Midstream Investments). • West is comprised of our gas gathering, processing, and treating operations in theRocky Mountain region ofColorado andWyoming , the
of south
the Mid-Continent region which includes the
basins. This segment also includes our NGL and natural gas marketing
business, storage facilities, an undivided 50 percent interest in an NGL
fractionator near
OPPL, a 50 percent equity-method investment in RMM, and a 15 percent
interest in
our former 50 percent equity-method investment in Jackalope, which was sold inApril 2019 .
• Other includes minor business activities that are not operating segments,
as well as corporate operations. 36
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Management's Discussion and Analysis (Continued)
Dividends
InJune 2020 , we paid a regular quarterly dividend of$0.40 per share. Overview of Six Months EndedJune 30, 2020 Net income (loss) attributable toThe Williams Companies, Inc. , for the six months endedJune 30, 2020 , decreased$719 million compared to the six months endedJune 30, 2019 , reflecting: •$866 million increase in Impairment of equity-method investments;
•
•
interest in Jackalope;
• A
an impairment of goodwill recorded by an equity-method investee in 2020;
•
These unfavorable changes were partially offset by:
• A
lower pre-tax income;
•
• A
noncontrolling interests primarily due to the noncontrolling interests'
share of the first-quarter 2020 goodwill impairment charge;
•
•
The following discussion and analysis of results of operations and financial condition and liquidity should be read in conjunction with the consolidated financial statements and notes thereto of this Form 10Q and our annual consolidated financial statements and notes thereto in Exhibit 99.1 of our Form 8-K datedMay 4, 2020 . Recent Developments Expansion Project Update Transmission &Gulf of Mexico Hillabee InFebruary 2016 , theFERC issued a certificate order for the initial phases ofTransco's Hillabee Expansion Project . The project involves an expansion ofTransco's existing natural gas transmission system from Station 85 in west centralAlabama to an interconnection with theSabal Trail pipeline in east centralAlabama . The project is being constructed in phases, and all of the project expansion capacity is dedicated toSabal Trail pursuant to a capacity lease agreement. Phase I was completed in 2017 and it increased capacity by 818 Mdth/d. We placed Phase II into service onMay 1, 2020 . Together, the first two phases of the project increased capacity by 1,025 Mdth/d. 37 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
COVID-19
The outbreak of novel coronavirus (COVID-19) has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. We are monitoring the COVID-19 pandemic and have taken steps intended to protect the safety of our customers, employees and communities, and to support the continued delivery of safe and reliable service to our customers and the communities we serve. We are continuing to monitor developments with respect to the outbreak and note the following: • Our financial condition, results of operations, and liquidity have not been materially impacted by direct effects of COVID-19.
• We believe we have the ability to access the debt market, if necessary, as
evidenced by the successful completion of debt offerings during
second-quarter 2020, and continue to have significant levels of unused
capacity on our revolving credit facility. • We have implemented remote working arrangements where possible and restricted business-related travel. Implementation of these measures has
not required material expenditures or significantly impacted our ability
to operate our business. • Our remote working arrangements have not significantly impacted our internal controls over financial reporting and disclosure controls and procedures. Customer Bankruptcies InJune 2020 , our customer Chesapeake Energy Corporation (Chesapeake) announced that it had voluntarily filed for relief under Chapter 11 of theU.S. Bankruptcy Code. We provide midstream services, including wellhead gathering, for the natural gas that Chesapeake and its joint interest owners produce primarily in theEagle Ford Shale ,Haynesville Shale , andMarcellus Shale regions (through our Appalachia Midstream Investments). In 2019, Chesapeake accounted for approximately 6 percent of our consolidated revenues. As ofJune 30, 2020 , we have approximately$91 million of trade accounts receivable due from Chesapeake, (substantially all of which is current atJune 30, 2020 ). We have evaluated these receivables from Chesapeake and our related asset groups and investments involved in providing services to Chesapeake and determined that no expected credit losses or impairment charges are required to be recognized at this time. This evaluation considered the physical nature of our services in these basins, where we gather at the wellhead and are critical to Chesapeake's ability to move product to market, along with an assessed low likelihood of contract rejection, noting that none of our contracts with Chesapeake were rejected in their initial bankruptcy filing. Chesapeake also received initial limited approval to continue paying for services such as those we provide. We also considered our prior experiences with customer bankruptcies, where receivables were ultimately collectible even if the timing of collections was impacted. Future developments in Chesapeake's ongoing bankruptcy proceedings could affect our assumptions and conclusions regarding credit losses and impairment charges. We have certain other customers of our consolidated operations and investees, which are less significant to our consolidated results of operations, that have also filed for bankruptcy protection. To date, based on considerations such as our review of those bankruptcy filings, our assessment of the likelihood of contract rejection, and/or ongoing collections of amounts invoiced, we have not recognized any significant credit losses or impairment charges related to these customers. For example, Extraction Oil & Gas, Inc., a customer of our RMM investee, has not rejected any contracts with RMM and has paid pre-petition amounts due to RMM. We continue to monitor these ongoing customer bankruptcy proceedings as it is reasonably possible that future developments could affect our assumptions and conclusions. Crude Oil Price Decline During the first several months of 2020, crude oil prices decreased as a result of surplus supply and weakened demand caused by the COVID-19 pandemic. In addition, in early March,Saudi Arabia announced that it would cut export prices and increase production, contributing to a sharp decline in crude oil prices. The significant decline in crude oil prices has also impacted NGL prices. While our businesses do not have direct exposure to crude oil prices, 38 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
the combined impacts of the crude oil price decline on our industry and the financial market declines driven by COVID-19 have impacted us as follows: • The publicly traded price for our common stock (NYSE: WMB) declined
significantly in the first quarter of 2020. As a result, our board of directors approved a limited duration shareholder rights agreement. (See
Note 11 - Stockholders' Equity of Notes to the Consolidated Financial
Statements.)
• Driven by the decline in our market capitalization and the underlying
decrease in fair value of our Northeast G&P reporting unit, we recognized
a$187 million impairment of goodwill during the first quarter of 2020. (See Note 12 - Fair Value Measurements and Guarantees of Notes to the Consolidated Financial Statements.) • The same economic conditions impacted the fair value of certain of our equity-method investments, resulting in$938 million of
other-than-temporary impairments of these investments in the first quarter
of 2020. (See Note 12 - Fair Value Measurements and Guarantees of Notes to
the Consolidated Financial Statements.)
Considering the decline in crude oil prices, we note the following about our businesses: • Our interstate natural gas transmission businesses are fully contracted under long-term firm reservation contracts with high credit quality customers and are not exposed to crude oil prices.
• We believe counterparty credit concerns in our gathering and processing
business are significantly mitigated by the physical nature of our services, where we gather at the wellhead and are therefore critical to a producer's ability to move product to market. • Our on-shore natural gas gathering and processing businesses are substantially focused on gas-directed drilling basins rather than oil,
with a broad diversity of basins and customers served. Further, a decline
in oil drilling would be expected to result in less associated natural gas
production, which could drive more demand for natural gas produced from gas-directed basins we serve. • Our deepwater transportation business is supported mostly by major oil producers with a long-cycle perspective. NGL Margins Per-unit non-ethane margins were approximately 40 percent lower in the first six months of 2020 compared to the same period in 2019 primarily due to a 40 percent decrease in per-unit non-ethane sales prices, partially offset by 36 percent lower per-unit natural gas feedstock prices. NGL margins are defined as NGL revenues less any applicable Btu replacement cost, plant fuel, and third-party transportation and fractionation. Per-unit NGL margins are calculated based on sales of our own equity volumes at the processing plants. Our equity volumes include NGLs where we own the rights to the value from NGLs recovered at our plants under both "keep-whole" processing agreements, where we have the obligation to replace the lost heating value with natural gas, and "percent-of-liquids" agreements whereby we receive a portion of the extracted liquids with no obligation to replace the lost heating value. The potential impact of commodity prices on our business for the remainder of 2020 is further discussed in the following Company Outlook. Filing of Rate Case OnAugust 31, 2018 ,Transco filed a general rate case with theFERC for an overall increase in rates. InSeptember 2018 , with the exception of certain rates that reflected a rate decrease, theFERC accepted and suspended our general rate filing to be effectiveMarch 1, 2019 , subject to refund and the outcome of a hearing. The specific rates that reflected a rate decrease were accepted, without suspension, to be effectiveOctober 1, 2018 , as requested byTransco , and were not subject to refund. InMarch 2019 , theFERC accepted our motion to place the rates that were suspended by theSeptember 2018 order into effect onMarch 1, 2019 , subject to refund. InOctober 2019 , we reached an agreement on 39 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
the terms of a settlement with the participants that would resolve all issues in the rate case without the need for a hearing, and onDecember 31, 2019 , we filed a formal stipulation and agreement with theFERC setting forth such terms of settlement. OnMarch 24, 2020 , theFERC issued an order approving the uncontested rate case settlement, which became effective onJune 1, 2020 . As ofJune 30, 2020 , we have provided a$284 million reserve for rate refunds related to increased rates collected sinceMarch 2019 . The refunds were paid onJuly 1, 2020 . Company Outlook Our strategy is to provide large-scale energy infrastructure designed to maximize the opportunities created by the vast supply of natural gas and natural gas products that exists inthe United States . We accomplish this by connecting the growing demand for cleaner fuels and feedstocks with our major positions in the premier natural gas and natural gas products supply basins. We continue to maintain a strong commitment to safety, environmental stewardship, operational excellence, and customer satisfaction. We believe that accomplishing these goals will position us to deliver safe and reliable service to our customers and an attractive return to our shareholders. Our business plan for 2020 includes a continued focus on earnings and cash flow growth, while continuing to improve leverage metrics and control operating costs. Many of our producer customers are impacted by extremely low energy commodity prices, which has resulted in a decrease in drilling activity and the temporary shut-in of existing production in certain oil-directed and liquids-rich areas. We are responding by reducing the pace of our capital growth spending in our gathering and processing business and remaining committed to operating cost discipline. In the current environment, the credit profiles of certain of our producer customers are increasingly challenged, including some that have filed for bankruptcy protection. But as previously discussed, the physical nature of services we provide supports the success of these customers. In many cases, we have long-term acreage dedications with strong historical contractual conveyances that create real estate interests in unproduced gas. In exchange for such dedication of production, we invest capital to build gathering lines uniquely to serve a producer's wells. Therefore, our gathering lines are physically connected to the customer's wellheads and pads, conditioning and connecting the production to available markets. There may not be other gathering lines nearby. The construction of gathering systems is capital intensive and it would be very costly for others to replicate, especially considering the depletion to date of the associated reserves. As a result, we play a critical role in getting a customer's production from the wellhead to a marketable condition and location. This tends to reduce collectability risk as our services enable producers to generate operating cash flows. In 2020, our operating results are expected to include lower deferred revenue amortization related to theWest's Barnett Shale region and Gulfstar One in the Eastern Gulf region. We also expect lower NGL margins overall and lower fee revenues in the West and Eastern Gulf region primarily from a decrease in drilling activity associated with a significant reduction in crude oil prices. Northeast G&P results are expected to increase from higher gathering and processing volumes. If current market conditions persist, the temporary shut-in of existing onshore and offshore production in certain oil-directed and liquids-rich areas will continue to negatively impact our results. We expect increases fromTransco's and Northwest Pipeline's recent expansion projects placed in-service andTransco's rate settlement as well as a full year contribution from the Norphlet project in the Eastern Gulf region. Additionally, we expect operating results will benefit from lower expenses associated with our organizational realignment completed earlier this year. Our growth capital and investment expenditures in 2020 are expected to be in a range from$1.0 billion to$1.2 billion . Growth capital spending in 2020 primarily includesTransco expansions, all of which are fully contracted with firm transportation agreements, and our Bluestem NGL pipeline project in the Mid-Continent region. In addition to growth capital and investment expenditures, we also remain committed to projects that maintain our assets for safe and reliable operations, as well as projects that meet legal, regulatory, and/or contractual commitments. Potential risks and obstacles that could impact the execution of our plan include: • Continued negative impacts of COVID-19 driving a global recession, which
could result in further downturns in financial markets and commodity
prices, as well as impact demand for natural gas and related products;
40 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
• Opposition to, and legal regulations affecting, our infrastructure
projects, including the risk of delay or denial in permits and approvals
needed for our projects; • Counterparty credit and performance risk, including unexpected developments in ongoing customer bankruptcy proceedings; • Unexpected significant increases in capital expenditures or delays in capital project execution; • Unexpected changes in customer drilling and production activities, which could negatively impact gathering and processing volumes;
• Lower than anticipated demand for natural gas and natural gas products
which could result in lower than expected volumes, energy commodity prices, and margins; • General economic, financial markets, or further industry downturn, including increased interest rates;
• Physical damages to facilities, including damage to offshore facilities by
named windstorms;
• Other risks set forth under Part I, Item 1A. Risk Factors in our Annual
Report on Form 10-K for the year ended
the
Part II, Item 1A. in our Quarterly Report on Form 10-Q for the quarter
ended
We seek to maintain a strong financial position and liquidity, as well as manage a diversified portfolio of energy infrastructure assets which continue to serve key growth markets and supply basins inthe United States . Expansion Projects Our ongoing major expansion projects include the following: Transmission &Gulf of Mexico Northeast Supply Enhancement InMay 2019 , we received approval from theFERC to expandTransco's existing natural gas transmission system to provide incremental firm transportation capacity from Station 195 inPennsylvania to the Rockaway Delivery Lateral transfer point inNew York . However, approvals required for the project from theNew York State Department of Environmental Conservation and theNew Jersey Department of Environmental Protection were denied inMay 2020 . We have not refiled our applications for those approvals. The project, which would increase capacity by 400 Mdth/d, was planned to be placed into service in the fall of 2021. See further discussion in Critical Accounting Estimates.Southeastern Trail InOctober 2019 , we received approval from theFERC to expandTransco's existing natural gas transmission system to provide incremental firm transportation capacity from thePleasant Valley interconnect with Dominion'sCove Point Pipeline inVirginia to the Station 65 pooling point inLouisiana . We plan to place up to 230 Mdth/d of capacity under the project into service in the fourth quarter of 2020, and the remainder of the project capacity into service in the first quarter of 2021. In total, the project is expected to increase capacity by 296 Mdth/d. Leidy South InJuly 2020 , we received approval from theFERC for the project to expandTransco's existing natural gas transmission system and also extend its system through a capacity lease withNational Fuel Gas Supply Corporation that will enable us to provide incremental firm transportation fromClermont, Pennsylvania and from the Zick interconnection onTransco's Leidy Line to theRiver Road regulating station inLancaster County, Pennsylvania . 41 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
We plan to place the project into service as early as the fourth quarter of 2021, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 582 Mdth/d. West Project Bluestem We are expanding our presence in the Mid-Continent region through building a 188-mile NGL pipeline from our fractionator nearConway, Kansas to an interconnect with a third-party NGL pipeline system inOklahoma , providing us with firm access to Mt. Belvieu pricing. As part of the project, the third-party is constructing a 110-mile pipeline extension of their existing NGL pipeline system that will have an initial capacity of 120 Mbbls/d. The pipeline and extension projects are expected to be placed into service during the first quarter of 2021. Further, during the first quarter of 2019, we exercised an option to purchase a 20 percent equity interest in a Mt. Belvieu fractionation train developed by the third party, which was placed into service in the first quarter of 2020. Critical Accounting Estimates Equity-Method Investments We monitor our equity-method investments for any indications that the carrying value may have experienced an other-than-temporary decline in value. In the first quarter of 2020, we observed a significant decline in the publicly traded price of our common stock (NYSE: WMB) as well as other industry peers and increases in equity yields within the midstream and overall energy industry, which served to increase our estimates of discount rates and weighted-average cost of capital. These changes were attributed to the swift, world-wide economic declines associated with actions to address the spread of COVID-19, coupled with the energy industry impact of significantly reduced energy commodity prices, which were further impacted by crude oil price declines associated with geopolitical actions during the quarter. These significant macroeconomic changes served as indications that the carrying amount of certain of our equity-method investments may have experienced an other-than temporary decline in fair value, determined in accordance with Accounting Standards Codification (ASC) Topic 323, "Investments -Equity Method and Joint Ventures ." As a result, we estimated the fair value of these equity-method investments in accordance with ASC Topic 820, "Fair Value Measurement," as of theMarch 31, 2020 , measurement date. In assessing the fair value, we were required to consider recent publicly available indications of value, which included lower observed publicly traded EBITDA (earnings before interest, taxes, depreciation, and amortization) market multiples as compared with recent history, and significantly higher industry weighted-average discount rates. As a result, we determined that there were other-than-temporary declines in the fair value of certain of our equity-method investments, resulting in recognized impairments during the first quarter of 2020 totaling$938 million . (See Note 12 - Fair Value Measurements and Guarantees of Notes to Consolidated Financial Statements.) This included impairments of certain of our equity-method investments in our Northeast G&P segment totaling$405 million , primarily associated with operations in wet-gas areas where producer drilling activities are influenced by NGL prices, which historically trend with crude oil prices. This total was primarily comprised of impairments of our investment in Caiman II and predominantly wet-gas gathering systems that are part of the Appalachia Midstream Investments. We also recognized an impairment of$97 million related to Discovery within the Transmission &Gulf of Mexico segment. We estimated the fair value of these investments as of theMarch 31, 2020 , measurement date utilizing income and market approaches, which were impacted by assumptions reflecting the significant recent market declines previously discussed, such as higher discount rates, ranging from 9.7 percent to 13.5 percent, and lower EBITDA multiples ranging from 5.0x to 6.2x. We also considered any debt held at the investee level, and its impact to fair value. We estimate that a one percentage point increase or decrease in the discount rates used would increase these recognized impairments by approximately$197 million or decrease the level of these recognized impairments by approximately$121 million and a 0.5x increase or decrease in the EBITDA multiples assumed would decrease or increase the level of impairments recognized by approximately$48 million . During the first quarter of 2020 we also recognized$436 million of impairments within our West segment related to our investments in RMM and Brazos Permian II, measured using an income approach. Both investees operate in primarily crude oil-driven basins where our gathering volumes are driven by crude oil drilling. Our expectation of 42 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
continued lower crude oil prices and related expectation of significant reductions in current and future producer activities in these areas led to reduced estimates of expected future cash flows. Our fair value estimates also reflected increases in the discount rates to approximately 17 percent for these investments. We also considered any debt held at the investee level, and its impact to fair value. We estimate that a one percentage point increase in the discount rate would increase these recognized impairments by approximately$32 million , while a one percentage point decrease would decrease these impairments by approximately$43 million . Judgments and assumptions are inherent in our estimates of future cash flows, discount rates, and market measures utilized and, as previously discussed, were significantly impacted by the recent unfavorable macroeconomic changes. The use of alternate judgments and assumptions could result in a different calculation of fair value, which could ultimately result in the recognition of a different impairment charge in the consolidated financial statements, potentially including impairments for investments which were evaluated but for which no impairments were recognized. Property, Plant, and Equipment and Other Identifiable Intangible Assets As a result of the previously described significant macroeconomic changes during the first quarter of 2020, we also evaluated certain of our property, plant, and equipment and other identifiable intangible assets for indicators of impairment as ofMarch 31, 2020 . In our assessments, we considered the impact of the then current market conditions on certain of our assets and did not identify any indicators that the carrying amounts of those assets may not be recoverable. The use of alternate judgments or changes in future conditions could result in a different conclusion regarding the occurrence and measurement of impairments affecting the consolidated financial statements. As ofJune 30, 2020 , Property, plant, and equipment in our Consolidated Balance Sheet includes approximately$217 million of capitalized project development costs for the Northeast Supply Enhancement project. As previously discussed, approvals required for the project from theNew York State Department of Environmental Conservation and theNew Jersey Department of Environmental Protection have been denied and we have not refiled at this time. Beginning inMay 2020 , we discontinued capitalization of costs related to this project. The customer precedent agreements remain in effect and the project'sFERC certificate remains active. As such, we do not believe this project is probable of abandonment at this time and consider the carrying amount to be recoverable; thus no impairment charge has been recognized. It is reasonably possible that further adverse developments in the near future could change this determination, resulting in a future impairment charge of a substantial portion of the capitalized costs. 43
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Management's Discussion and Analysis (Continued)
Results of Operations Consolidated Overview The following table and discussion is a summary of our consolidated results of operations for the three and six months endedJune 30, 2020 , compared to the three and six months endedJune 30, 2019 . The results of operations by segment are discussed in further detail following this consolidated overview discussion. Three Months Ended Six Months Ended June 30, June 30, 2020 2019 $ Change* % Change* 2020 2019 $ Change* % Change* (Millions) (Millions) Revenues: Service revenues$ 1,446 $ 1,489 -43 -3 %$ 2,920 $ 2,929 -9 - % Service revenues - commodity consideration 25 56 -31 -55 % 53 120 -67 -56 % Product sales 310 496 -186 -38 % 721 1,046 -325 -31 % Total revenues 1,781 2,041 3,694 4,095 Costs and expenses: Product costs 271 483 +212 +44 % 667 1,008 +341 +34 % Processing commodity expenses 15 24 +9 +38 % 28 64 +36 +56 % Operating and maintenance expenses 320 387 +67 +17 % 657 727 +70 +10 % Depreciation and amortization expenses 430 424 -6 -1 % 859 840 -19 -2 % Selling, general, and administrative expenses 127 152 +25 +16 % 240 280 +40 +14 % Impairment of certain assets - 64 +64 +100 % - 76 +76 +100 % Impairment of goodwill - - - - 187 - -187 NM Other (income) expense - net 6 9 +3 +33 % 13 41 +28 +68 % Total costs and expenses 1,169 1,543 2,651 3,036 Operating income (loss) 612 498 1,043 1,059 Equity earnings (losses) 108 87 +21 +24 % 130 167 -37 -22 % Impairment of equity-method investments - 2 -2 -100 % (938 ) (72 ) -866 NM Other investing income (loss) - net 1 124 -123 -99 % 4 125 -121 -97 % Interest expense (294 ) (296 ) +2 +1 % (590 ) (592 ) +2 - % Other income (expense) - net 5 7 -2 -29 % 9 18 -9 -50 % Income (loss) before income taxes 432 422 (342 ) 705 Provision (benefit) for income taxes 117 98 -19 -19 % (87 ) 167 +254 NM Net income (loss) 315 324 (255 ) 538 Less: Net income (loss) attributable to noncontrolling interests 12 14 +2 +14 % (41 ) 33 +74 NM Net income (loss) attributable to The Williams Companies, Inc.$ 303 $ 310 $ (214 ) $ 505
* + = Favorable change; - = Unfavorable change; NM = A percentage calculation is
not meaningful due to a change in signs, a zero-value denominator, or a percentage change greater than 200. 44
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Management's Discussion and Analysis (Continued)
Three months endedJune 30, 2020 vs. three months endedJune 30, 2019 Service revenues decreased primarily due to lower volumes in our West segment, the expiration of an MVC agreement in theBarnett Shale region, lower deferred revenue amortization at Gulfstar One, and temporary shut-ins at certain offshoreGulf of Mexico operations. This decrease was partially offset by an increase in theEagle Ford Shale region primarily due to higher MVC revenue, higher transportation fee revenues atTransco primarily associated with expansion projects placed in service in 2019 and its rate case settlement, as well as higher Northeast JV revenues driven by higher volumes. Service revenues - commodity consideration decreased primarily due to lower commodity prices, along with lower equity NGL processing volumes due to less producer drilling activity. These revenues represent consideration we receive in the form of commodities as full or partial payment for processing services provided. Most of these NGL volumes are sold within the month processed and therefore are offset in Product costs below. Product sales decreased primarily due to lower NGL and natural gas prices associated with our marketing and equity NGL sales activities, as well as lower volumes associated with our equity NGL sales activities, partially offset by higher marketing volumes. This decrease also includes lower system management gas sales. Marketing revenues and system management gas sales are substantially offset in Product costs. Product costs decreased primarily due to lower NGL and natural gas prices associated with our marketing and equity NGL production activities. This decrease also includes lower volumes acquired as commodity consideration for NGL processing services and lower system management gas costs, partially offset by higher volumes for marketing activities. Operating and maintenance expenses decreased due to lower employee-related expenses driven by the absence of second-quarter 2019 severance and related costs (see Note 6 - Other Accruals of Notes to Consolidated Financial Statements) and the associated reduced costs in 2020, as well as lower maintenance costs primarily due to timing and scope of activities. Selling, general, and administrative expenses decreased primarily due to lower employee-related expenses, including the absence of second-quarter 2019 severance and related costs (see Note 6 - Other Accruals of Notes to Consolidated Financial Statements) and the associated reduced costs in 2020, as well as the absence of transaction costs associated with our 2019 formation of the Northeast JV. The favorable change in Impairment of certain assets includes the absence of a 2019 impairment of certainEagle Ford Shale gathering assets (see Note 12 - Fair Value Measurements and Guarantees of Notes to Consolidated Financial Statements). The favorable change in Operating income (loss) includes the absence of the 2019 impairment of certain assets, as well as higher Northeast JV volumes, lower employee-related expenses, and the favorable impact fromTransco's expansion projects and rate case. The favorable change was partially offset by the expiration of an MVC agreement in theBarnett Shale region, lower deferred revenue amortization at Gulfstar One, and the impact of various temporary shut-ins across theGulf of Mexico . Equity earnings (losses) increased primarily due to increases at Appalachia Midstream Investments and Caiman II. The unfavorable change in Other investing income (loss) - net includes the absence of a 2019 gain on the sale of our equity-method investment in Jackalope (see Note 5 - Investing Activities of Notes to Consolidated Financial Statements). Provision (benefit) for income taxes changed unfavorably primarily due to the allocation of losses to nontaxable noncontrolling interest and higher pre-tax income. See Note 7 - Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods. 45 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
Six months endedJune 30, 2020 vs. six months endedJune 30, 2019 Service revenues decreased primarily due to the expiration of an MVC agreement in theBarnett Shale region, lower deferred revenue amortization at Gulfstar One, lower volumes and rates in our West segment, and temporary shut-ins at certainGulf of Mexico operations. This decrease was partially offset by higher Northeast JV revenues driven by higher volumes and theMarch 2019 consolidation of UEOM, higher transportation fee revenues atTransco primarily associated with its expansion projects placed in service in 2019 and rate case settlement, as well as higher MVC revenue in theEagle Ford Shale region. Service revenues - commodity consideration decreased primarily due to lower commodity prices, as well as lower equity NGL processing volumes due to less producer drilling activity and higher ethane rejection. These revenues represent consideration we receive in the form of commodities as full or partial payment for processing services provided. Most of these NGL volumes are sold within the month processed and therefore are offset in Product costs below. Product sales decreased primarily due to lower NGL and natural gas prices associated with our marketing and equity NGL sales activities, as well as lower volumes associated with our equity NGL sales activities, partially offset by higher marketing volumes. This decrease also includes lower system management gas sales. Marketing revenues and system management gas sales are substantially offset in Product costs. Product costs decreased primarily due to lower NGL and natural gas prices associated with our marketing and equity NGL production activities. This decrease also includes lower volumes acquired as commodity consideration for NGL processing services and lower system management gas costs, partially offset by higher volumes for marketing activities. Processing commodity expenses decreased primarily due to lower natural gas purchases associated with equity NGL production primarily due to lower volumes and lower natural gas prices. Operating and maintenance expenses decreased due to lower employee-related expenses, including the absence of second-quarter 2019 severance and related costs and the associated reduced costs in 2020, and lower maintenance primarily due to timing and scope of activities. This decrease was partially offset by higher expenses related to the consolidation of UEOM inMarch 2019 . Depreciation and amortization expenses increased primarily due to new assets placed in service and theMarch 2019 consolidation of UEOM, partially offset by lower expense related to assets that became fully depreciated in the fourth quarter of 2019. Selling, general, and administrative expenses decreased primarily due to lower employee-related expenses, including the absence of second-quarter 2019 severance and related costs and the associated reduced costs in 2020, as well as the absence of transaction costs associated with our 2019 acquisition of UEOM and the formation of the Northeast JV. The favorable change in Impairment of certain assets includes the absence of 2019 impairments of certainEagle Ford Shale gathering assets and certain idle gathering assets. Impairment of goodwill reflects the goodwill impairment charge at Northeast G&P in 2020 (see Note 12 - Fair Value Measurements and Guarantees of Notes to Consolidated Financial Statements). The favorable change in Other (income) expense - net within Operating income (loss) includes net favorable changes to charges and credits associated with regulatory assets and liabilities primarily associated withTransco's rate case settlement and the absence of a 2019 unfavorable regulatory asset adjustment at Other. The unfavorable change in Operating income (loss) includes the 2020 impairment of goodwill at Northeast G&P, the expiration of an MVC agreement in theBarnett Shale region, lower deferred revenue amortization at Gulfstar One, and unfavorable commodity margins primarily reflecting lower NGL sales prices. The unfavorable change was partially offset by higher Northeast JV volumes, the absence of the 2019 impairment of certain assets, lower employee-related 46 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
expenses, the favorable impacts of the consolidation of UEOM, and the favorable impact fromTransco's expansion projects and rate case. Equity earnings (losses) decreased primarily due to our share of the 2020 impairment of goodwill at RMM (see Note 5 - Investing Activities of Notes to Consolidated Financial Statements). This decrease was partially offset by increases at Appalachia Midstream Investments and Caiman II. Impairment of equity-method investments includes impairments of various equity-method investments in 2020, partially offset by the absence of a 2019 impairment of UEOM (see Note 12 - Fair Value Measurements and Guarantees of Notes to Consolidated Financial Statements). The unfavorable change in Other investing income (loss) - net is primarily due to the absence of a 2019 gain on the sale of our equity-method investment in Jackalope. The unfavorable change in Other income (expense) - net below Operating income (loss) is primarily due to a 2020 pension plan settlement charge. Provision (benefit) for income taxes changed favorably primarily due to lower pre-tax income. See Note 7 - Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods. The favorable change in Net income (loss) attributable to noncontrolling interests is primarily due to the noncontrolling interests' share of the first-quarter 2020 goodwill impairment charge, and lower Gulfstar One results, partially offset by the impact from to the formation of the Northeast JV inJune 2019 . Period-Over-Period Operating Results - Segments We evaluate segment operating performance based upon Modified EBITDA. Note 14 - Segment Disclosures of Notes to Consolidated Financial Statements includes a reconciliation of this non-GAAP measure to Net income (loss). Management uses Modified EBITDA because it is an accepted financial indicator used by investors to compare company performance. In addition, management believes that this measure provides investors an enhanced perspective of the operating performance of our assets. Modified EBITDA should not be considered in isolation or as a substitute for a measure of performance prepared in accordance with GAAP. Transmission &Gulf of Mexico Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Millions) Service revenues$ 795 $ 808 $ 1,624 $ 1,631 Service revenues - commodity consideration 3 13 8 26 Product sales 36 68 88 150 Segment revenues 834 889 1,720 1,807 Product costs (37 ) (69 ) (89 ) (151 ) Processing commodity expenses (1 ) (5 ) (3 ) (10 ) Other segment costs and expenses (223 ) (269 ) (437 ) (506 ) Proportional Modified EBITDA of equity-method investments 42 44 86 86 Transmission & Gulf of Mexico Modified EBITDA$ 615 $ 590 $ 1,277 $ 1,226 Commodity margins$ 1 $ 7 $ 4 $ 15 47
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Management's Discussion and Analysis (Continued)
Three months ended
end of the exclusive use period at Gulfstar One;
• A
Gunflint related to pricing and scheduled maintenance.
These decreases were partially offset by:
• A
primarily driven by higher revenues from
placed in service and rate case settlement in 2019;
• An increase at Gulfstar One associated with higher volumes in the Tubular
Bells field due to a new well and higher production.
The net sum of Service revenues - commodity consideration, Product sales, Product costs, and Processing commodity expenses comprise our commodity margins. Our commodity margins associated with our equity NGLs decreased$4 million primarily driven by unfavorable NGL sales volumes and prices. Additionally, the decrease in Product sales includes a$21 million decrease in commodity marketing sales. Marketing sales are substantially offset in Product costs and therefore have little impact to Modified EBITDA. Other segment costs and expenses decreased primarily due to lower employee-related expenses, including the absence of second-quarter 2019 severance and related costs and the associated reduced costs in 2020 (see Note 6 of Notes to Consolidated Financial Statements) and the absence of$15 million of expense in 2019 related to the reversal of expenditures previously capitalized, as well as net favorable changes to charges and credits associated with regulatory assets and liabilities primarily driven by the terms of settlement inTransco's general rate case. Additionally, expenses decreased due to lower maintenance costs. Six months endedJune 30, 2020 vs. six months endedJune 30, 2019 Transmission & Gulf of Mexico Modified EBITDA increased primarily due to favorable changes to Other segment costs and expenses. Service revenues decreased primarily due to: • A$61 million decrease due to lower deferred revenue amortization and the
end of the exclusive use period at Gulfstar One;
• A
Gunflint related to pricing and scheduled maintenance.
These decreases were partially offset by:
• A
primarily driven by higher revenues from
placed in service and rate case settlement in 2019;
• A
the Tubular Bells field due to a new well and higher production; 48
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Management's Discussion and Analysis (Continued)
• An
The net sum of Service revenues - commodity consideration, Product sales, Product costs, and Processing commodity expenses comprise our commodity margins. Our commodity margins associated with our equity NGLs decreased$8 million primarily driven by unfavorable NGL sales prices and volumes. Additionally, the decrease in Product sales includes a$36 million decrease in commodity marketing sales primarily due to lower NGL prices and$8 million lower system management gas sales. Marketing revenues and system management gas sales are substantially offset in Product costs and therefore have little impact to Modified EBITDA. Other segment costs and expenses decreased primarily due to lower employee-related expenses, including the absence of second-quarter 2019 severance and related costs and the associated reduced costs in 2020, as well as net favorable changes to charges and credits associated with regulatory assets and liabilities primarily driven by the terms of settlement inTransco's general rate case, and the absence of$15 million of expense in 2019 related to the reversal of expenditures previously capitalized. Additionally, expenses decreased due to lower contracted services mainly related to general maintenance and other testing atTransco . These decreases were partially offset by higher operating taxes and a 2020 pension plan settlement charge. Northeast G&P Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Millions) Service revenues$ 354 $ 330 $ 712 $ 606 Service revenues - commodity consideration 1 3 3 8 Product sales 1 37 30 84 Segment revenues 356 370 745 698 Product costs - (38 ) (29 ) (85 ) Processing commodity expenses (1 ) (2 ) (2 ) (5 ) Other segment costs and expenses (111 ) (130 ) (221 ) (231 ) Proportional Modified EBITDA of equity-method investments 126 103 246 225 Northeast G&P Modified EBITDA$ 370 $ 303 $ 739 $ 602 Commodity margins$ 1 $ -$ 2 $ 2 Three months endedJune 30, 2020 vs. three months endedJune 30, 2019 Northeast G&P Modified EBITDA increased primarily due to higher Service revenues, increased Proportional Modified EBITDA of equity-method investments, and lower Other segment costs and expenses. Service revenues increased primarily due to: • A$23 million increase at the Northeast JV, related to higher gathering, processing, fractionation, and transportation revenues primarily associated with higher volumes, partially offset by • A$7 million decrease associated with lower gathering volumes at Susquehanna Supply Hub. Product sales decreased primarily due to lower non-ethane prices within our marketing activities. The changes in marketing revenues are offset by similar changes in marketing purchases, reflected above as Product costs. Other segment costs and expenses decreased primarily due to lower employee-related expenses driven by the absence of second-quarter 2019 severance and related costs (see Note 6 - Other Accruals of Notes to Consolidated 49 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
Financial Statements) and the associated reduced costs in 2020, and the absence of transaction costs associated with the formation of the Northeast JV. Additionally, maintenance and repairs expenses decreased primarily due to timing and scope of activities. Proportional Modified EBITDA of equity-method investments increased at Appalachia Midstream Investments primarily due to higher volumes and at Caiman II driven by a gain on early debt retirement atBlue Racer Midstream, LLC . Six months endedJune 30, 2020 vs. six months endedJune 30, 2019 Northeast G&P Modified EBITDA increased primarily due to higher Service revenues and the favorable impact of acquiring the additional interest of UEOM, which is a consolidated entity after the remaining ownership interest was purchased inMarch 2019 , in addition to increased Proportional Modified EBITDA of equity-method investments from higher volumes at Appalachia Midstream Investments and Caiman II. Service revenues increased primarily due to: • An$84 million increase at the Northeast JV, including$52 million higher
gathering, processing, fractionation, and transportation revenues
primarily due to higher volumes, and a
with the consolidation of UEOM, as previously discussed;
• An
offset by similar changes in electricity charges, reflected in Other
segment costs and expenses;
• A
higher volumes.
Product sales decreased primarily due to lower NGL prices and lower non-ethane volumes within our marketing activities. The changes in marketing revenues are offset by similar changes in marketing purchases, reflected above as Product costs. Other segment costs and expenses decreased primarily due to lower employee-related expenses, including the absence of second-quarter 2019 severance and related costs and the associated reduced costs in 2020, and the absence of transaction costs associated with our 2019 acquisition of UEOM and the formation of the Northeast JV. Additionally, maintenance and repair expenses and operating expenses decreased primarily due to timing and scope of activities. These decreases were partially offset by higher reimbursable electricity expenses in addition to increased expenses associated with the consolidation of UEOM. Proportional Modified EBITDA of equity-method investments increased at Appalachia Midstream Investments driven by higher volumes and at Caiman II driven by higher volumes and a gain on early debt retirement. These increases were partially offset by a$16 million decrease as a result of the consolidation of UEOM, as previously discussed. 50 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
West Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 (Millions) Service revenues$ 316 $ 368 $ 627 $ 727 Service revenues - commodity consideration 21 40 42 86 Product sales 303 434 662 913 Segment revenues 640 842 1,331 1,726 Product costs (281 ) (437 ) (649 ) (912 ) Processing commodity expenses (13 ) (19 ) (23 ) (50 ) Other segment costs and expenses (117 ) (138 ) (243 ) (274 ) Impairment of certain assets - (64 ) - (76 ) Proportional Modified EBITDA of equity-method investments 24 28 52 54 West Modified EBITDA$ 253 $ 212 $ 468 $ 468 Commodity margins$ 30 $ 18 $ 32 $ 37 Three months endedJune 30, 2020 vs. three months endedJune 30, 2019 West Modified EBITDA increased primarily due to the absence of Impairment of certain assets, lower Other segment costs and expenses, and higher Commodity margins, partially offset by lower Service revenues. Service revenues decreased primarily due to: • A$33 million decrease driven by lower deferred revenue amortization and MVC deficiency fee revenues associated with the second-quarter 2019 expiration of the MVC agreement in theBarnett Shale region;
• A
• A
region and the expiration of a cost-of-service period on a contract in the
Mid-Continent region; • An$11 million decrease driven by the absence of a favorable 2019 cost-of-service agreement adjustment in the Mid-Continent region;
• A
revenue and higher rates, partially offset by lower volumes primarily due
to decreased producer activity, including shut-ins on certain gathering
systems;
• A
from a customer.
The net sum of Service revenues - commodity consideration, Product sales, Product costs, and Processing commodity expenses comprise our commodity margins, which we further segregate into product margins associated with our equity NGLs and marketing margins. Marketing margins increased by$25 million primarily due to favorable changes in net commodity prices. The decrease in Product sales includes a$107 million decrease in marketing sales, which is due to lower sales prices, partially offset by higher marketing sales volumes. These decreases are substantially offset in Product costs. Additionally, product margins from our equity NGLs decreased$13 million primarily due to: 51 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
• A
48 percent lower average net realized per-unit non-ethane sales prices;
• A
14 percent lower non-ethane sales volumes primarily due to less producer
drilling activity;
• A
associated with lower natural gas prices and lower equity NGL production
volumes.
Other segment costs and expenses decreased primarily due to lower employee-related expenses driven by the absence of second-quarter 2019 severance and related costs and the associated reduced costs in 2020 (see Note 6 - Other Accruals of Notes to the Consolidated Financial Statements), lower maintenance costs primarily due to timing and scope of activities, and lower operating costs due to fewer leased compressors. Impairment of certain assets decreased primarily due to the absence of a$59 million impairment of certainEagle Ford Shale gathering assets in 2019 (see Note 12 - Fair Value Measurements and Guarantees of Notes to the Consolidated Financial Statements). Proportional Modified EBITDA of equity-method investments decreased primarily due to lower volumes at OPPL. Six months endedJune 30, 2020 vs. six months endedJune 30, 2019 West Modified EBITDA includes lower Service revenues and lower Commodity margins, offset by the absence of Impairment of certain assets and lower Other segment costs and expenses. Service revenues decreased primarily due to: • A$72 million decrease driven by lower deferred revenue amortization and MVC deficiency fee revenues associated with the second-quarter 2019 expiration of the MVC agreement in theBarnett Shale region;
• A
region and the expiration of a cost-of-service period on a contract in the
Mid-Continent region;
• A
Ford Shale region; • An$11 million decrease driven by the absence of a favorable 2019 cost-of-service agreement adjustment in the Mid-Continent region;
• A
revenue and higher rates, partially offset by lower volumes primarily due
to decreased producer activity, including shut-ins on certain gathering
systems;
• A
from a customer.
The net sum of Service revenues - commodity consideration, Product sales, Product costs, and Processing commodity expenses comprise our commodity margins, which we further segregate into product margins associated with our equity NGLs and marketing margins. Product margins from our equity NGLs decreased$17 million primarily due to: • A$24 million decrease associated with lower sales prices primarily due to
40 percent lower average net realized per-unit non-ethane sales prices;
52 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
• A$19 million decrease associated with 16 percent lower non-ethane sales volumes primarily due to less producer drilling activity as well as lower sales volumes primarily due to 49 percent lower ethane sales volumes resulting from higher ethane rejection;
• A
associated with lower equity NGL production volumes and lower natural gas
prices.
Additionally, marketing margins increased by$12 million primarily due to favorable changes in net commodity prices. The decrease in Product sales includes a$195 million decrease in marketing sales, which is due to lower sales prices, partially offset by higher marketing sales volumes. These decreases are substantially offset in Product costs. Other segment costs and expenses decreased primarily due to lower employee-related expenses driven by the absence of second-quarter 2019 severance and related costs and the associated reduced costs in 2020, as well as lower maintenance costs primarily due to timing and scope of activities, and lower operating costs due to fewer leased compressors. Impairment of certain assets decreased primarily due to the absence of a$59 million impairment of certainEagle Ford Shale gathering assets and a$12 million impairment of certain idle gathering assets in 2019. Proportional Modified EBITDA of equity-method investments decreased primarily due to lower volumes at OPPL and the absence of the Jackalope equity-method investment sold inApril 2019 , partially offset by growth at the RMM equity-method investment. Other Three Months Ended June 30, Six Months Ended June 30, 2020 2019 2020 2019 (Millions) Other Modified EBITDA $ 8$ 7 $ 15$ 3 Six months endedJune 30, 2020 vs. six months endedJune 30, 2019 Other Modified EBITDA increased primarily due to the absence of a first-quarter 2019$12 million unfavorable adjustment to a regulatory asset associated with an increase inTransco's estimated deferred state income tax rate following the merger transaction wherein we acquired all of the outstanding common units held by others of our former publicly traded master limited partnership. 53 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
Management's Discussion and Analysis of Financial Condition and Liquidity Outlook As previously discussed in Company Outlook, our growth capital and investment expenditures in 2020 are currently expected to be in a range from$1.0 billion to$1.2 billion . Growth capital spending in 2020 includesTransco expansions, all of which are fully contracted with firm transportation agreements, and our Bluestem NGL pipeline project in the Mid-Continent region. In addition to growth capital and investment expenditures, we also remain committed to projects that maintain our assets for safe and reliable operations, as well as projects that meet legal, regulatory, and/or contractual commitments. We intend to fund substantially all of our planned 2020 capital spending with cash available after paying dividends. We retain the flexibility to adjust planned levels of growth capital and investment expenditures in response to changes in economic conditions or business opportunities. During the first half of 2020, we retired approximately$1.5 billion of long-term debt and issued approximately$2.2 billion of new long-term debt. InAugust 2020 , we expect to early retire our$600 million of 4.125 percent senior unsecured notes that are scheduled to mature inNovember 2020 . InJuly 2020 , we paid$284 million for rate refunds related toTransco's increased rates collected since the new rates became effective inMarch 2019 . (See Note 13 - Contingent Liabilities of Notes to Consolidated Financial Statements.) Liquidity Based on our forecasted levels of cash flow from operations and other sources of liquidity, we expect to have sufficient liquidity to manage our businesses in 2020. Our potential material internal and external sources and uses of liquidity are as follows: Sources: Cash and cash equivalents on hand Cash generated from operations Distributions from our equity-method investees Utilization of our credit facility and/or commercial paper program Cash proceeds from issuance of debt and/or equity securities Proceeds from asset monetizations Uses: Working capital requirements Capital and investment expenditures Quarterly dividends to our shareholders Debt service payments, including payments of long-term debt Distributions to noncontrolling interests
Potential risks associated with our planned levels of liquidity discussed above include those previously discussed in Company Outlook.
54 --------------------------------------------------------------------------------
Management's Discussion and Analysis (Continued)
As ofJune 30, 2020 , we had a working capital deficit of$100 million , including cash and cash equivalents and long-term debt due within one year. Our available liquidity is as follows: Available Liquidity June 30, 2020 (Millions) Cash and cash equivalents $ 1,133 Capacity available under our$4.5 billion credit facility, less amounts outstanding under our$4 billion commercial paper program (1) 4,500 $ 5,633
(1) In managing our available liquidity, we do not expect a maximum outstanding
amount in excess of the capacity of our credit facility inclusive of any
outstanding amounts under our commercial paper program. We had no commercial
paper outstanding as of
amount outstanding under our commercial paper program and credit facility
during 2020 was
the financial covenants associated with our credit facility.
Dividends
We increased our regular quarterly cash dividend to common stockholders by approximately 5 percent from the previous quarterly cash dividends of$0.38 per share paid in each quarter of 2019, to$0.40 per share for the quarterly cash dividends paid in March andJune 2020 . Registrations InFebruary 2018 , we filed a shelf registration statement as a well-known seasoned issuer. InAugust 2018 , we filed a prospectus supplement for the offer and sale from time to time of shares of our common stock having an aggregate offering price of up to$1 billion . These sales are to be made over a period of time and from time to time in transactions at then-current prices. Such sales are to be made pursuant to an equity distribution agreement between us and certain entities who may act as sales agents or purchase for their own accounts as principals at a price agreed upon at the time of the sale. Distributions from Equity-Method Investees The organizational documents of entities in which we have an equity-method investment generally require distribution of their available cash to their members on a quarterly basis. In each case, available cash is reduced, in part, by reserves appropriate for operating their respective businesses. Credit Ratings The interest rates at which we are able to borrow money are impacted by our credit ratings. The current ratings are as follows: Senior Unsecured Rating Agency Outlook Debt Rating S&P Global Ratings Stable BBB Moody's Investors Service Stable Baa3 Fitch Ratings Stable BBB- InMay 2020 , Fitch Ratings changed its Outlook from Rating Watch Positive to Stable. These credit ratings are included for informational purposes and are not recommendations to buy, sell, or hold our securities, and each rating should be evaluated independently of any other rating. No assurance can be given that the credit rating agencies will continue to assign us investment-grade ratings even if we meet or exceed their current criteria for investment-grade ratios. A downgrade of our credit ratings might increase our future cost of borrowing and would require us to provide additional collateral to third parties, negatively impacting our available liquidity. 55
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