UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 FORM 10-Q (Mark One)



QUARTERLY REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
JuneSeptember3,21 r


TRANSITION REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to ____________ _ Commission file number 1-4174



THEWILLIAMSCOMPANIES,INC.

(Exact name of registrant as specified in its charter)



DELAWARE
73-0569878

(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)


ONE WILLIAMS CENTER

TULSA, OKLAHOMA
74172-0172

(Address of principal executive offices)
(Zip Code) Registrants telephone number, including area code: (918)573-2000 NO CHANGE



(Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer
Acceleratedfiler
Non-acceleratedfiler
Smallerreportingcompany

(Donotcheckifasmallerreportingcompany)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes No Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.



Class
Shares Outstanding at JulyOctober 276,21

Common Stock, $1 par value
749,7
11,27464,737



The Williams Companies, Inc. Index



Page

Part I. Financial Information

Item1. Financial Statements

Consolidated Statement of
Income Three and Six Months Ended June 30, 2015 and 2014
6

Consolidated Statement of Comprehensive Income
Operations Three and SixNine Months Ended JuneSeptember 0 05ad21
7

Consolidated
Balance Sheet June 30, 2015 and December 31,Statement of Comprehensive Income (Loss) Three and Nine Months Ended September 30, 2015 and 04 8

Consolidated
Statement of Changes in Equity Six Months Ended JuneBalance Sheet September 30, 2015 and December 301, 20154
9

Consolidated Statement of C
ash Flows Six Months Ended June 30, 2015 and 2014hanges in Equity Nine Months Ended September 30, 2015
10

Consolidated Statement of Cash Flows Nine Months Ended September 30, 2015 and 2014
11

Notes to Consolidated Financial Statements
112

Item2. Managements Discussion and Analysis of Financial Condition and Results of Operations
306

Item3. Quantitative and Qualitative Disclosures About Market Risk
5360

Item4. Controls and Procedures
5461

Part II. Other Information
5461

Item1. Legal Proceedings
5461

Item1A. Risk Factors
5562

Item6. Exhibits
57
Certain matters contained in this report includ
64
The reports, filings, and other public announcements of The Williams Companies, Inc. (Williams) may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements ar
e forward-looking statements within the meaning of Section27A of the Securities Act of 1933, as amended, and Section21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to anticipated financial performance, managements plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements.
We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.
Forward-looking statements can be identified by various forms of words such as anticipates, believes, seeks, could, may, should, continues, estimates, expects, forecasts, intends, might, goals, objectives, targets, planned, potential, projects, scheduled, will, assumes, guidance, outlook, in service date, or other similar expressions. These forward-looking statements are based on managements beliefs and assumptions and on information currently available to management and include, among others, statements regarding:


The status, expected timing and expected outcome of the proposed ETC Merger;


Statements regarding the proposed ETC Merger;


Our beliefs relating to value creation as a result of the proposed ETC Merger;


Expected levels of cash distributions by Williams Partners L.P. (WPZ) with respect to general partner interests, incentive distribution rights, and limited partner interestsBenefits and synergies of the proposed ETC Merger;

Levels of dividends to stockholdersFuture opportunities for the combined company;

TOther status, expected timing, and expected outcome of our proposed acquisition of all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (Acquisition of WPZ Public Units)ements regarding Williams and Energy Transfers future beliefs, expectations, plans, intentions, financial condition or performance; 1


The status, expected timing, and expected outcome of the unsolicited proposal for us to be acquired in an all-equity transaction (UnsoExpected levels of cash distributions by Williams Partners L.P. (WPZ) with respect to general partner interests, incentive distribution rights and licmited Proposal) and our Board of Directors ongoing review of strategic alternativepartner interests;


Levels of dividends to Williams stockholder
s


Our fFuture credit ratings of Williams and WPZ;

Amounts and nature of future capital expenditures;


Expansion and growth of our business and operations;


Financial condition and liquidity;


Business strategy;


Cash flow from operations or results of operations;


Seasonality of certain business components;


Natural gas, natural gas liquids
, and olefins supply, prices and demandprices, supply, and demand;


Demand for our services.
Forward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:


Satisfaction of the conditions to the completion of the proposed ETC Merger, including receipt of the approval of Williams stockholders;


The timing and likelihood of completion of the proposed ETC Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals for the proposed merger that could reduce anticipated benefits or cause the parties to abandon the proposed transaction;


The possibility that the expected synergies and value creation from the proposed ETC Merger will not be realized or will not be realized within the expected time period;


The risk that the businesses of Williams and Energy Transfer will not be integrated successfully
;

D
emand for our services. Forward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or resisruption from the proposed ETC Merger making it more difficults to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:maintain business and operational relationships;


Satisfaction of the conditions to the completion of the Acquisition of WPZ Public Units, including receipt of the approval of our stockhold The risk that unexpected costs will be incurred in connection with the proposed ETC Mergers;

The
results of our Board of Directors ongoing review of strategic alternativepossibility that the proposed ETC Merger does not close, including due to the failure to satisfy the closing conditions


Whether WPZ will produce sufficient cash flows to provide the level of cash distributions we expect;
2


Whether
we areWilliams is bet a urn n xetdlvl fdvdns


Availability of supplies, market demand, n oaiiyo rcs


Inflation, interest rates, fluctuation in foreign exchange rates, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our utmr n upir)


The strength and financial resources of our competitors and the effects of competition;


Whether we are able to successfully identify, evaluate and execute investment opportunities;


Our ability to acquire new businesses and assets and successfully integrate those operations and assets into our existing businesses, swl sscesul xadorfclte;

Development of alternative energy sources;


The impact of operational and developmental aad n noeenitrutos


Costs of, changes in, or the results of laws, government regulations (including safety and environmental regulations), environmental liabilities, litigation, and rate proceedings;
2


OurWilliams ot n udn biain o eie eei eso ln n te oteieetbnftpas


Changes in maintenance and construction costs;


Changes in the current geopolitical situation;


Our exposure to the credit risk of our customers and counterparties;


Risks related to financing, including restrictions stemming from
our debt agreements, future changes in our credit ratings, as well as the credit rating of WPZ sdtrie yntoal-eonzdcei aigaece n h viaiiyadcs fcptl


Teaon fcs itiuin rmadcptlrqieet forivsmnsadjitvnue nwihw atcpt;

Risks associated with weather and natural phenomena, including climate conditions;


Acts of terrorism, including cybersecurity threats and related disruptions;


Additional risks described in our filings with the SEC.

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments. In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise. Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item1A. Risk Factors in our Annual Report on Form 10-K for the year ended December31, 2014, and Part II, Item 1A. Risk Factors of this Form 10-Q. 3
In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those statements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.
Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K filed with the SEC on February25, 2015 and in Part II, Item 1A. Risk Factors in this Quarterly Report on Form 10-Q.
4
DEFINITIONS
The following is a listing of certain abbreviations, acronyms, and other industry terminology used throughout this Form 10-Q.
Measurements : Barrel : One barrel of petroleum products that equals 42 U.S. gallons Bcf : One billion cubic feet of natural gas Bcf/d : One billion cubic feet of natural gas per day British Thermal Unit (Btu) : A unit of energy needed to raise the temperature of one pound of water by one degree Fahrenheit Dekatherms (Dth) : A unit of energy equal to one million British thermal units Mbbls/d : One thousand barrels per day Mdth/d : One thousand dekatherms per day MMcf/d : One million cubic feet per day MMdth : One million dekatherms or approximately one trillion British thermal units MMdth/d : One million dekatherms per day TBtu : One trillion British thermal units Consolidated Entities : ACMP: Access Midstream Partners, L.P. prior to its merger with Pre-merger WPZ Cardinal: Cardinal Gas Services, L.L.C. Constitution: Constitution Pipeline Company, LLC Gulfstar One: Gulfstar One LLC Jackalope: Jackalope Gas Gathering Services, L.L.C Northwest Pipeline: Northwest Pipeline LLC Pre-merger WPZ: Williams Partners L.P. prior to its merger with ACMP Transco: Transcontinental Gas Pipe Line Company, LLC WPZ: Williams Partners L.P. Partially Owned Entities : Entities in which we do not own a 100 percent ownership interest and which, as of
June September30, 2015, we account for as an equity-method investment, including principally the following: Aux Sable: Aux Sable Liquid Products LP Bluegrass Pipeline: Bluegrass Pipeline Company LLC Caiman II: Caiman Energy II, LLC Discovery: Discovery Producer Services LLC Gulfstream: Gulfstream Natural Gas System, L.L.C. Laurel Mountain: Laurel Mountain Midstream, LLC Moss Lake: Moss Lake Fractionation LLC and Moss Lake LPG Terminal LLC OPPL: Overland Pass Pipeline Company LLC UEOM: Utica East Ohio Midstream LLC
4
Government and Regulatory: EPA: Environmental Protection Agency FERC: Federal Energy Regulatory Commission SEC: Securities and Exchange Commission Other : B/B Splitter: Butylene/Butane splitter RGP Splitter: Refinery grade propylene splitter Fractionation: The process by which a mixed stream of natural gas liquids is separated into constituent products, such as ethane, propane, and butane GAAP: U.S. generally accepted accounting principles IDR: Incentive distribution right NGLs: Natural gas liquids; natural gas liquids result from natural gas processing and crude oil refining and are used as petrochemical feedstocks, heating fuels, and gasoline additives, among other applications NGL margins : NGL revenues less Btu replacement cost, plant fuel, transportation, and fractionation PDH facility: Propane dehydrogenation facility
5
Government and Regulatory: EPA: Environmental Protection Agency FERC: Federal Energy Regulatory Commission SEC: Securities and Exchange Commission Other : Energy Transfer: Energy Transfer Equity, L.P. ETC: Energy Transfer Corp LP Merger Agreement : Merger Agreement and Plan of Merger of Williams with Energy Transfer and certain of its affiliates ETC Merger: Merger wherein Williams will be merged into ETC CCR: Contingent consideration right B/B Splitter: Butylene/Butane splitter RGP Splitter: Refinery grade propylene splitter Fractionation: The process by which a mixed stream of natural gas liquids is separated into constituent products, such as ethane, propane, and butane GAAP: U.S. generally accepted accounting principles IDR: Incentive distribution right NGLs: Natural gas liquids; natural gas liquids result from natural gas processing and crude oil refining and are used as petrochemical feedstocks, heating fuels, and gasoline additives, among other applications NGL margins : NGL revenues less Btu replacement cost, plant fuel, transportation, and fractionation PDH facility: Propane dehydrogenation facility
6
PART I FINANCIAL INFORMATION
The Williams Companies, Inc. Consolidated Statement of
IncomeOperations Uadtd



Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions, except per-share amounts)

Revenues:

Service revenues
$
1,24139
$
8251,127
$
2,4383,677
$
1,6442,771

Product sales
5
98
853
60
942

1,
11677
12,78325

Total revenues
1,
83799
1,678
3,555
2,069
5,354

35,42796

Costs and expenses:

Product costs
4
94
724
956
1,493
26
807
1,382
2,300


Operating and maintenance expenses
4
37
308
824
606
03
412
1,227
1,018


Depreciation and amortization expenses
4
28
214
855
428
32
369
1,287
797


Selling, general, and administrative expenses
17
47
1
36
370
286
71
547
457


Net insurance recoveries Geismar Incident
(126
)
(42
)
(126
)
(161
)

Other (income) expensenet
40
27
57
5
3
62

4
47

Total costs and expenses
1,44
73
1,
367
2,936
2,696
762
4,379
4,458


Operating income (loss)
3
9256
3
11
619
731
07
975
1,038


Equity earnings (losses)
9
3
37
144
2
66
236
55

Gain on remeasurement of equity-method investment
2,522
2,522

Impairment of equity-method investments
(461
)

(
1461 )

Other investing income (loss) net
9
18
9
32
11
27
43


Interest incurred
(2
780
)
(19262 )
(55831 )
(
361623
)

Interest capitalized
1
67
29
38
58
52
55
110


Other income (expense)net
34
4
20
10

570
15
Income (loss) from continuing operations before income taxes
266
207
309
454
(238
)
2,706
71
3,160


Provision (benefit) for income taxes
83
84
(65
)
998
48

1
,13
135
3

Income (loss) from continuing operations
183
123
196
319
(173
)
1,708
23
2,027


Income (loss) from discontinued operations
4
4

Net income (loss)
183
127
196
323
(173
)
1,708
23
2,031


Less: Net income (loss) attributable to noncontrolling interests
69
24
(133
)
30

(121
8)
11
0
Net income (loss) attributable to The Williams Companies, Inc.
$
114(40
)

$
103,678
$
1844 $
2431,921

Amounts attributable to The Williams Companies, Inc.:

Income (loss) from continuing operations
$
(40
)
$
114,678
$
99144
$
1
84
$
239
,917

Income (loss) from discontinued operations
4
4

Net income (loss)
$
114(40
)

$
103,678
$
1844 $
2431,921

Basic earnings (loss) per common share:

Income (loss) from continuing operations
$
.15(.05
)

$
.12.24 $
.2519
$
.342.70

Income (loss) from discontinued operations
.01
.01

Net income (loss)
$
.15(.05
)

$
.152.24
$
.2519
$
.352.70

Weighted-average shares (thousands)
749,
253
696,553
748,669
690,695
824
747,412
749,059
709,809


Diluted earnings (loss) per common share:

Income (loss) from continuing operations
$
.15(.05
)

$
.142.22
$
.2419
$
.342.68

Income (loss) from discontinued operations
.01
.01

Net income (loss)
$
.15(.05
)

$
.152.22
$
.2419
$
.352.68

Weighted-average shares (thousands)
7
52,775
700,696
752,403
694,832
49,824
752,064
752,621
714,119


Cash dividends declared per common share
$
.59640
$
.
4255600 $
1.
8170
$
.821.387
See accompanying notes.
67
The Williams Companies, Inc. Consolidated Statement of Comprehensive Income
(Loss) Uadtd



Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions)

Net income (loss)
$
183(173
)

$
1
27,708
$
19623
$
3232,031

Other comprehensive income (loss):

Cash flow hedging activities:

Net unrealized gain (loss) from derivative instruments, net of taxes
6
6

Reclassifications into earnings of net derivative instruments (gain) loss, net of taxes
(4
)
(4
)

Foreign currency translation adjustments, net of taxes of ($6)$14 and $1024 in 2015 and ($9)$13 and ($8)$5 in 2014, respectively
10
37
(85
(74
)
(51
)
(159

)
(758
)

Pension and other postretirement benefits:

Amortization of prior service cost (credit) included in net periodic benefit cost, net of taxes of $01 and $12 in 2015 and $1 and $23 in 2014, respectively
(1
)
(1
)
(2
)
(23
)

Amortization of actuarial (gain) loss included in net periodic benefit cost, net of taxes of ($45) and ($813) in 2015 and ($4) and ($711) in 2014, respectively
7 6
214
1
28

Other comprehensive income (loss)
16
42
(65
)
(46
)
(138
)

(
743 )
3

Comprehensive income (loss)
199
169
123
326
(238
)
1,662
(115
)
1,988


Less: Comprehensive income (loss) attributable to noncontrolling interests
74
37
(157
)
12

(1
875
)
93105

Comprehensive income (loss) attributable to The Williams Companies, Inc.
$
125(81
)

$
132,650
$
14160
$
231,883 See accompanying notes.
78
The Williams Companies, Inc. Consolidated Balance Sheet (Unaudited)



JuneSeptember3, 2015
December31,
2014

(Millions, except per-share amounts)

ASSETS

Current assets:

Cash and cash equivalents
$
204125
$
240

Accounts and notes receivable net:

Trade and other
7
042
972

Income tax receivable
96
167

Deferred income tax asset
6873
67

Inventories
1
568
231

Other current assets and deferred charges
23500
213

Total current assets
1,4264
1,890

Investments
8,
712198
8,400

Property, plant, and equipment, at cost
38,
070761
36,435

Accumulated depreciation and amortization
(
8,9819,285
)
(8,354
)

Property, plant and equipment net
29,089476
28,081

Goodwill
1,145
1,120

Other intangible assets net of accumulated amortization
10,
158053
10,453

Regulatory assets, deferred charges, and other
6383 619

Total assets
$
5
1,1630,819
$
50,563

LIABILITIES AND EQUITY

Current liabilities:

Accounts payable
$
7236
$
865

Accrued liabilities
9241,225
900

Commercial paper
1,
743530
798

Long-term debt due within one year
3787
4

Total current liabilities
3,76858 2,567

Long-term debt
21,
2805 20,888

Deferred income taxes
4,
665582
4,712

Other noncurrent liabilities
2,27314 2,224

Contingent liabilities (Note 123)
Equity:

Stockholders equity:

Common stock (960 million shares authorized at $1 par value;
784 million shares issued at
JuneSeptember 0 05ad72mlinsae
issued at December 31, 2014)
74 782

Capital in excess of par value
14,81233
14,925

Retained deficit
(6,
243764
)
(5,548
)

Accumulated other comprehensive income (loss)
(
384425
)
(341
)

Treasury stock, at cost (35 million shares of common stock)
(1,041
)
(1,041
)

Total stockholders equity
7,
928387
8,777

Noncontrolling interests in consolidated subsidiaries
1
1,240,873 11,395

Total equity
1
9,1718,260
20,172

Total liabilities and equity
$
5
1,1630,819
$
50,563
See accompanying notes.
89
The Williams Companies, Inc. Consolidated Statement of Changes in Equity (Unaudited)



The Williams Companies, Inc., Stockholders

Common Stock
Capitalin Excess of ParValue
Retained Deficit
Accumulated Other Comprehensive Income (Loss)
Treasury Stock
Total Stockholders Equity
Noncontrolling Interests
Total Equity

(Millions)

Balance December31, 2014
$
782
$
14,925
$
(5,548
)
$
(341
)
$
(1,041
)
$
8,777
$
11,395
$
20,172

Net income (loss)
1844
1
844
(121
196)
23


Other comprehensive income (loss)
(
843
)
(
843
)
(3054
)
(
73138
)

Cash dividends common stock
(871,356 )
(871,356 )
(871,356 )

Dividends and distributions to noncontrolling interests
(
462704
)
(
462704
)

Stock-based compensation and related common stock issuances, net of tax
2
48
50
50
66
68
68


Changes in ownership of consolidated subsidiaries, net
(16058
)
(16058
)
2562
9
64

Contributions from noncontrolling interests
57
57
85
85


Other
(14
)
(3
)
(4
)
1520
1
16

Net increase (decrease) in equity
2
(
113
)
(695
92
)
(1,216

)
(
843
)
(
8491,390
)
(
1522 )
(1,
001912
)

Balance
JuneSeptember3,21
$
784
$
14,81233
$
(6,
243764
)
$
(
384425
)
$
(1,041
)
$
7,
928387
$
1
1,240,873 $
1
9,1718,260
See accompanying notes.
910
The Williams Companies, Inc. Consolidated Statement of Cash Flows (Unaudited)



SixNine Months Ended
JuneSeptember 0

2015
2014

(ilos

OPERATING ACTIVITIES:

Net income (loss)
$
19623
$
3232,031

Adjustments to reconcile to net cash provided (used) by operating activities:

Depreciation and amortization
855
428
1,287
797


Provision (benefit) for deferred income taxes
108
3
41
1,042

Impairment of equity-method investments
46
1
Amortization of stock-based awards
46
23
65
36

Gain on remeasurement of equity-method investment
(2,522
)


Cash provided (used) by changes in current assets and liabilities:

Accounts and notes receivable
3
50
17
74
(106
)


Inventories
764
(8
19
)

Other current assets and deferred charges
(456
)
(3749
)

Accounts payable
(48137
)
(34
)
60

Accrued liabilities
(716
)
(126

)
60

Other, including changes in noncurrent assets and liabilities
(3682
)
2930

Net cash provided (used) by operating activities
1,483
759
2,086
1,104


FINANCING ACTIVITIES:

Proceeds from (payments of) commercial paper net
942
(226
)
727
39


Proceeds from long-term debt
5,720
4,935
6,885
6,134


Payments of long-term debt
(
4,9225,563
)
(864

)

Proceeds from issuance of common stock
217
3,4
0814

Proceeds from sale of limited partner units of consolidated partnership
55


Dividends paid
(871,356 )
(
567986
)

Dividends and distributions paid to noncontrolling interests
(
462704
)
(
296509
)

Contributions from noncontrolling interests
57
122
85
260


Payments for debt issuance costs
(2933
)
(3740
)

Special distribution from Gulfstream
396

Othernet
342
1724

Net cash provided (used) by financing activities
483506
7,
356527

INVESTING ACTIVITIES:

Property, plant, and equipment:

Capital expenditures (1)
(
1,6542,425
)
(
1,8392,943
)

Net proceeds from dispositions
63
2835

Purchases of businesses, net of cash acquired
(112
)
(5,958
)

Purchases of and contributions to equity-method investments
(483529
)
(
246345
)

Cash held for ACMP Acquisition
(5,995
)
Distributions from unconsolidated affiliates in excess of cumulative earnings
251
165


Othernet
241
11
105
3
6
Net cash provided (used) by investing activities
(2,
002707
)
(
7,9369,010
)


Increase (decrease) in cash and cash equivalents
(
36115
)
(379

)
179

Cash and cash equivalents at beginning of year
240
681

Cash and cash equivalents at end of period
$
204125
$
860302

_________

(1)Increases to property, plant, and equipment
$
(
1,5542,311
)
$
(
1,7892,902
)

Changes in related accounts payable and accrued liabilities
(10014
)
(5041
)

Capital expenditures
$
(
1,6542,425
)
$
(
1,8392,943
)
See accompanying notes.
101
The Williams Companies, Inc. Notes to Consolidated Financial Statements (Unaudited)
Note 1 General, Description of Business, and Basis of Presentation General Our accompanying interim consolidated financial statements do not include all the notes in our annual financial statements and, therefore, should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2014, in Exhibit 99.1 of our Form 8-K dated May 6, 2015. The accompanying unaudited financial statements include all normal recurring adjustments and others that, in the opinion of management, are necessary to present fairly our interim financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Unless the context clearly indicates otherwise, references in this report to
Williams, we, our, us, or like terms refer to The Williams Companies, Inc. and its subsidiaries. Unless the context clearly indicates otherwise, references to Williams, we, our, and us include the operations in which we own interests accounted for as equity-method investments that are not consolidated in our financial statements.When we refer to our equity investees by name, we are referring exclusively to their businesses and operations. Merger On FebruaryEnergy Transfer Merger Agreement On September 28, 2015, we completed the merger of our consolidated master limited partnerships, Williams Partners L.P. (Pre-merger WPZ) and Access Midstream Partners, L.P. (ACMP) (Merger). The merged partnership is named Williams Partners L.P. Under the termsentered into an Agreement and Plan of Merger (Merger Agreement) with Energy Transfer Equity, L.P. (Energy Transfer) and certain of its affiliates. The Merger Agreement provides that we will be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger), with ETC surviving the ETC Merger. Energy Transfer formed ETC as a limited partnership that will be treated as a corporation for U.S. federal income tax purposes. ETC will be publicly traded on the New York Stock Exchange under the symbol ETC. At the effective time of the ETC Merger, each issued and outstanding share of our common stock (except for certain shares such as those held by us or our subsidiaries and any held by ETC and its affiliates) will be canceled and automatically converted into the right to receive, at the election of each holder and subject to proration as set forth in the Merger Agreement:


1.8716 common shares representing limited partnership interests in ETC (ETC common shares) (Stock Consideration); or


$43.50 in cash (Cash Consideration); or


$8.00 in cash and 1.5274 ETC common shares (Mixed Consideration). Elections to receive the Stock Consideration
ofr the merger agreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to theCash Consideration will be subject to proration to ensure that the aggregate number of ETC common shares and the aggregate amount of cash paid in the ETC Merger will be the same as if all electing shares of our common stock received the Mixed Consideration. In addition, our stockholders will receive a special one-time dividend of $0.10 per share of Williams common stock, to be paid to holder of record immediately prior to the closing of the ETC Merger and contingent upon consummation of the ETC Merger. In conjunection with the ETC Merger, each Pre-merger WPZ common unit held by the public wasEnergy Transfer will subscribe for a number of ETC common shares at the transaction price, in exchanged for 0.86672 ACMP common units.Each Pre-merger WPZ common unit held by us was exchanged for 0.80036 ACMP common units.Prior to the closing of the Mergthe amount of cash needed by ETC to fund the cash portion of the merger consideration (the Parent Cash Deposit), and, as a result, based on the number of shares of Williams common stock outstanding as
12
Notes (Continued)
of the date thereof, will own approximately 19 percent of the outstanding ETC common shares immediately after the effective time of the ETC Merger. Immediately following the completion of the ETC Merger and of the LE GP, LLC merger with and into Energy Transfer Equity GP, LLC, ETC will contribute to Energy Transfer all of the assets and liabilities of Williams in exchange for the issuance by Energy Transf
er, the Class D limited partner units of Pre-merger WPZ, all of which were held by us, were converted into WPZ common units on a one -for-one basis pursuant to the terms of the WPZ partnership agreement. Following the Merger, we own approximately 60 percent of the merged partnership, including the general partner interest and incentive distribution rights (IDRs). In this report, we refer to the post-merger partnership as WPZ and the pre-merger entities as Pre-merger WPZ and ACMP. Acquisition of WPZ Public Unitso ETC of a number of Energy Transfer Class E common units equal to the number of ETC common shares issued to our stockholders in the ETC Merger plus the number of ETC common shares issued to Energy Transfer in consideration for the Parent Cash Deposit (such contribution, together with the ETC Merger and the other transactions contemplated by the Merger Agreement, the Transactions). To address potential uncertainty as to how the newly listed ETC common shares, as a new security, will trade relative to Energy Transfer common units, each ETC common share issued in the ETC Merger, as well as the ETC common shares issued to Energy Transfer in connection with the Parent Cash Deposit, will have attached to it one contingent consideration right (CCR). The terms of the CCRs are fully described in the form of CCR Agreement attached to the Merger Agreement as Exhibit H to Exhibit 2.1 of our Current Report on Form 8-K dated September 29, 2015. The receipt of the merger consideration is expected to be tax-free to our stockholders, except with respect to any cash consideration received. Completion of the Transactions is subject to the satisfaction or waiver of a number of customary closing conditions as set forth in the Merger Agreement, including approval of the ETC Merger by our stockholders, receipt of required regulatory approvals in connection with the Transactions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and effectiveness of a registration statement on Form S-4 registering the ETC common shares (and attached CCRs) to be issued in connection with the Transactions. Termination of WPZ Merger Agreement On May 12, 2015, we entered into an agreement for a unit-for-stock transaction whereby we willould have acquired all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (Acquisition of WPZ Public Units). Each such WPZ common unit will be converted into the right to receive 1.115 shares of our common stock. In the event this aWPZ Merger Agreement). On September 28, 2015, prior to our entry into the Merger Agreement, we entered into a Termination Agreement and Release (Termination Agreement is), terminated under certain circumstances, we could bing the WPZ Merger Agreement. We are required to pay a $41028 million termination fee to WPZ, of which we currently own approximately 60 percent , including the interests of the general partner and incentive distribution rights (IDRs). Such termination fee would beill settled through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $102.5209 million per quarter). Strategic Alternatives On JuneThe next distribution from WPZ in November 2015 will be reduced by $209 million related to this termination fee. ACMP Merger On February 21, 2015, we publicly announced in a press release that we had received and subsequently rejected an unsolicited proposal to acquire us in an all-equity transaction. The unsolicited proposal was contingentcompleted the merger of our consolidated master limited partnerships, Williams Partners L.P. (Pre-merger WPZ) and Access Midstream Partners, L.P. (ACMP) (ACMP Merger). The merged partnership is named Williams Partners L.P. Under the terms of the merger agreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to the ACMP Merger. In conjunction with the ACMP Merger, each Pre-merger WPZ common unit held by the public was exchanged for 0.86672 ACMP common units.Each Pre-merger WPZ common unit held by us was exchanged for 0.80036 ACMP common units.Prior to the closing onf the termination of our pending Acquisition of WPZ Public Units. Our Board of Directors has authorized a process to explore a rangeACMP Merger, the Class D limited partner units of Pre-merger WPZ, all of which were held by us, were converted into WPZ common units on a one -for-one basis pursuant to the terms of the WPZ partnership agreement. Following the ACMP Merger, we own approximately 60 percent of the merged partnership, including the general partner interest and IDRs. In this report, we refer to the post-merger partnership as WPZ and the pre-merger entities as Pre-merger WPZ and ACMP.
1
13
Notes (Continued)
of strategic alternatives, which could include, among other things, a merger, a sale of us, or continuing to pursue our existing operating and growth plan. Description of Business Our operations are located principally in the United States and are organized into the Williams Partners and Williams NGL& Petchem Services reportable segments. All remaining business activities are included in Other. For periods after the ACMP Acquisition (see Note 2 Acquisitions ), the former Access Midstream segment is reported within Williams Partners. For periods prior to the ACMP Acquisition, the results associated with our former equity-method investment in Access Midstream are reported within Other. Prior periods segment disclosures have been recast. Williams Partners Williams Partners consists of our consolidated master limited partnership, Williams Partners L.P. (WPZ)PZ, and primarily includes gas pipeline and midstream businesses. WPZs gas pipeline businesses primarily consist of two interstate natural gas pipelines, which are Transcontinental Gas Pipe Line Company, LLC (Transco) and Northwest Pipeline LLC (Northwest Pipeline), and several joint venture investments in interstate and intrastate natural gas pipeline systems, including a 50 percent equity-method investment in Gulfstream Natural Gas System, L.L.C., and a 41 percent interest in Constitution Pipeline Company, LLC (Constitution) (a consolidated entity). WPZs midstream businesses primarily consist of (1)natural gas gathering, treating, and processing; (2)natural gas liquid (NGL) fractionation, storage, and transportation; (3)oil transportation; and (4)olefins production. The primary service areas are concentrated in major producing basins in Colorado, Texas, Oklahoma, Kansas, New Mexico, Wyoming, the Gulf of Mexico, Louisiana, Pennsylvania, West Virginia, New York, and Ohio which include the Marcellus and Utica shale plays as well as the Eagle Ford, Haynesville, Barnett, Mid-Continent, and Niobrara areas. The midstream businesses include equity-method investments in natural gas gathering and processing assets and NGL fractionation and transportation assets, including a 62 percent equity-method investment in Utica East Ohio Midstream, LLC (UEOM), a 50 percent equity-method investment in the Delaware basin gas gathering system in the Mid-Continent region, a 69 percent equity-method investment in Laurel Mountain Midstream, LLC, a 58 percent equity-method investment in Caiman Energy II, LLC, a 60 percent equity-method investment in Discovery Producer Services LLC, a 50 percent equity-method investment in Overland Pass Pipeline, LLC, and Appalachia Midstream Services, LLC, which owns an approximate average 45 percent equity-method investment interest in 11 gas gathering systems in the Marcellus Shale (Appalachia Midstream Investments). The midstream businesses also include our Canadian midstream operations, which are comprised of an oil sands offgas processing plant near Fort McMurray, Alberta, an NGL/olefin fractionation facility and butylene/butane splitter facility at Redwater, Alberta, and the Boreal Pipeline. Williams NGL& Petchem Services Williams NGL & Petchem Services includes certain other domestic olefins pipeline assets and certain Canadian growth projects under development (including a propane dehydrogenation facility and a liquids extraction plant). Other Other includes other business activities that are not operating segments, as well as corporate operations. Basis of Presentation Consolidated master limited partnership As of JuneSeptember30, 2015 , we own approximately 60 percent of the interests in WPZ, including the interests of the general partner, which are wholly owned by us, and IDRs.
1
24
Notes (Continued)
The previously described
ACMP Merger and other equity issuances by WPZ had the combined net impact of increasing Noncontrolling interests in consolidated subsidiaries by $2562 million and decreasing Capital in excess of par value by $16058 million and Deferred income taxes by $964 million in the Consolidated Balance Sheet . WPZ is self-funding and maintains separate lines of bank credit and cash management accounts and also has a commercial paper program. (See Note 910 Debt and Banking Arrangements .) Cash distributions from WPZ to us, including any associated with our IDRs, occur through the normal partnership distributions from WPZ to all partners. Discontinued operations Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to our continuing operations. Accounting standards issued but not yet adopted In JulySeptember 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-11 Simplifying the Measurement of Inventory6 Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments (ASU 2015-116). ASU 2015-11 simplifies the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, in scope inventory should be measured at the lower of cost and net realizable value. The new standard is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted. We are evaluating the impact of the new standard. In May 2015, the FASB issued ASU 2015-07 Fair Value Measurement (Topic 820) Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU 2015-07). ASU 2015-17 removes from the fair value hierarchy investments measured using the net asset value per share (or its equivalent) practical expedient.The standard primarily impacts certain investments included in our employee benefit plans. The guidance6 requires an entity to recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined; record, in the same periods financial statements, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date; and present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. The new standard is effective for financial statements issued for reportingterim and annual periods beginning after December 15, 2015, and interim periods within the reporting periods and requires retrospective presentation. Early adoption is permitted. We are evaluating the impact of the new standard and our timing for adoptionwith early adoption permitted for financial statements that have not been issued. We do not expect the new standard will have a significant impact on our consolidated financial statements. In Aprilugust 2015, the FASB issued ASU 2015-315 Interest - -Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements-Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (ASU 2015-3).15). In ASU 2015-3 simplifies the presentation of debt issuance costs by requiring such costs be presented as a deduction from the corresponding debt liability. The guidance15 the FASB stated that the guidance in ASU 2015-03 did not address the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements, and entities are permitted to defer and present debt issuance costs related to line-of-credit arrangements as assets. The new standard is effective for financial statements issued for interim and annual reporting periods beginning after December 15, 2015, and interim periods within the reporting periods and requires retrospective presentation. We are evaluating the impact of the new standard. In February 2015, the FASB issued ASU 2015-2 Amendments to the Consolidation Analysisrequires retrospective presentation, concurrent with ASU 2015-03. We do not expect the new standard will have a material impact on our consolidated financial statements. In July 2015, the FASB issued ASU 2015-11 Simplifying the Measurement of Inventory (ASU 2015-211). ASU 2015-2 alters the models used to determine consolidation conclusions for certain entities, including limited partnerships, and may require additional disclosures. The ASU11 simplifies the guidance on the subsequent measurement of inventory, excluding inventory measured using last-in, first out or the retail inventory method. Under the new standard, in scope inventory should be measured at the lower of cost and net realizable value. The new standard is effective for financial statements issued for reportingterim and annual periods beginning after December 15, 2015, and interim periods within the reporting periods with either retrospective or modified retrospective presentation allowed. We are currently6, with early adoption permitted. We are evaluating the impact of the new standard on our consolidated financial statements and our timing for adoption. In May 20145, the FASB issued ASU 20145-09 establishing Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 6067 Fair Value Measurement (Topic 820) Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) (ASU 2015-07). ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures.The standard is effective forU 2015-07 removes from the fair value hierarchy investments measured using the net asset value per share (or its equivalent) practical expedient.The standard primarily impacts certain investments included in our employee benefit plans. The standard is effective for financial statements issued for interim and annual reporting periods beginning after December 15, 20175, and interim periods within the reporting period.ASC 606 allows either full retrospective or modified retrospective transition and early adoption is permitted for annual periods beginning after December 15, 2016. We continue to evaluate bothrequires retrospective presentation. Early adoption is permitted. We are evaluating the impact of thise new standard on our consolidated financial statements and the transition method we will utilize for adoption.our timing for adoption. In April 2015, the FASB issued ASU 2015-03 Interest - Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs (ASU 2015-03). ASU 2015-03 simplifies the presentation of debt issuance costs by requiring
1
35
Notes (Continued)
such costs be presented as a deduction from the corresponding debt liability. The standard is effective for financial statements issued for interim and annual reporting periods beginning after December 15, 2015, and requires retrospective presentation. Adoption of this standard would result in the presentation of $125 million and $108 million of debt issuance costs as of September 30, 2015 and December 31, 2014, respectively, as a direct reduction from debt in our consolidated balance sheet. The standard will have no impact on our consolidated statements of income and cash flows. In February 2015, the FASB issued ASU 2015-02 Amendments to the Consolidation Analysis (ASU 2015-02). ASU 2015-02 alters the models used to determine consolidation conclusions for certain entities, including limited partnerships, and may require additional disclosures. The standard is effective for financial statements issued for interim and annual reporting periods beginning after December 15, 2015, with either retrospective or modified retrospective presentation allowed. We are evaluating the impact of the new standard on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09 establishing Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).ASC 606 establishes a comprehensive new revenue recognition model designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to be entitled to receive in exchange for those goods or services and requires significantly enhanced revenue disclosures.In August 2015, the FASB issued ASU 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date (ASU 2015-14). Per ASU 2015-14, the standard is effective for interim and annual reporting periods beginning after December 15, 2017.ASC 606 allows either full retrospective or modified retrospective transition and early adoption is permitted for annual periods beginning after December 15, 2016. We continue to evaluate both the impact of this new standard on our consolidated financial statements and the transition method we will utilize for adoption. Note 2 Acquisitions
AM
We acquired control of ACMP on July 1, 2014 (ACMP Acquisition). Our basis in ACMP reflects business combination accounting, which, among other things, requires identifiable assets acquired and liabilities assumed to be measured at their acquisition-date fair values.
The following table presents the allocation of the acquisition-date fair value of the major classes of the assets acquired, which are presented in the Williams Partners segment, liabilities assumed, and noncontrolling interest at July1, 2014. Changes to the preliminary allocation disclosed in Exhibit 99.1 of our Form 8-K dated May 6, 2015, which were recorded in the first quarter of 2015, reflect an increase of $150 million in Property, plant, and equipment and $25 million in Goodwill , and a decrease of $168 million in Other intangible assets and $7 million in Investments . These adjustments during the measurement period were not considered significant to require retrospective revisions of our financial statements.



(Millions)

Accounts receivable
$
168

Other current assets
63

Investments
5,865

Property, plant, and equipment
7,165

Goodwill
499

Other intangible assets
8,841

Current liabilities
(408
)

Debt
(4,052
)

Other noncurrent liabilities
(9
)

Noncontrolling interest in ACMPs subsidiaries
(958
)

Noncontrolling interest in ACMP
(6,544
)
Eagle Ford Gathering System In May 2015, WPZ acquired a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility in the Eagle Ford shale for $112 million . The acquisition was accounted for as a business combination, and the preliminary allocation of the acquisition-date fair value of the major classes of assets acquired include $60 million of Property, plant, and equipment, at cost and $52 million of Other intangible assets net of accumulated amortization in the Consolidated Balance Sheet .
UEOM Equity-Method Investment In June 2015, WPZ acquired an approximate 13 percent additional equity interest in its equity-method investment, UEOM, for $357 million . Following the acquisition WPZ owns approximately 62 percent of UEOM. However, WPZ continues to account for this as an equity-method investment because WPZ does not control UEOM due to the significant participatory rights of its partner. In connection with the acquisition of the additional interest, we have agreed to waive approximately $2 million of our WPZ IDR payments each quarter through 2017. Note 3 Variable Interest Entities As of June30, 2015 , we consolidate the following variable interest entities (VIEs): Gulfstar One WPZ owns a 51 percent interest in Gulfstar One LLC (Gulfstar One), a subsidiary that, due to certain risk-sharing provisions in its customer contracts, is a VIE. Gulfstar One includes a proprietary floating-production system, Gulfstar FPS, and associated pipelines which provide production handling and gathering services for the Tubular Bells oil and
14
16
Notes (Continued)
Eagle Ford Gathering System In May 2015, WPZ acquired a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility in the Eagle Ford shale for $112 million . The acquisition was accounted for as a business combination, and the preliminary allocation of the acquisition-date fair value of the major classes of assets acquired includes $80 million of Property, plant, and equipment, at cost and $32 million of Other intangible assets net of accumulated amortization in the Consolidated Balance Sheet . Changes to the preliminary allocation disclosed in the second quarter of 2015 reflect an increase of $20 million in Property, plant, and equipment, at cost , and a decrease of $20 million in Other intangible assets net of accumulated amortization .
UEOM Equity-Method Investment In June 2015, WPZ acquired an approximate 13 percent additional equity interest in its equity-method investment, UEOM, for $357 million . Following the acquisition WPZ owns approximately 62 percent of UEOM. However, WPZ continues to account for this as an equity-method investment because WPZ does not control UEOM due to the significant participatory rights of its partner. In connection with the acquisition of the additional interest, we have agreed to waive approximately $2 million of our WPZ IDR payments each quarter through 2017. Note 3 Variable Interest Entities As of September30, 2015 , we consolidate the following variable interest entities (VIEs): Gulfstar One WPZ owns a 51 percent interest in Gulfstar One LLC (Gulfstar One), a subsidiary that, due to certain risk-sharing provisions in its customer contracts, is a VIE. Gulfstar One includes a proprietary floating-production system, Gulfstar FPS, and associated pipelines which provide production handling and gathering services for the Tubular Bells oil and
gas discovery in the eastern deepwater Gulf of Mexico. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Gulfstar Ones economic performance. Construction of an expansion project is underway that will provide production handling and gathering services for the Gunflint oil and gas discovery in the eastern deepwater Gulf of Mexico. The expansion project is expected to be in service in the first quarterhalf of 2016. The current estimate of the total remaining construction costs for the expansion project is approximately $99145 million , which is expected to be funded with revenues received from customers and capital contributions from WPZ and the other equity partner on a proportional basis. Constitution WPZ owns a 41 percent interest in Constitution, a subsidiary that, due to shipper fixed-payment commitments under its long-term firm transportation contracts, is a VIE. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Constitutions economic performance. WPZ, as construction manager for Constitution, is building a pipeline connecting its gathering system in Susquehanna County, Pennsylvania, to the Iroquois Gas Transmission and the Tennessee Gas Pipeline systems. WPZ plans to place the project in service in the second halffourth quarter of 2016 and estimates the total remaining construction costs of the project to be approximately $634598 million , which is expected to be funded with capital contributions from WPZ and the other equity partners on a proportional basis. Cardinal WPZ owns a 66 percent interest in Cardinal Gas Services, L.L.C (Cardinal), a subsidiary that provides gathering services for the Utica region and is a VIE due to certain risks shared with customers. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Cardinals economic performance. Future expansion activity is expected to be funded with capital contributions from WPZ and the other equity partner on a proportional basis. Jackalope WPZ owns a 50 percent interest in Jackalope Gas Gathering Services, L.L.C (Jackalope), a subsidiary that provides gathering and processing services for the Powder River basin and is a VIE due to certain risks shared with customers. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Jackalopes economic performance. Future expansion activity is expected to be funded with capital contributions from WPZ and the other equity partner on a proportional basis.
1
57
Notes (Continued)
Jackalope WPZ owns a 50 percent interest in Jackalope Gas Gathering Services, L.L.C (Jackalope), a subsidiary that provides gathering and processing services for the Powder River basin and is a VIE due to certain risks shared with customers. WPZ is the primary beneficiary because it has the power to direct the activities that most significantly impact Jackalopes economic performance. Future expansion activity is expected to be funded with capital contributions from WPZ and the other equity partner on a proportional basis. Tefloigtbepeet mut nlddi u osldtdBlneSetta r o h s rolgto forcnoiae Is



JuneSeptember3, 2015
December 31, 2014
Classification

(Millions)

Assets (liabilities):

Cash and cash equivalents
$
981 $
113
Cash and cash equivalents

Accounts receivable
593
52
Accounts and notes receivable net, Trade and other

Other current assets
2
3
3
Other current assets and deferred charges

Property, plant and equipment net
2,882937
2,794
Property, plant and equipment net

Goodwill
107
103
Goodwill

Other intangible assets net
1,46148
1,493
Other intangible assets net of accumulated amortization

Other noncurrent assets
3
14
Regulatory assets, deferred charges, and other

Accounts payable
(329
)
(48
)
Accounts payable

Accrued liabilities
(2211
)
(36
)
Accrued liabilities

Current deferred revenue
(632
)
(45
)
Accrued liabilities

Noncurrent deferred income taxes
(13
)
Deferred income taxes

Asset retirement obligation
(952
)
(94
)
Other noncurrent liabilities

Noncurrent deferred revenue associated with customer advance payments
(35742
)
(395
)
Other noncurrent liabilities Note 4
Investing Activities Investing Income
During the third quarter of 2015, we recognized other-than-temporary pre-tax impairment charges of $458 million and $3 million related to WPZs equity-method investments in the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, respectively (see Note 12 Fair Value Measurements and Guarantees .) We also recognized a loss of $16 million within Equity earnings (losses) in the Consolidated Statement of Operations associated with our share of underlying property impairments at certain of the Appalachia Midstream Investments. These items are reported within the Williams Partners segment. Gain on remeasurement of equity-method investment Gain on remeasurement of equity-method investment of $2.522 billion for the three and nine months ended September30, 2014 , is a result of remeasuring our equity-method investment in ACMP to a preliminary acquisition-date fair value of $4.6 billion when we obtained control and consolidated ACMP following the ACMP Acquisition.
18
Notes (Continued)
Equity earnings (losses) Equity earnings (losses) for the three and nine months ended September30, 2014 , include $19 million of equity losses associated with our share of certain compensation-related costs at ACMP that were triggered by the ACMP Acquisition. Equity earnings (losses) for the nine months ended September30, 2014 , include $70 million of losses reported within Williams NGL & Petchem Services related to the write-off of previously capitalized project development costs by Bluegrass Pipeline, Moss Lake Fractionation LLC, and Moss Lake LPG Terminal LLC after our management decided to discontinue further funding of the projects. These entities were dissolved in the fourth quarter of 2014. Interest income and other The three and nine months ended September30, 2015 , include $18 million and $27 million , respectively, and the three and nine months ended September30, 2014 , include $14 million and $41 million , respectively, of interest income associated with a receivable related to the sale of certain former Venezuela assets reflected in Other investing income (loss) net in the Consolidated Statement of Operations . Due to changes in circumstances that led to late payments and increased uncertainty regarding the recovery of the receivable, we began accounting for the receivable under a cost recovery model in first quarter 2015. Subsequently, we received payments greater than the remaining carrying amount of the receivable, which resulted in the recognition of interest income. Investments Accrued liabilities in the Consolidated Balance Sheet reflects a special distribution WPZ received on September24, 2015, of $396 million from Gulfstream related to WPZs proportional share of proceeds from new debt issued by Gulfstream. The new debt was issued to refinance Gulfstreams current debt maturities and WPZ will contribute its proportional share of amounts necessary to fund those current debt maturities when due. Note 5
Other Income and Expenses The following table presents certain gains or losses reflected in Other (income) expensenet within Costs and expenses in our Consolidated Statement of IncomeOperations



Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions)

Williams Partners

Amortization of regulatory assets associated with asset retirement obligations
$
98
$
8
$
1725
$
25

Impairment of certain assets (See Note 12)
2
29
17

Impairment of certain assets (See Note 11)
24
17
27
17
Net gain related to partial acreage dedication release
(12
)
(12
)
Geismar Incident On June13, 2013, an explosion and fire occurred at Williams Partners Geismar olefins plant. The incident (Geismar Incident) rendered the facility temporarily inoperable and resulted in significant human, financial, and operational effects. At the time of the incident, we had insurance coverage for repair and replacement costs, lost production, and additional expenses relrendered the facility temporarily inoperable (Geismar Incident). We received $126 million and $175 million of insurance recoveries related to the Geismar Incident during the nine months ended September30, 2015 and 2014 , respectively. The nine months ended September30, 2014 , also includes $14 million of related covered insurable expenses incurred in excess of our retentions (deductibles). These amounts are reported within Williams Partners and reflected as a net gain in Net insurance recoveries Geismar Incident in the Consolidated Statement of Operations .
19
Notes (Continued)
Since June 2013, we have settled claims associated with $480 million of available property damage and business interruption coverage for a total of $422 million . ACMP Acquisition & Merger Certain ACMP Acquisition and ACMP Merger costs included in Selling, general, and administrative expenses , Operating and maintenance expenses, and Interest incurred are as follows:


Selling, general, and administrative expenses includes $26 million for the nine months ended September30, 2015 , and $17 million and $19 million for the three and nine months ended September30, 2014 , respectively, primarily related to professional advisory fees associ
ated towith the incident as follows:ACMP Acquisition and ACMP Merger, reported within the Williams Partners segment.


Property damage and business interruption coverage with a combined per-occurrence limit of $500 million and retentions (deductibles) of $10 million per occurrence for property damage and a waiting per Selling, general, and administrative expenses for the three and nine months ended September30, 2015 , also includes $1 million and $9 million , respectively, of related employee transition costs reported within the Williams Partners segment, in addition to $7 million and $20 million , respectively, of general corporate expenses associated with integration and re-alignment of resources. Selling, general, and administrative expenses for the three and nine months ended September30, 2014 , also includes $4 million of related employee transition costs reported within the Williams Partners segment, in addition to $3 milliodn of 60 days per occurrence for business interruption;general corporate expenses associated with integration and re-alignment of resources.


General liability coverage with per-occurrence and aggregate annual limits of $610 million and retentions (deductibles) of $2 million per occurrence;
16
Notes (Continued)
Operating and maintenance expenses includes $10 million for the nine months ended September30, 2015 , and $3 million for the three and nine months ended September30, 2014 , of transition costs reported within the Williams Partners segment.


Workers compensation coverage with statutory limits and retentions (deductibles) of $1 million total per occurrence. We received $126 million of insurance recoveries related to the Geismar Incident during the three and sixInterest incurred includes $2 million for the nine months ended JuneSeptember30, 2015 , and we received $50 million and $175 million during the three and six months ended June30, 2014 , respectively. The three and six month periods ended June30, 2014 , also include $8 million and $14 million , respectively, of related covered insurable expenses incurred in excess of our retentions (deductibles). These amounts are reported within Williams Partners and reflected as a net gain in Net insurance recoveries Geismar Incident in the Consolidated Statement of Income . Since June 2013, we have settled claims associated with $480 million of available property damage and business interruption coverage for a total of $422 million $9 million for the nine months ended September30, 2014 , of transaction-related financing costs. Additional Items Selling, general, and administrative expenses includes $18 million and $265 million for the three and six months ended June30, 2015 , respectively, and $2 million for the three and six months ended June 30, 2014, primarily related to professional advisory fees associated with the ACMP Acquisition and Merger, reported within the Williams Partners segment. Selling, general, and administrative expenses for the three and six months ended June30, 2015 , also includes $4 million and $8 million , respectively, of related employee transition costs reported within the Williams Partners segment, in addition to $7 million and $13 million , respectively, of general corporate expenses associated with integration and re-alignment of resources. Operating and maintenance expenses for the three and six months ended June30, 2015 , includes $8 million and $12 million , respectively,nine months ended September30, 2015 , respectively, of costs associated with our evaluation of stransition costs reported within the Williams Partners segment. Additionally, Interest incurred includes $2 million for the six months ended June 30, 2015, and $9 million for the three and six months ended June30, 2014, of transaction-related financing costs. The six months ended June30, 2014 , includes $19 million of project development costs related to the Bluegrass Pipeline Company LLC (Bluegrass Pipeline) reported within Williams NGL & Petchem Services and reflected in Selling, general, and administrative expenses in the Consolidated Statement of Income . Equity earnings (losses) for the six months ended June30, 2014 , include $70 million of losses reported within Williams NGL & Petchem Services related to the write-off of previously capitalized project development costs by Bluegrass Pipeline, Moss Lake Fractionation LLC, and Moss Lake LPG Terminal LLC after our management decided to discontinue further funding of the projects. These entities were dissolved in the fourth quarter of 2014. The three and six month periods ended Junetegic alternatives. The nine months ended September30, 2014 , includes $19 million of project development costs related to the Bluegrass Pipeline Company LLC (Bluegrass Pipeline) reported within Williams NGL & Petchem Services and reflected in Selling, general, and administrative expenses in the Consolidated Statement of Operations . The three and nine months ended September30, 2015 , each include $9 million , and the three and six month periods ended June30, 2014 , include $1421 million and $257 million , respectively, of interest income associated with a receivable related to the sale of certain former Venezuela assets reflected in Other investing income (loss) net in the Consolidated Statement of Income . Due to changes in circumstances that led to late payments and increased uncertainty regarding the recovery of the receivable, we began accounting for the receivable under a cost recovery model in first quarter 2015. In second quarter 2015, we received a payment greater than the remaining carrying amount of the receivable, which resulted in the recognition of interest income. The three and six month periods ended Juneand the three and nine months ended September30, 20154 , include $190 million and $36 million , respectively, and the three and six month periods ended June 30, 2014, include $7 million and $120 million , respectively, of allowance for equity funds used during construction (AFUDC) reported within Williams Partners in Other income (expense)net below Operating income (loss) . AFUDC increased during 2015 due to the increase in spending on various Transco expansion projects and Constitution. Other income (expense)net below Operating income (loss) includes a $14 million gain for the three and six month periods ended Junenine months ended September30, 2015 , resulting from the early retirement of certain debt.
17 20
Notes (Continued)
Note 56 rvso Bnft o noeTxsTePoiin(eei)fricm ae nlds



Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions)

Current:

Federal
$
$
(2415
)
$
$
11398

State
1
(1
(2
)
1
42

Foreign
2
3
4
2
6

57

32
(
2215
)
57
1
2207

Deferred:

Federal
73
95
98
(1
(60
)
911
38
910

State
(16
)
98
(4

)
6
2
5
103

Foreign
8(1
)

54
87
913

80
106
108
13
(67
)
1,013
41
1,026



Total provision (benefit)
$
83(65
)

$
9984
$
11348
$
1
,1335
The effective income tax rate for the total
provisionbenefit for the three months ended JuneSeptember30, 2015 , is less than the federal statutory rate primarily due to the impact of nontaxable noncontrolling interests, partially offset by the effect of state income taxes and taxes on foreign operations. The effective income tax rate for the total provision for the sixnine months ended JuneSeptember30, 2015 , is greater than the federal statutory rate primarily due to a $14 million tax provision associated with an adjustment to the prior year taxable foreign income, and taxes on foreign operations, and the effect of state income taxes, partially offset by the impact of nontaxable noncontrolling interests and the effect of state income taxes. The effective income tax rate for the total provision for the three months ended JuneSeptember30, 2014 , is greater than the federal statutory rate primarily due to a provision associated with a revision of our estimate of the undistributed earnings related to the contribution of certain Canadian operations to WPZ,the effect of state income taxes, partially offset by taxes on foreign operations, and the effect of state income taxes, partially offset by the impact of nontaxable noncontrolling interests. The effective income tax rate for the total provision for the sixnine months ended JuneSeptember30, 2014 , is lessgreater than the federal statutory rate primarily due to the effect of state income taxes and taxes on foreign operations, partially offset by a tax benefit related to the contribution of certain Canadian operations to WPZ in the first quarter of 2014 and the impact of nontaxable noncontrolling interests, partially offset by. The federal and state income tax provisions for the three and nine months ended September30, 2014 include the tax effect of state income taxes and taxes on foreign operations.a $2.5 billion gain associated with remeasuring our equity-method investment to fair value as a result of the ACMP Acquisition. (See Note 4 Investing Activities .) During the next 12 months, we do not expect ultimate resolution of any unrecognized tax benefit associated with domestic or international matters to have a material impact on our unrecognized tax benefit position.
218
Notes (Continued)
Note 67 anns(os e omnSaefo otnigOeain



Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Dollars in millions, except per-share amounts; shares in thousands)

Income (loss) from continuing operations attributable to The Williams Companies, Inc. available to common stockholders for basic and diluted earnings (loss) per common share
$
114(40
)

$
991,678
$
1844 $
2391,917

Basic weighted-average shares
749,
253
696,553
748,669
690,695
824
747,412
749,059
709,809


Effect of dilutive securities:

Nonvested restricted stock units
1,755
2,091
2,424
1,9
8500
2,
094205

Stock options
1,750
2,034
2,210
1,
73662
2,0
2587

Convertible debentures
17
18
17
18

Diluted weighted-average shares

752,775
700,696
752,403
694,832
(1)
749,824
752,064
752,621
714,119


Earnings (loss) per common share from continuing operations:

Basic
$
.15(.05
)

$
.12.24 $
.2519
$
.342.70

Diluted
$
.15(.05
)

$
.142.22
$
.2419
$
.34
2.68





(1)
For the three months ended September 30, 2015, 1.7 million weighted-average nonvested restricted stock units and 1.5 million weighted-average stock options have been excluded from the computation of diluted earnings per common share as their inclusion would be antidilutive due to our loss from continuing operations attributable to The Williams Companies, Inc.
Note 78 mlyeBnftPasNtproi eei ot(rdt sa olw:


Pension Benefits

Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions)

Components of net periodic benefit cost:

Service cost
$
15
$
10
$
2944
$
230
Interest cost
14
15
29
31
43
46


Expected return on plan assets
(189
)
(19
)
(3756
)
(3857
)

Amortization of net actuarial loss
11
10
1032
2
9

Net actuarial loss from settlements
1
1
9

Net periodic benefit cost
$
212
$
16
$
642
$
3248
22
Notes (Continued)




Other Postretirement Benefits

Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions)

Components of net periodic benefit cost (credit):

Service cost
$
$
$
1
$
1

Interest cost
3
2
37
4
5
7

Expected return on plan assets
(3
)
(3
)
(69
)
(69
)

Amortization of prior service credit
(4
)
(5
)
(812
)
(105
)

Amortization of net actuarial loss
1
1

Reclassification to regulatory liability
1
1
23
23

Net periodic benefit cost (credit)
$
(3
)
$
(45
)
$
(69
)
$
(
8
)
19
Notes (Continued)
13
)
Amortization of prior service credit and net actuarial loss included in net periodic benefit cost (credit) for our other postretirement benefit plans associated with Transco and Northwest Pipeline are recorded to regulatory assets/liabilities instead of other comprehensive income (loss). The amounts of amortization of prior service credit recognized in regulatory liabilities were $3 million for the three months ended June September30, 2015 and 2014 , respectively, and $58 million and $69 million for the sixnine months ended JuneSeptember30, 2015 and 2014 , respectively. During the sixnine months ended JuneSeptember30, 2015 , we contributed $632 million to our pension plans and $35 million to our other postretirement benefit plans. We presently anticipate making additional contributions of approximately $32 million to our pension plans and approximately $31 million to our other postretirement benefit plans in the remainder of 2015. Note 89 netre



JuneSeptember3, 2015
December 31,
2014

(Millions)

Natural gas liquids, olefins, and natural gas in underground storage
$
9584
$
150

Materials, supplies, and other
732
81

$
1
568
$
231
Note
910 Debt and Banking Arrangements Long-Term Debt Issuances and retirements On April 15, 2015, WPZ paid $783 million , including a redemption premium, to early retire $750 million of 5.875 percent senior notes due 2021 with a carrying value of $797 million . On March 3, 2015, WPZ completed a public offering of $1.25 billion of 3.6 percent senior unsecured notes due 2022, $750 million of 4 percent senior unsecured notes due 2025, and $1 billion of 5.1 percent senior unsecured notes due 2045. WPZ used the net proceeds to repay amounts outstanding under its commercial paper program and credit facility, to fund capital expenditures, and for general partnership purposes. WPZ retired $750 million of 3.8 percent senior unsecured notes that matured on February 15, 2015.
23
Notes (Continued)
Commercial Paper Program As of JuneSeptember 30, 2015, WPZ had $1,74.53 mbillion of Commercial paper outstanding under its $3 billion commercial paper program with a weighted average interest rate of 0.55 percent .
20
6 percent . Credit Facilities On August 26, 2015, WPZ entered into a Credit Agreement providing for a $1.0 billion short-term credit facility with a maturity date of August 24, 2016. The agreement governing this credit facility contains the following terms and conditions:


This facility becomes available when the aggregate amount of outstanding loans under WPZs long-term credit facility plus outstanding commercial paper borrowings reach a total of $3.5 billion .


Various covenants that limit, among other things, a borrowers and its respective material subsidiaries ability to grant certain liens supporting indebtedness, a borrowers ability to merge or consolidate, sell all or substantially all of its assets in certain circumstances, enter into certain affiliate transactions, make certain distributions during an event of default, enter into certain restrictive agreements and allow any material change in the nature of its business.


If an event of default with respect to a borrower occurs under the credit facility, the lenders will be able to terminate the commitments and accelerate the maturity of the loans and exercise other rights and remedies.


Each time funds are borrowed under the credit facility, the borrower may choose from two methods of calculating interest: a fluctuating base rate equal to an alternate base rate plus an applicable margin, or a periodic fixed rate equal to LIBOR plus an applicable margin. The borrower is required to pay a commitment fee based on the unused portion of the credit facility. The applicable margin and the commitment fee are determined by reference to a pricing schedule based on the borrowers senior unsecured long-term debt ratings. The significant financial covenant requires the ratio of debt to EBITDA, each as defined in the credit agreement, as of the last day of any fiscal quarter for which financial statements have been delivered to be no greater than 6.0 to 1.0. WPZ is in compliance with this financial covenant at September 30, 2015. On February 3, 2015, WPZ entered into a $1.5 billion short-term credit facility. In accordance with its terms, this facility terminated on March 3, 2015, upon the completion of the previously described debt offering. WPZ did not borrow under this credit facility.
24

Notes (Continued)
Credit Facilities On February 2, 2015, we entered into a Credit Agreement with aggregate commitments remaining at $1.5 billion , and the credit facilities for Pre-merger WPZ and ACMP were terminated in connection with the ACMP egr P loetrdit 35blincei aiiy



JuneSeptember 0 05
Stated Capacity
Outstanding

(Millions)


WMB

Loans
$
1,500
$
3
750

Swingline loans sublimit
50

Letters of credit sublimit
675

Letters of credit under certain bilateral bank agreements
164

WPZ

Long-term credit facility:

Loans (1)
3,500
500

Swingline loans sublimit
150

Letters of credit sublimit
1,125

Letters of credit under certain bilateral bank agreements
3

Short-term credit facility
1,000





(1)
In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of WPZs credit facility inclusive of any outstanding amounts under its commercial paper program.
On February 3, 2015, WPZ entered into a $1.5 billion short-term credit facility. In accordance with its terms, this facility terminated on March 3, 2015, upon the completion of the previously described debt offering. WPZ did not borrow under this credit facility. Note 10Note 11 tchlesEut h olwn al rsnstecagsi cuuae te opeesv noe(os ycmoet e ficm ae:


Cash Flow Hedges
Foreign Currency Translation
Pensionand Other Post Retirement Benefits
Total

(Millions)

Balance at December31, 2014
$
(1
)
$
31
$
(371
)
$
(341
)

Other comprehensive income (loss) before reclassifications
(553
(103

)
(55100
)

Amounts reclassified from accumulated other comprehensive income (loss)
12(3
)
19

1
26

Other comprehensive income (loss)
(55103
)
1
29
(
843
)

Balance at
June September3,21
$
(1
)
$
(
724
)
$
(3592
)
$
(
384425
)
215
Notes (Continued)
Reclassifications out of Accumulated other comprehensive income (loss) are presented in the following table by component for the
sixnine months ended JuneSeptember3,21




Cmoet Reclassifications
Classification

(Millions)

Cash flow hedges:

Energy commodity contracts
$
(3
)
Product sales

Total cash flow hedges
(3
)


Pension and other postretirement benefits:

Amortization of prior service cost (credit) included in net periodic benefit cost
$
(3
(4
)
Note 78 mlyeBnftPas
Amortization of actuarial (gain) loss included in net periodic benefit cost
2234
Note
78 mlyeBnftPas
Total pension and other postretirement benefits, before income taxes
1930


Reclassifications before income tax
27


Income tax benefit
(711
)
Provision (benefit) for income taxes

Reclassifications during the period
$
1
26
26

Note
11s (Continued)
Note 12
arVleMaueet n urnesTefloigtbepeet,b ee ihntefi au irrh,crano u iaca sesadlaiiis h arigvle fcs n aheuvlns consrcial,cmeca ae,adacut aal prxmt arvlebcueo h hr-emntr fteeisrmns hrfr,teeast n iblte r o rsne ntefloigtbe



Fair Value Measurements Using

Carrying Amount
Fair Value
Quoted PricesIn Active Marketsfor Identical Assets (Level 1)
Significant Other Observable Inputs (Level 2)
Significant Unobservable Inputs (Level 3)

(Millions)

Assets (liabilities) at
June September3,21:
Measured on a recurring basis:

ARO Trust investments
$
63
$
63
$
63
$
$

Energy derivatives assets designated as hedging instruments
14
14
14

Energy derivatives assets not designated as hedging instruments
3
3
1
2
2
2

Energy derivatives liabilities not designated as hedging instruments
(2
)
(2
)
(2
)

Additional disclosures:

Notes receivable and other
8
12
6
14
3
3
8
2
4


Long-term debt, including current portion (1)
(2
1,662,180 )
(2
1,6350,010
)
(2
1,6350,010
)

Guarantee
(30
)
(2517
)
(2517
)


Assets (liabilities) at December 3,21:
Maue narcrigbss

ARO Trust investments
$
48
$
48
$
48
$
$

Energy derivatives assets not designated as hedging instruments
3
3
3
1
2

Energy derivatives liabilities not designated as hedging instruments
(2
)
(2
)
(2
)

Additional disclosures:

Notes receivable and other
30
57
4
53

Long-term debt, including current portion (1)
(20,887
)
(21,131
)
(21,131
)

Guarantee
(31
)
(27
)
(27
)
___________________________________ (1) Excludes capital leases. Fair Value Methods We use the following methods and assumptions in estimating the fair value of our financial instruments: Assets and liabilities measured at fair value on a recurring basis ARO Trust investments : Transco deposits a portion of its collected rates, pursuant to its rate case settlement, into an external trust (ARO Trust) that is specifically designated to fund future asset retirement obligations (ARO). The ARO Trust invests in a portfolio of actively traded mutual funds that are measured at fair value on a recurring basis based on quoted prices in an active market, is classified as available-for-sale, and is reported in Regulatory assets, deferred charges, and other in the Consolidated Balance Sheet. Both realized and unrealized gains and losses are ultimately recorded as regulatory assets or liabilities.
2
27
Notes (Continued)
Fair Value Methods We use the following methods and assumptions in estimating the fair value of our financial instruments: Assets and liabilities measured at fair value on a recurring basis ARO Trust investments : Transco deposits a portion of its collected rates, pursuant to its rate case settlement, into an external trust (ARO Trust) that is specifically designated to fund future asset retirement obligations (ARO). The ARO Trust invests in a portfolio of actively traded mutual funds that are measured at fair value on a recurring basis based on quoted prices in an active market, is classified as available-for-sale, and is reported in Regulatory assets, deferred charges, and other in the Consolidated Balance Sheet. Both realized and unrealized gains and losses are ultimately recorded as regulatory assets or liabilities. Energy derivatives : Energy derivatives include commodity based exchange-traded contracts and over-the-counter (OTC) contracts, which consist of physical forwards, futures, and swaps that are measured at fair value on a recurring basis. The fair value amounts are presented on a gross basis and do not reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements. Further, the amounts do not include cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions. Energy derivatives assets are reported in Other current assets and deferred charges and Regulatory assets, deferred charges, and other in the Consolidated Balance Sheet. Energy derivatives liabilities are reported in Accrued liabilities and Other noncurrent liabilities in the Consolidated Balance Sheet. Reclassifications of fair value between Level 1, Level 2, and Level 3 of the fair value hierarchy, if applicable, are made at the end of each quarter. No transfers between Level 1 and Level 2 occurred during the sixnine months ended JuneSeptember30, 2015 or 2014 . Additional fair value disclosures Notes receivable and other: Notes receivable and other consists of various notes, including a receivable related to the sale of certain former Venezuela assets. The disclosed fair value of this receivable is determined by an income approach. We calculated the net present value of a probability-weighted set of cash flows utilizing assumptions based on contractual terms, historical payment patterns by the counterparty, future probabilities of default, our likelihood of using arbitration if the counterparty does not perform, and discount rates. We determined the fair value of the receivable to be $84 million at JuneSeptember30, 2015 . We began accounting for the receivable under a cost recovery model in first-quarter 2015, and in second-quarter 2015. Subsequently, we received a payment greater than the carrying amount of the receivable. A and as a result, the carrying value of this receivable is zero at JuneSeptember30, 2015 . See Note 4 Other Income and ExpensInvesting Activities for interest income associated with this receivable. The current and noncurrent portions of our receivables are reported in Accounts and notes receivable net, Other current assets and deferred charges , and Regulatory assets, deferred charges, and other , respectively, in the Consolidated Balance Sheet. Long-term debt : The disclosed fair value of our long-term debt is determined by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. Guarantee : The guarantee represented in the table consists of a guarantee we have provided in the event of nonpayment by our previously owned communications subsidiary, Williams Communications Group (WilTel), on a lease performance obligation that extends through 2042. To estimate the disclosed fair value of the guarantee, an estimated default rate is applied to the sum of the future contractual lease payments using an income approach. The estimated default rate is determined by obtaining the average cumulative issuer-weighted corporate default rate based on the credit rating of WilTels current owner and the term of the underlying obligation. The default rate is published by Moodys Investors Service. This guarantee is reported in Accrued liabilities in the Consolidated Balance Sheet. Assets measured at fair value on a nonrecurring basis We recorded impairment charges for the nine months ended September30, 2015 , of $20 million for our Williams Partners segment associated with certain surplus equipment reported in Property, plant, and equipment, at cost in the Consolidated Balance Sheet . The estimated fair value of this equipment at the assessment date was $17 million . The estimated fair value was determined by a market approach based on our analysis of observable inputs in the principal market. These impairment charges are recorded in Other (income) expensenet within Costs and expenses in the Consolidated Statement of Operations . These nonrecurring fair value measurements fall within Level 3 of the fair value hierarchy. Certain of these assets were previously presented as held for sale, but are now reported as held for use. During the third quarter of 2015, we recognized other-than-temporary pre-tax impairment charges of $458 million and $3 million related to WPZs equity-method investments in the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, respectively, reflected within Impairment of equity-method investments in the Consolidated Statement of Operations . The historical carrying value of these investments was initially recorded based
2
38
Notes (Continued)
Assets measured aton estimated fair value on a nonrecdurring basis During the second quarter of 2015, we recorded impairment charges of $20 million for our Williams Partners segment associated with certain surplus equipment reported in Property, plant, and equipment, at cost in the Consolidated Balance Sheet . The estimated fair value of this equipment at June 30, 2015, is $17 million . The estimated fair value is determined by a market approach based on our analysis of observable inputs in the principal market. These impairment charges are recorded in Other (income) expensenet within Costs and expenses in the Consolidated Statement of Income . These nonrecurring fair value measurements fall within Level 3 of the fair value hierarchy. Certain of these assets were previously presented as held for sale, but are now reported as held for usethe third quarter of 2014 in conjunction with the ACMP Acquisition. For these Level 3 measurements, we estimated the fair value of these investments as of September30, 2015 , using an income approach based on expected future cash flows and appropriate discount rates. The determination of estimated future cash flows involved significant assumptions regarding gathering volumes and related capital spending. Discount rates utilized were 11.8 percent and 8.8 percent for the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, respectively, and reflected recent increases in our cost of capital driven by market conditions and risks associated with the underlying businesses. The fair values of the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments measured as of September30, 2015 , were estimated to be approximately $1.02 billion and $185 million , respectively. Guarantees We are required by our revolving credit agreements to indemnify lenders for certain taxes required to be withheld from payments due to the lenders and for certain tax payments made by the lenders. The maximum potential amount of future payments under these indemnifications is based on the related borrowings and such future payments cannot currently be determined. These indemnifications generally continue indefinitely unless limited by the underlying tax regulations and have no carrying value. We have never been called upon to perform under these indemnifications and have no current expectation of a future claim. Regarding our previously described guarantee of WilTels lease performance, the maximum potential exposure is approximately $33 million at JuneSeptember30, 2015 . Our exposure declines systematically throughout the remaining term of WilTels obligation. Note 123 Contingent Liabilities Indemnification of WPX We have agreed to indemnify our former affiliate, WPX and its subsidiaries, related to the following matter. Reporting of nNatural gGas-rRelated iInformation to tTrade pPublications Direct and indirect purchasers of natural gas in various states filed class actions against WPXus, our former affiliate WPX and its subsidiaries, and others alleging the manipulation of published gas price indices and seeking unspecified amounts of damages. Such actions were transferred to the Nevada federal district court for consolidation of discovery and pre-trial issues. We have agreed to indemnify WPX and its subsidiaries related to this matter. Because of the uncertainty around the remaining pending unresolved issues, including an insufficient description of the purported classes and other related matters, we cannot reasonably estimate a range of potential exposure at this time. However, it is reasonably possible that the ultimate resolution of these actions and our related indemnification obligation could result in future charges that may be material to our results of operations. In connection with this indemnification, we have an accrued liability balance associated with this matter, and as a result, have exposure to future developments in this matter. Other Legal Matters Geismar Incident As a result of the previously discussed Geismar Incident, there were two fatalities and numerous individuals (including employees and contractors) reported injuries, which varied from minor to serious. We are addressing the following matters in connection with the Geismar Incident. On October 21, 2013, the EPA issued an Inspection Report pursuant to the Clean Air Acts Risk Management Program following its inspection of the facility on June 24 through June 28, 2013. The report notes the EPAs preliminary determinations about the facilitys documentation regarding process safety, process hazard analysis, as well as operating procedures, employee training, and other matters. On June 16, 2014, we received a request for information related to the Geismar Incident from the EPA under Section 114 of the Clean Air Act to which we responded on August 13, 2014. The EPA could issue penalties pertaining to final determinations. Multiple lawsuits, including class actions for alleged offsite impacts, property damage, customer claims, and personal injury, have been filed against us. To date, we have settled certain of the personal injury claims for an aggregate immaterial amount that we have recovered from our insurers. The trial for certain plaintiffs claiming personal injury, that was set to begin on June 15, 2015 in Iberville Parish, Louisiana, has been postponed to September 6, 2016. We
2
49
Notes (Continued)
Multiple lawsuits, including class actions for alleged offsbelieve ite impacts, property damage, customer claims, and personal injury, have been filed against us. To date, we have settled certain of the personal injury claims for an aggregate immaterial amount that we have recovered from our insurers. The trial for certain plaintiffs claiming personal injury, that was set to begin on June 15, 2015 in Iberville Parish, Louisiana, has been continued or postponed for at least 120 days. For these and all other unsettled lawsuits, we believe it is probable that additional losses will be incurred, while for thes probable that additional losses will be incurred on some lawsuits, while for others we believe it is only reasonably possible that losses will be incurred. However, due to ongoing litigation concerninvolving defenses to liability, the number of individual plaintiffs, limited information as to the nature and extent of all plaintiffs damages, and the ultimate outcome of all appeals, we are unable to reliably estimate any such losses at this time. We believe that it is probable that any ultimate losses incurred will be covered by our general liability insurance policy, which has an aggregate annual limit of $610 million and retention (deductible) of $2 million per occurrence. Alaska rRefinery cContamination lLitigation In 2010, James West filed a class action lawsuit in state court in Fairbanks, Alaska on behalf of individual property owners whose water contained sulfolane contamination allegedly emanating from the Flint Hills Oil Refinery in North Pole, Alaska. The suit named our subsidiary, Williams Alaska Petroleum Inc. (WAPI), and Flint Hills Resources Alaska, LLC (FHRA), a subsidiary of Koch Industries, Inc., as defendants. We owned and operated the refinery until 2004 when we sold it to FHRA. We and FHRA made claims under the pollution liability insurance policy issued in connection with the sale of the North Pole refinery to FHRA. We and FHRA also filed claims against each other seeking, among other things, contractual indemnification alleging that the other party caused the sulfolane contamination. In 2011, we and FHRA settled the James West claim. We and FHRA subsequently filed motions for summary judgment on the others claims. On July 8, 2014, the court dismissed all FHRAs claims and entered judgment for us. On August 6, 2014, FHRA appealed the courts decision to the Alaska Supreme Court. We currently estimate that our reasonably possible loss exposure in this matter could range from an insignificant amount up to $32 million , although uncertainties inherent in the litigation process, expert evaluations, and jury dynamics might cause our exposure to exceed that amount.
On November 26, 2014, the City of North Pole (North Pole) filed suit in Alaska state court in Fairbanks against FHRA and WAPI, alleging nuisance and violations of municipal and state statutes based upon the sulfolane contamination allegedly emanating from the North Pole refinery. North Pole claims an unspecified amount of past and future damages as well as punitive damages against WAPI. FHRA filed cross-claims against us.
Independent of the litigation matter described in the preceding paragraphs, in 2013, the Alaska Department of Environmental Conservation (ADEC) indicated that it views FHRA and us as responsible parties, and that it intended to enter a compliance order to address the environmental remediation of sulfolane and other possible contaminants including cleanup work outside the refinerys boundaries. On March 6, 2014, the State of Alaska filed suit against FHRA and us in state court in Fairbanks seeking injunctive relief and damages in connection with the sulfolane contamination. On May 5, 2014, FHRA filed cross-claims against us in the State of Alaska suit, and FHRA also seeks injunctive relief and damages. Due to the ongoing assessment of the level and extent of sulfolane contamination and the ultimate cost of remediation and division of costs among the potentially responsible parties, we are unable to estimate a range of exposure at this time.
Shareholder lLitigation
In July 2015, a purported stockholder of us filed a putative class and derivative action on behalf of us in the Court of Chancery of the State of Delaware.The action names as defendants certain members of our Board of Directors (Individual Defendants), as well as WPZ, and names us as a nominal defendant. Among other things, the action seeks to enjoin the Acquisition of WPZ Public Units and seeks monetary damages, including the repayment of the $410 million termination fee that may becoame payable by us, in certain circumstances, if there were a due to the termination of the merger agreement for the Acquisition of WPZ Public Units (see Note 1 - General, Description of Business, and Basis of Presentation). The action alleges, among other things, that the Individual Defendants breached their fiduciary duties owed to us and our stockholders by failing to adequately evaluate an
25
unsolicited proposal to acquire us in an all-equity transaction and by putting their personal interests ahead of the interests of us and our stockholders in connection with that unsolicited proposal. The action further alleges that WPZ aided and abetted the alleged breaches. We cannot reasonably estimate a range of potential loss at this time.
30

Notes (Continued)
unsolicited proposal to acquire us in an all-equity transaction and by puttiPurported stockholders of us have filed various putative class actions in the Court of Chancery of the State of Delaware. Some cases name as defendants all of the individual members of our Board of Directors, Energy Transfer, and us, among others. One other case only names as defendants all of the individual members of our Board of Directors and Energy Transfer, among otheir personal interests ahead of the interests of us and our stockholders in connection wrs. The actions allege, among other things, that the Directors breached their fiduciary duties by approving the merger into the Energy Transfer family of companies, claiming it to be the product of a flawed process that undervalues us and deprives the stockholders of the abilithy that unsolicited proposalo participate in our long-term prospects. The actions further alleges that WPZ aided and abetted the alleged breacheswe and/or Energy Transfer aided and abetted the Directors in their alleged breaches of fiduciary duties. The actions seek to enjoin the merger or, in the alternative, to rescind the merger. We cannot reasonably estimate a range of potential loss at this time. Royalty Matters Certain of our customers, including one major customer, have been named in various lawsuits alleging underpayment of royalties. In certain of these cases, we have also been named as a defendant based on allegations that we improperly participated with that major customer in causing the alleged royalty underpayments. We have also received subpoenas from the United States Department of Justice and the Pennsylvania Attorney General requesting documents relating to the agreements between us and our major customer and calculations of the major customers royalty payments. We believe that the claims asserted to date are subject to indemnity obligations owed to us by that major customer. Due to the preliminary status of the cases, we are unable to estimate a range of liability at this time. Environmental Matters We are a participant in certain environmental activities in various stages including assessment studies, cleanup operations and remedial processes at certain sites, some of which we currently do not own. We are monitoring these sites in a coordinated effort with other potentially responsible parties, the EPA, and other governmental authorities. We are jointly and severally liable along with unrelated third parties in some of these activities and solely responsible in others. Certain of our subsidiaries have been identified as potentially responsible parties at various Superfund and state waste disposal sites. In addition, these subsidiaries have incurred, or are alleged to have incurred, various other hazardous materials removal or remediation obligations under environmental laws. As of JuneSeptember30, 2015 , we have accrued liabilities totaling $41 million for these matters, as discussed below. Our accrual reflects the most likely costs of cleanup, which are generally based on completed assessment studies, preliminary results of studies or our experience with other similar cleanup operations. Certain assessment studies are still in process for which the ultimate outcome may yield significantly different estimates of most likely costs. Any incremental amount in excess of amounts currently accrued cannot be reasonably estimated at this time due to uncertainty about the actual number of contaminated sites ultimately identified, the actual amount and extent of contamination discovered and the final cleanup standards mandated by the EPA and other governmental authorities. The EPA and various state regulatory agencies routinely promulgate and propose new rules, and issue updated guidance to existing rules.More recent rules and rulemakings include, but are not limited to, rules for reciprocating internal combustion engine maximum achievable control technology, new air quality standards for ground level ozone, one hour nitrogen dioxide emission limits, and new air quality standards impacting storage vessels, pressure valves, and compressors.WOn October 1, 2015, the EPA issued its new rule regarding National Ambient Air Quality Standards for ground-level ozone, setting a new standard of 70 parts per billion . We are monitoring the rules implementation and evaluating potential impacts to our operations. For these and other new regulations, we are unable to estimate the costs of asset additions or modifications necessary to comply with these new regulations due to uncertainty created by the various legal challenges to these regulations and the need for further specific regulatory guidance. Continuing operations Our interstate gas pipelines are involved in remediation activities related to certain facilities and locations for polychlorinated biphenyls, mercury, and other hazardous substances.These activities have involved the EPA and various state environmental authorities, resulting in our identification as a potentially responsible party at various Superfund waste sites.At JuneSeptember30, 2015 , we have accrued liabilities of $108 million for these costs.We expect that these costs will be recoverable through rates. We also accrue environmental remediation costs for natural gas underground storage facilities, primarily related to soil and groundwater contamination. At June30, 2015 , we have accrued liabilities totaling $8 million for these costs. Former operations, including operations classified as discontinued We have potential obligations in connection with assets and businesses we no longer operate. These potential obligations include remediation activities at the direction of federal and state environmental authorities and the indemnification of the purchasers of certain of these assets and businesses for environmental and other liabilities existing
26

31

Notes (Continued)
We also accrue environmental remediation costs for natural gas underground storage facilities, primarily related to soil and groundwater contamination. At September30, 2015 , we have accrued liabilities totaling $7 million for these costs. Former operations, including operations classified as discontinued We have potential obligations in connection with assets and businesses we no longer operate. These potential obligations include remediation activities at the direction of federal and state environmental authorities and the indemnification of the purchasers of certain of these assets and businesses for environmental and other liabilities existing a h ietesl a osmae.Orrsosblte eaet h prtoso h sesadbsnse ecie eo.

Former agricultural fertilizer and chemical operations and former retail petroleum and refining operations;


Former petroleum products and natural gas pipelines;


Former petroleum refining facilities;


Former exploration and production and mining operations;


Former electricity and natural gas marketing and trading operations. At
JuneSeptember30, 2015 , we have accrued environmental liabilities of $236 million related to these matters. Other Divestiture Indemnifications Pursuant to various purchase and sale agreements relating to divested businesses and assets, we have indemnified certain purchasers against liabilities that they may incur with respect to the businesses and assets acquired from us. The indemnities provided to the purchasers are customary in sale transactions and are contingent upon the purchasers incurring liabilities that are not otherwise recoverable from third parties. The indemnities generally relate to breach of warranties, tax, historic litigation, personal injury, property damage, environmental matters, right of way and other representations that we have provided. At JuneSeptember30, 2015 , other than as previously disclosed, we are not aware of any material claims against us involving the indemnities; thus, we do not expect any of the indemnities provided pursuant to the sales agreements to have a material impact on our future financial position. Any claim for indemnity brought against us in the future may have a material adverse effect on our results of operations in the period in which the claim is made. In addition to the foregoing, various other proceedings are pending against us which are incidental to our operations.
Summary We have disclosed our estimated range of reasonably possible losses for certain matters above, as well as all significant matters for which we are unable to reasonably estimate a range of possible loss. We estimate that for all other matters for which we are able to reasonably estimate a range of loss, our aggregate reasonably possible losses beyond amounts accrued are immaterial to our expected future annual results of operations, liquidity and financial position. These calculations have been made without consideration of any potential recovery from third parties. Note 134 Segment Disclosures Our reportable segments are Williams Partners and Williams NGL& Petchem Services. All remaining business activities are included in Other. (See Note 1 General, Description of Business, and Basis of Presentation .) Performance Measurement Prior to first quarter of 2015, we evaluated segment operating performance based on Segment profit (loss) from operations. Beginning in the first quarter of 2015, we evaluate segment operating performance based upon Modified EBITDA (earnings before interest, taxes, depreciation and amortization). This measure represents the basis of our internal financial reporting and is the primary performance measure used by our chief operating decision maker in measuring performance and allocating resources among our reportable segments. Prior period segment disclosures have been recast to reflect this change.
27

32

Notes (Continued)
Performance Measurement Prior to first quarter of 2015, we evaluated segment operating performance based on Segment profit (loss) from operations. Beginning in the first quarter of 2015, we evaluate segment operating performance based upon Modified EBITDA (earnings before interest, taxes, depreciation, and amortization). This measure represents the basis of our internal financial reporting and is the primary performance measure used by our chief operating decision maker in measuring performance and allocating resources among our reportable segments. Prior period segment disclosures have been recast to reflect this change. We define Modified EBITDA as follows: Net income (loss) before: Income (loss) from discontinued operations; Provision (benefit) for income taxes; Interest incurred, net of interest capitalized; Equity earnings (losses); Gain on remeasurement of equity-method investment; Impairment of equity-method investments;Ohrivsigicm ls)nt ercainadaotzto xess crto xes soitdwt se eieetolgtosfrnneuae prtos


This measure is further adjusted to include our proportionate share (based on ownership interest) of Modified EBITDA from our equity-method investments calculated consistently with the definition described above. The following table reflects the reconciliation of Segment revenues to Total revenues as reported in the Consolidated Statement of
IncomeOperations n oa sesb eotbesget



Williams Partners
Williams NGL&Petchem Services (1)
Other
Eliminations
Total

(Millions)

Three Months Ended
JuneSeptember 0 05
Segment revenues:

Service revenues

External
$
1,2312
$
1
$
96
$
$
1,24139

Internal
3864
(
3864
)

Total service revenues
1,2312
1
470
(
3864
)
1,24139

Product sales

External
59860
5
9860

Internal
1
(1
)

Total product sales
5
99
(1
)
598
60
560


Total revenues
$
1,830792
$
1 $
470
$
(3964
)
$
1,83799

Three Months Ended
JuneSeptember 0 04
Segment revenues:

Service revenues

External
$
7631,065
$
$
62
$
$
8251,127

Internal
41
7

(
48
)

Total service revenues
7631,066
6
69
(
48
)
8251,127

Product sales

External
853
853
942
942


Internal

Total product sales
853
853
942
942


Total revenues
$
1,6162,008
$
$
669
$
(48
)
$
1,6782,069



33
Notes (Continued)



Williams Partners
Williams NGL&Petchem Services (1)
Other
Eliminations
Total


(Millions)

SixNine Months Ended JuneSeptember 0 05
Segment revenues:

Service revenues

External
$
2,4233,655
$
12
$
1420
$
$
2,4383,677

Internal
59
(59
123
(123

)

Total service revenues
2,423
1
7
3,655
2
14
3
(
59123
)
2,4383,677

Product sales

External
1,11677
1,
11677
Internal
1
(1
)
Total product sales
1,11678 (1
)
1,
117
28
Notes (Continued)
677


Williams Partners
Williams NGL&Petchem Services (1)
Other
Eliminations
Total

(Millions)

Total revenues
$
3,5415,333
$
12
$
7143 $
(60124
)
$
3,5555,354


SixNine Months Ended JuneSeptember 0 04
Segment revenues:

Service revenues

External
$
12,52691
$
$
1
180
$
$
1,6442,771

Internal
71
14

(
715
)

Total service revenues
12,5926
1
2594
(
715
)
1,6442,771

Product sales

External
12,78325
12,78325

Internal

Total product sales
12,78325
12,78325

Total revenues
$
35,30917
$
$
12594
$
(715
)
$
35,42796


JuneSeptember3,21

Total assets
$
50,04049,639
$
731802
$
1,064999
$
(6
721
)
$
5
1,1630,819

December31, 2014

Total assets
$
49,322
$
612
$
1,220
$
(591
)
$
50,563
_______________



_________________


(1)
Includes certain projects under development and thus nominal reported revenues to date.

34
Notes (Continued)
The following table reflects the reconciliation of Modified EBITDA to Net income (loss) as reported in the Consolidated Statement of IncomeOperations



Three Months Ended
June
September
30,
SixNine Months Ended June
September
0

2015
2014
2015
2014

(ilos

Modified EBITDA by Segment:

Williams Partners
$
1,05321
$
596843
$
12,87091
$
1,3042,147

Williams NGL & Petchem Services
(35
)
(84
)
(813
)
(10812
)

Other
(417
)
(17

)
60
(4
(21
)
1
018

1,046
648
999
822

12,8587
1,3142,136

Accretion expense associated with asset retirement obligations for nonregulated operations
(96
)
(64
)
(
215
)
(913
)

Depreciation and amortization expenses
(4
328
)
(214369
)
(
8551,287
)
(428797
)

Equity earnings (losses)
9
3
37
144
2
66
236
55

Gain on remeasurement of equity-method investment
2,522
2,522

Impairment of equity-method investments
(461
)

(
1461 )

Other investing income (loss) net
9
18
9
32
11
27
43


Proportional Modified EBITDA of equity-method investments
(1835
)
(1
132
)
(319504
)
(141273
)

Interest expense
(26
23
)
(210

)
(
163776
)
(513
)
(303
)

(Provision) benefit for income taxes
(83 65
(998

)
(
848
)
(1
1,133 )
(135
)

Income (loss) from discontinued operations, net of tax
4
4

Net income (loss)
$
183(173
)

$
1
27,708
$
19623
$
323
29
2,031
35

Item2 Managements Discussion and Analysis of Financial Condition and Results of Operations General We are an energy infrastructure company focused on connecting North Americas significant hydrocarbon resource plays to growing markets for natural gas, NGLs, and olefins. Our operations are located principally in the United States, but span from the deepwater Gulf of Mexico to the Canadian oil sands, and are organized into the Williams Partners and Williams NGL& Petchem Services reportable segments. All remaining business activities are included in Other. Williams Partners Williams Partners consists of our consolidated master limited partnership, WPZ, which includes gas pipeline and midstream businesses. The gas pipeline businesses include interstate natural gas pipelines and pipeline joint project investments; and the midstream businesses provide natural gas gathering, treating, and processing services; NGL production, fractionation, storage, marketing
, and transportation; deepwater production handling and crude oil transportation services; an olefin production business, and is comprised of several wholly owned and partially owned subsidiaries and joint project investments. As of JuneSeptember30, 2015, we own approximately 60 percent of the interests in WPZ, including the interests of the general partner, which is wholly owned by us, and IDRs. Williams Partners' gas pipeline businesses consist primarily of Transco and Northwest Pipeline. Our gas pipeline business also holds interests in joint venture interstate and intrastate natural gas pipeline systems including a 50 percent equity-method investment interest in Gulfstream and a 41 percent interest in Constitution. As of December 31, 2014, Transco and Northwest Pipeline own and operate a combined total of approximately 13,600 miles of pipelines with a total annual throughput of approximately 3,870 TBtu of natural gas and peak-day delivery capacity of approximately 14 MMdth of natural gas. WPZsilliams Partners' midstream businesses primarily consist of (1)natural gas gathering, treating, and processing; (2)natural gas liquid (NGL) fractionation, storage and transportation; (3)oil transportation; and (4)olefins production. The primary service areas are concentrated in major producing basins in Colorado, Texas, Oklahoma, Kansas, New Mexico, Wyoming, the Gulf of Mexico, Louisiana, Pennsylvania, West Virginia, New York, and Ohio which include the Marcellus and Utica shale plays as well as the Eagle Ford, Haynesville, Barnett, Mid-Continent, and Niobrara areas. The midstream businesses include equity-method investments in natural gas gathering and processing assets and NGL fractionation and transportation assets, including a 62 percent equity-method investment in UEOM, a 50 percent equity-method investment in the Delaware basin gas gathering system in the Mid-Continent region, a 69 percent equity-method investment in Laurel Mountain Midstream, LLC, a 58 percent equity-method investment in Caiman EnergyII, LLC, a 60 percent equity-method investment in Discovery Producer Services LLC, a 50 percent equity-method investment in Overland Pass Pipeline, LLC, and Appalachia Midstream Services, LLC, which owns an approximate average 45 percent equity-method investment interest in 11 gas gathering systems in the Marcellus Shale (Appalachia Midstream Investments). The midstream businesses also include our Canadian midstream operations, which are comprised of an oil sands offgas processing plant near Fort McMurray, Alberta, an NGL/olefin fractionation facility and butylene/butane splitter facility at Redwater, Alberta, and the Boreal Pipeline. Williams Partners ongoing strategy is to safely and reliably operate large-scale, interstate natural gas transmission and midstream infrastructures 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 and utilizing our low cost-of-capital to investing in growing markets, including the deepwater Gulf of Mexico, the Marcellus Shale, the Gulf Coast Region, the Canadian oil sands, and areas of increasing natural gas demand.
36
Managements Discussion and Analysis (Continued)
Williams Partners interstate transmission and related storage activities are subject to regulation by the FERC 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 the FERCs ratemaking process. Changes in commodity prices and volumes transported have little near-term impact on these revenues because the majority of cost of service is recovered through firm capacity reservation charges in transportation rates. Williams NGL& Petchem Services Williams NGL & Petchem Services includes certain other domestic olefins pipeline assets and certain Canadian growth projects under development, including a propane dehydrogenation facility and a liquids extraction plant. These projects are under development and thus have had limited operating revenues to date. Unless indicated otherwise, the following discussion and analysis of results of operations and financial condition and liquidity relates to our current continuing operations and should be read in conjunction with the consolidated financial statements and notes thereto of this Form10-Q and our annual consolidated financial statements and notes thereto in Exhibit 99.1 of our Form 8-K dated May 6, 2015. Dividends In September 2015 , we paid a regular quarterly dividend of $0.64 per share, which was 14 percent higher than the same period last year. Overview of Nine Months Ended September30, 2015 Net income (loss) attributable to The Williams Companies, Inc. , for the nine months ended September30, 2015 , decreased $1,777 million compared to the nine months ended September30, 2014 , primarily due to the absence of a $2.5 billion gain recognized in 2014 as a result of remeasuring our previous equity-method investment in ACMP to fair value, impairment charges associated with certain equity-method investments (See Note 4 Investing Activities of Notes to Consolidated Financial Statements), declines in NGL margins driven by 67 percent lower prices, higher depreciation expense caused by significant projects that have gone into service in 2014 and 2015, as well as increased interest expense associated with new debt issuances. These decreases were partially offset by new fee revenue associated with certain growth projects that were placed in service in 2014 and 2015 and the absence of equity losses in 2014 associated with the discontinuance of the Bluegrass Pipeline project. See additional discussion in Results of Operations. Abundant and low-cost natural gas reserves in the United States continue to drive demand for midstream and pipeline infrastructure. We believe that we have successfully positioned our energy infrastructure businesses for significant future growth. However, an overall decline in energy commodity prices over the past year has adversely impacted the midstream industry, including us. Energy Transfer Merger Agreement On September 28, 2015, we entered into an Agreement and Plan of Merger (Merger Agreement) with Energy Transfer Equity, L.P. (Energy Transfer) and certain of its affiliates. The Merger Agreement provides that we will be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger), with ETC surviving the ETC Merger. Energy Transfer formed ETC as a limited partnership that will be treated as a corporation for U.S. federal income tax purposes. ETC will be publicly traded on the New York Stock Exchange under the symbol ETC. At the effective time of the ETC Merger, each issued and outstanding share of our common stock (except for certain shares such as those held by us or our subsidiaries and any held by ETC and its affiliates) will be canceled and automatically converted into the right to receive stock, cash, or a combination thereof as previously described in Note 1 of Notes to Consolidated Financial Statements. In connection with the ETC Merger, Energy Transfer will subscribe for a number of ETC common shares at the transaction price, in exchange for the amount of cash needed by ETC to fund the cash portion of the merger consideration (the Parent Cash Deposit), and, as a result, based on the number of shares of Williams common stock outstanding as
3
07
Managements Discussion and Analysis (Continued)
o
r abandonment of jurisdictional facilities and accounting, among other things, are subject to regulation. The rates are established through the FERCs ratemaking process. Changes in commodity prices and volumes transported have little near-term impact on these revenues because the majority of cost of service is recovered through firm capacity reservation charges in transportation rates. Williams NGL& Petchem Services Williams NGL & Petchem Services includes certain other domestic olefins pipeline assets and certain Canadian growth projects under development, including a propane dehydrogenation facility and a liquids extraction plant. These projects are under development and thus have had limited operating revenues to date. Unless indicated otherwise, the following discussion and analysis of results of operations and financial condition and liquidity relates to our current continuing operations and should be readf the date thereof, will own approximately 19 percent of the outstanding ETC common shares immediately after the effective time of the ETC Merger. Immediately following the completion of the ETC Merger and of the LE GP, LLC merger with and into Energy Transfer Equity GP, LLC, ETC will contribute to Energy Transfer all of the assets and liabilities of Williams in exchange for the issuance by Energy Transfer to ETC of a number of Energy Transfer Class E common units equal to the number of ETC common shares issued to our stockholders in the ETC Merger plus the number of ETC common shares issued to Energy Transfer in consideration for the Parent Cash Deposit (such contribution, together with the ETC Merger and the other transactions contemplated by the Merger Agreement, the Transactions). To address potential uncertainty as to how the newly listed ETC common shares, as a new security, will trade relative to Energy Transfer common units, each ETC common share issued in the ETC Merger, as well as the ETC common shares issued to Energy Transfer in conjunection with the consolidated financial statements and notesParent Cash Deposit, will have attached to it one contingent consideration right (CCR). The theretoms of this Form10-Q and our annual consolidate CCRs are fully described financial stat the form of CCR Agreements and notes thereto inttached to the Merger Agreement as Exhibit H to Exhibit 992.1 of our Form 8-K dated May 6, 2015. Dividends In June 2015 , we paid a regular quarterly dividend of $0.59 per share, which was 39 percent higher than the same period last year. Overview of Six Months Ended June30, 2015 Net income (loss) attributable to The Williams Companies, Inc. ,Current Report on Form 8-K dated September 29, 2015. We expect the transaction to close in the first half of 2016. Completion of the Transactions is subject to the satisfaction or waiver of a number of customary closing conditions as set for the six months ended June30, 2015 , decreased $59 million compared to the six months ended June30, 2014, primarily due to higher depreciation expense caused by significant projects that have gone into service in 2014 and 2015, increased interest expense associated with new debt issuances, as well as declines in NGL margins driven by 59 percent lower prices. These decreases were partially offset by new fee revenue associated with certain growth projects that were placed in service in 2014 and 2015 and the absence of equity losses in 2014 associated with the discontinuance of the Bluegrass Pipeline project. See additional discussion in Results of Operations. Abundant and low-cost natural gas reserves in the Merger Agreement, including approval of the ETC Merger by our stockholders, receipt of required regulatory approvals in connection with the Transactions, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended and effectiveness of a registration statement on Form S-4 registering the United States continue to drive demand for midstream and pipeline infrastructure. We believe that we have successfully positioned our energy infrastructure businesses for significant future growth. Acquisition of WPZ Public UnitsETC common shares (and attached CCRs) to be issued in connection with the Transactions. Termination of WPZ Merger Agreement On May 12, 2015, we entered into an agreement for a unit-for-stock transaction whereby we willould have acquired all of the publicly held outstanding common units of WPZ in exchange for shares of our common stock (Acquisition of WPZ Public Units). Each such WPZ common unit will be converted into the right to receive 1.115 shares of our common stock. In the event this aWPZ Merger Agreement). On September 28, 2015, prior to our entry into the Merger Agreement, we entered into a Termination Agreement and Release (Termination Agreement is), terminated under certain circumstances, we could bing the WPZ Merger Agreement. We are required to pay a $41028 million termination fee to WPZ, of which we currently own approximately 60 percent , including the interests of the general partner and incentive distribution rights (IDRs). Such termination fee would beill settled through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $102.5209 million per quarter). Strategic Alternatives On JuneThe next distribution from WPZ in November 2015 will be reduced by $209 million related to this termination fee. Williams Partners ACMP Merger On February 21, 2015, we publicly announced in a press release that we had received and subsequently rejected an unsolicited proposal to acquire us in an all-equity transaction. The unsolicited proposal was contingentcompleted a merger of our consolidated master limited partnerships, Pre-merger WPZ and ACMP (ACMP Merger). The merged partnership was renamed Williams Partners L.P. Under the terms of the ACMP merger agreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to the ACMP Merger. In conjunction with the ACMP Merger, each Pre-merger WPZ common unit held by the public was exchanged for 0.86672 ACMP common units. Each WPZ common unit held by us was exchanged for 0.80036 ACMP common units. Prior to the closing onf the termination of our pending Acquisition of WPZ Public Units. Our Board of Directors has authorized a process to explore a range of strategic alternatives, which could include, amoACMP Merger, the Class D limited partner units of Pre-merger WPZ, all of which were held by us, were converted into WPZ common units on a one-for-one basis pursuant to the terms of the Pre-merger WPZ partnership agreement. Following the ACMP Merger, we own an approximate 60 percent of the merged partnership, including the general partner interest and incentive distribution rights. Geismar Incident and plant expansion Following other things, a merger, a sale of us, or continuing to pursue our existing operating and growth plan Geismar Incident in 2013, the Geismar plant ramped up in the second quarter of 2015 and reached full capacity in the third quarter of 2015.
3
18
Managements Discussion and Analysis (Continued)
Williams PartOur total property damage and businerss Access Merger On February 2,interruption loss exceeded our $500 million policy limit. Since June 20153, we completed a merger of our consolidated master limited partnerships, Pre-merger WPZ and ACMP (Merger). The merged partnership was renamed Williams Partners L.P. Under the terms of the merger agreement, each ACMP unitholder received 1.06152 ACMP units for each ACMP unit owned immediately prior to the Merger. In conjunction with the Merger, each Pre-merger WPZ common unit held by the public was exchanged for 0.86672 ACMP common units. Each WPZ common unit held by us was exchanged for 0.80036 ACMP common units. Prior to the closing of the Merger, the Class D limited partner units of Pre-merger WPZ, all of which were held by us, were converted into WPZ common units onhave settled claims associated with $480 million of available property damage and business interruption coverage for a total of $422 million. This total includes $126 million which we received in the second quarter of 2015. The remaining insurance limits total approximately $20 million and we are vigorously pursuing collection. Utica and Haynesville gas gathering agreements In September 2015, Williams announced an expansion of gas gathering services for a certain major producer customer in dry gas production areas of the Utica Shale in eastern Ohio and a consolidation of contracts in the Haynesville Shale in northwestern Louisiana. In the Utica, WPZ executed a lone-for-one basis pursuant to the terms of the Pre-merger WPZ partnershipg-term fee-based contract that extends the length of certain agcreement. Following the Merger, we own an approximate 60 percent of the merged partnership, including the general partner interest and incentive distribution rights. Geismar Incident and Plant Expansion On June13, 2013, an explosion and fire occurred at William Partners Geismar olefins plant. The incident (Geismar Incident) rendered the facility temporarily inoperable and resulted in significant human, financial, and operational effects. The Geismar plant ramped up inage dedication to 2035, increases the area of dedication from 140,000 acres to 190,000 net acres and converts the cost-of-service mechanism to a fixed-fee structure with minimum volume commitments (MVCs). A new Haynesville contract consolidates the Springridge and Mansfield contracts into a single agreement with a fixed-fee structure and extends the second quarter of 2015 and the expanded plant is now online. Our total property damage and business interruption loss exceeded our $500 million policy limit. Since Junetract term to 2035. The consolidated contract is supported by MVCs and a drilling commitment to turn 140 equivalent wells online before the end of 2017. Virginia Southside In September 20135, we have settled claims associated with $480 million of available property damage and business interruption coverage for a total of $422 million. This total includes $126 million which we received in the second quarter of 2015. The remaining insurance limits total approximately $20 million and we are vigorously pursuing collectionTranscos Virginia Southside expansion from New Jersey to a power station in Virginia and delivery points in North Carolina was placed into service, which enabled us to begin providing 270 Mdth/d of additional firm transportation service. Northeast Connector In May 2015, the Northeast Connector project was placed into service, which increased additional firm transportation capacity to 100 Mdth/d from Transcos Station 195 in southeastern Pennsylvania to the Rockaway Delivery Lateral. Rockaway Delivery Lateral In May 2015, Transcos Rockaway Delivery Lateral expansion between Williams Transco transmission pipeline and the National Grid distribution system was placed in service, which enabled us to begin providing 647 Mdth/d of additional firm transportation service to a distribution system in New York. Mobile Bay South III In April 2015, Transcos Mobile Bay South III expansion south from Station 85 in west central Alabama to delivery points along the line was placed into service, which enabled us to begin providing 225 Mdth/d of additional firm transportation service on the Mobile Bay Lateral. Bucking Horse Ggas Pprocessing Ffacility The Bucking Horse gas processing plant (Bucking Horse) began operating in February 2015. Bucking Horse, is located in Converse County, Wyoming, and adds 120 MMcf/d of processing capacity in the Powder River basin Niobrara Shale play. Processed volumes at Bucking Horse have continued to increase through the seconthird quarter of 2015 as existing rich gas production was re-directed from other third-party processing facilities. Bucking Horse has led to higher gathering volumes in 2015 as previously curtailed production has increased due to the additional processing capability. Eagle Ford gathering system In May 2015, WPZ acquired a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility capable of handling up to 100 MMcf/d in the Eagle Ford shale for $112 million. The acquisition is contributing approximately 20 MMcf/d to the existing Eagle Ford throughput of approximately 400 MMcf/d.
3
29
Managements Discussion and Analysis (Continued)
Eagle Ford Gathering System In May 2015, WPZ acquired a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility capable of handling up to 100 MMcf/d in the Eagle Ford shale for $112 million. The acquisition will immediately contribute approximately 20 MMcf/d to the existing Eagle Ford throughput of approximately 400 MMcf/d. UEOM In June 2015, WPZ acquired an approximate 13 percent equity interest in UEOM for approximately $357 million, increasing our ownership from 49 percent to approximately 62 percent. Volatile commodity prices NGL margins were approximately 5961 percent lower in the first sixnine otso 05cmae otesm eido 04die rmrl y6 ecn oe o-taepie atal fstb oe aua a edtc rcs.NLmrisaedfnda G eeusls n plcbeBurpaeetcs,patfe,adtidprytasotto n rcinto.Prui G agn r acltdbsdo ae foroneut oue ttepoesn lns u qiyvlmsicueNL hr eontergt otevlefo Gsrcvrda u lnsudrbt epwoepoesn gemns hr ehv h biaint elc h othaigvlewt aua a,adpreto-iud gemnsweeyw eev oto fteetatdlqiswt oolgto orpaetels etn au.Tefloiggahilsrtsteefcso agnvltlt n G rdcinadslsvlms swl stemri ifrnilbtenehn n o-taepout n h eaiemxo hs rdcs



33The potential impact of commodity price changes on our business for the remainder of 2015 is further discussed in the following Company Outlook.
40

Managements Discussion and Analysis (Continued)
The potential impact of commodity price changes on our business for the remainder of 2015 is further discussed in the following Company Outlook. Williams NGL & Petchem Services Texas Belle Pipeline In March 2015, the Texas Belle Pipeline (Texas Belle) went into service in the Houston Ship Channel area. Texas Belle is a 32-mile pipeline that transports NGLs and was designed to deliver butanes and natural gasolines from Mont Belvieu, Texas, to new demand in the Houston Ship Channel area. Texas Belle is one of several projects under development that will provide open access, service-focused purity NGL and olefin transportation options to customers that have traditionally been primarily served by proprietary pipeline systems. These projects are a collection of pipeline systems developed in collaboration with producers and consumers to connect new supply sources to growing demand throughout the Gulf Coast region. Company Outlook As previously discussed, we are currently evaluating a range of strategic alternatives that could include, among oentered into a Merger Agreement with Energy Transfer and certain of its affiliates and expect ther things, a merger, a sale of us, or continuing to pursue our existing operating and growth plan. The following discussion reflects continued pursuit of our existing operating and growth planransaction to close in the first half of 2016. The following discussion reflects our operating plan for 2015 and 2016. Our strategy is to provide large-scale energy infrastructure designed to maximize the opportunities created by the vast supply of natural gas, natural gas products, and crude oil that exists in North America. We seek to accomplish this through further developing our scale positions in current key markets and basins and entering new growth markets and basins where we can become the large-scale service provider. We will maintain a strong commitment to safety, environmental stewardship, operational excellence and customer satisfaction. We believe that accomplishing these goals will position us to deliver an attractive return to our shareholders.
FollowingWe expect the sharp decline in energy commodity prices beginning in fourth quarter 2014, we expect crude oil, NGLs, and olefins prices to remain at lower levels throughout 2015 as compared to 2014 average prices, which and continuing through the present will have an adverse effect on our operating results and cash flows. Fee-based businesses are a significant component of our portfolio and have further increased as a result of the ACMP Acquisition and significant investments in fee-based projects. This serves to somewhat reduce the influence of commodity price fluctuations on our operating results and cash flows. However, we anticipate producer activities will be impacted by lower natural gasenergy commodity prices which may reduce the rate of growth of our gathering and processing volumes from th. Additionally, declines in NGL and olefins margins may also reduce courrent level operating results and cash flows.
Our business plan for 2015 continues to reflect
both significant capital investment and continueds well as dividend growth as compared to 2014. We continue to manage expenditures as appropriate without compromising safety and compliance. Our planned consolidated capital investments for 2015 total between $3.96 billion andare expected to be approximately $4.593 billion. We expect to maicontain an attractive cost of capital and reliable access to capital markets, both of which will allow us to pursue development projects and acquisitionsue significant capital investment in 2016.Ptnilrssadosalsta ol matteeeuino u lnicue


General economic, financial markets, or industry downturn;


Lower than anticipated energy commodity prices and margins;


Decreased volumes from third parties served by our midstream business;


Unexpected significant increases in capital expenditures or delays in capital project execution;


Lower than expected distributions, including IDRs, from WPZ. WPZs liquidity could also be impacted by a lack of adequate access to capital markets to fund its growth;


LHigher cost of capital and/or limited availability of capital due to a change in our financial condition, interest rates, market or industry conditions;
34
Managements Discussion and Analysis (Continued)


Downgrade of our credit ratings and associated increase in cost of borrowings;


Cutrat rdtadpromners;

Cagsi h oiia n euaoyevrnet;

Physical damages to facilities, including damage to offshore facilities by named windstorms;


Reduced availability of insurance coverage.
We continue to address these risks through disciplined investment strategies, sufficient liquidity from cash and cash equivalents and available capacity under our credit facilities. In 2015, we anticipate an overall improvement in operating results compared to 2014
primarily due todue to increases in our fee-based businesses primarily as a result of the ACMP Acquisition and projects placed in service and an increases in our olefins volumes associated with the repair and expansion of the Geismar plant and in our fee-based businesses primarily as a result of the ACMP Acquisition,prilyofe ylwrNLmrisadhge prtn xessascae ihtegot forbsns. The following factors, among others, could impact our businesses in 2015. Commodity price changes NGL and olefin price changes have historically correlated somewhat with changes in the price of crude oil, although NGL, olefin, crude, and natural gas prices are highly volatile, and difficult to predict. Commodity margins are highly dependent upon regional supply/demand balances of natural gas as they relate to NGL margins, while olefins are impacted by global supply and demand fundamentals. NGL products are currently the preferred feedstock for ethylene and propylene production, and are expected to remain advantaged over crude-based feedstocks into the foreseeable future. We continue to benefit from our strategic feedstock cost advantage in propylene production from Canadian oil sands offgas. Following the sharp decline in overall energy commodity prices in the fourth quarter of 2014, we anticipate the following trends in 2015, compared to 2014:


Natural gas and ethane prices are expected to be lower primarily due to higher inventory levels in the marketplace.


Non-ethane prices, including propane, are expected to be lower primarily due to oversupply and the sharp decline in crude oil prices.


Olefins prices, including propylene, ethylene, and the overall ethylene crack spread, are expected to be lower than 2014 levels due to
theoversupply as well as oe rcso rd i n orltdpout. Gathering, transportation, processing, and NGL sales volumes The growth of natural gas production supporting our gathering and processing volumes is impacted by producer drilling activities, which are influenced by commodity prices, including natural gas, ethane and propane prices. In addition, the natural decline in production rates in producing areas impact the amount of gas available for gathering and processing.


Following the ACMP Acquisition, we began consolidating our Access Midstream business results of operations effective July 1, 2014. As such, we expect an increase in overall results for our Access Midstream business in 2015 compared to 2014 associated with a full year of consolidated results.


In the Gulf Coast region, we expect higher production handling volumes in 2015, following the completion of Gulfstar FPS in the fourth quarter of 2014.
35
Managements Discussion and Analysis (Continued)


We anticipate higher natural gas transportation revenues at Transco compared to 2014, as a result of expansion projects placed into service in 2014 and
anticipated to be placed in service in 2015.2015.
41
Managements Discussion and Analysis (Continued)



In the northeast region, we anticipate growth in our natural gas gathering volumes compared to the prior year as our infrastructure grows to support producer activities in the region.


Volumes in the Haynesville area at our Access Midstream business are expected to be higher in 2015 as compared to 2014 primarily due to an increase in well connections in the area.


We expect an increase in volumes in 2015, as compared to 2014 at our Access Midstream business in the Utica area primarily due to the build out of the Cardinal system, relieving compression constraints and adding new well connections.


In the western region, we anticipate an unfavorable impact in NGL margins in 2015 compared to 2014, primarily due to the sharp decline in NGL prices.


In 2015, our domestic businesses anticipate a continuation of periods when it will not be economical to recover ethane. Olefin production volumes


Our Gulf olefins business anticipates higher ethylene volumes in 2015 compared to 2014 substantially due to the repair and expansion of the Geismar plant, which returned to operations in late March. Other


Operating results from our equity-method investments are expected to be higher in 2015 compared to 2014 primarily due to the completion of Discoverys Keathley Canyon Connector lateral in the first quarter of 2015 and an anticipated increase in volumes as well as our increased ownership interest in UEOM. These increases are offset by an expected decrease in results from our equity-method investment in the Delaware basin gas gathering system primarily due to a redetermination of rates in association with a contract extension.


Amounts recognized under minimum volume commitments at our Access Midstream business in the Barnett area are expected to increase in 2015 compared to 2014.


We expect higher operating expenses in 2015 compared to 2014, related to our growing operations in the northeast region and expansion projects at Transco, partially offset by cost reductions and synergies associated with the ACMP Acquisition. Expansion Projects
We expect to invest between $3.47 billion and $4.1 billion of capital among our business segments in 2015. Our ongoing major expansion projects include the following: Williams Partners Access Midstream Projects We plan to expand our gathering infrastructure in the Eagle Ford, Mid-Continent, Utica, and Marcellus shale regions in order to meet our customers production plans. The expansion of the gathering infrastructure includes the addition of new facilities, well connections, and gathering pipeline to the existing systems. Oak Grove Expansion We plan to expand our processing capacity at our Oak Grove facility by adding a second 200MMcf/d cryogenic natural gas processing plant, which, based on our customers needs, is expected to be placed into service in 2017.
42
Managements Discussion and Analysis (Continued)
Susquehanna Supply Hub We will continue to expand the gathering system in the Susquehanna Supply Hub in northeastern Pennsylvania that is needed to meet our customers production plans. The expansion of the gathering infrastructure includes additional compression and gathering pipeline to the existing system. Atlantic Sunrise In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system along with greenfield facilities to provide incremental firm transportation capacity from the northeastern Marcellus producing area to markets along Transcos mainline as far south as Station 85 in west central Alabama. We plan to place the project into service during the second half of 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 1,700 Mdth/d. Leidy Southeast In December 2014, we received approval from the FERC to expand Transcos existing natural gas transmission system from the Marcellus Shale production region on Transcos Leidy Line in Pennsylvania to delivery points along its mainline as far south as Station 85 in west central Alabama. In March 2015, we began providing firm transportation service through the mainline portion of the project on an interim basis, until the in-service date of the project as a whole. We plan to place the remainder of the project into service during the fourth quarter of 2015 and expect it to increase capacity by 525 Mdth/d.
Constitution Pipeline In December 2014, we received approval from the FERC to construct and operate the jointly owned
Constinent, Utica, and Marcellus shale regions in order to meet our customers production plans. The expansion of the gathering infrastructure includes the addition of new facilities, well connections, and gathering pipeline to the existing systems.
36
tution pipeline. We also received a Notice of Complete Application from the New York Department of Environmental Conservation (NYDEC) in December 2014, but we continue to seek issuance of Clean Water Act Section 401 certification by the NYDEC. We currently own 41 percent of Constitution with three other parties holding 25 percent, 24 percent, and 10 percent, respectively. We will be the operator of Constitution. The 124-mile Constitution pipeline will connect our gathering system in Susquehanna County, Pennsylvania, to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in New York. We plan to place the project into service in the fourth quarter of 2016, assuming timely receipt of all necessary regulatory approvals, with an expected capacity of 650 Mdth/d.
Rock Springs In March 2015, we received approval from the FERC to expand Transcos existing natural gas transmission system from New Jersey to a proposed generation facility in Maryland. The project is planned to be placed into service in third quarter 2016, assuming timely receipt of all other necessary regulatory approvals, and is expected to increase capacity by 192 Mdth/d.
Hillabee In November 2014, we filed an application with the FERC for approval of the initial phases of Transcos Hillabee Expansion project, which involves an expansion of its existing natural gas transmission system from Station 85 in west central Alabama to a proposed new interconnection with Sabal Trail Transmission's system in Alabama. The project will be constructed in phases, and all of the project expansion capacity will be leased to Sabal Trail Transmission. We plan to place the initial phases of the project into service during the second quarters of 2017 and 2020, assuming timely receipt of all necessary regulatory approvals, and together they are expected to increase capacity by 1,025 Mdth/d.
Gulf Trace In December 2014, we filed an application with the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from Station 65 in St. Helena Parish, Louisiana westward to a new interconnection with Sabine Pass Liquefaction in Cameron Parish,
43

Managements Discussion and Analysis (Continued)
Oak Grove Expansion We plan to expand our processing capacity at our Oak Grove facility by adding a second 200MMcf/d cryogenic natural gas processing plant, which, based on our customers needs, is expected to be placed into service at the end of 2016. Susquehanna Supply Hub We will continue to expand the gathering system in the Susquehanna Supply Hub in northeastern Pennsylvania that is needed to meet our customers production plans. The expansion of the gathering infrastructure includes additional compression and gathering pipeline to the existing system. Atlantic SunriseLouisiana. We plan to place the project into service during the first quarter of 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 1,200 Mdth/d. Dalton In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system alongtogether with greenfield facilities to provide incremental firm transportation capacity from the northeastern Marcellus producing area to markets along Transcos mainline as far south as Station 85 in west central AlabamStation 210 in New Jersey to markets in northwest Georgia. We plan to place the project into service during the second half ofin 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 1,700448 Mdth/d. Leidy Southeast In DecemberGarden State In February 20145, we received approval fromfiled an application with the FERC to expand Transcos existing natural gas transmission system from the Marcellus Shale production region on Transcos Leidy Line in Pennsylvania to delivery points along its mainline as far south asto provide incremental firm transportation capacity from Station 85210 in west central Alabama. In March 2015, we began providing firm transportation service through the mainline portion of the project on an interim basis, until the in-service date of the project as a wholeNew Jersey to a new interconnection on our Trenton Woodbury Lateral in New Jersey. The project will be constructed in phases and is expected to increase capacity by 180 Mdth/d. We plan to place the remainderinitial phase of the project into service during the fourth quarter of 20156 and expect it to increase capacity by 525 Mdth/d.
Constitution Pipeline In December
the remaining portion in the third quarter of 20147, we received approval from the FERC to construct and operate the jointly owned Constitution pipeline. We also received a Notice of Complete Aassuming timely receipt of all necessary regulatory approvals. Virginia Southside II In March 2015, we filed an application fromwith the New York Department of Environmental Conservation in December 2014. We currently own 41 percent of ConstitutionFERC to expand Transcos existing natural gas transmission system together with thgree other parties holding 25 percent, 24 percent, and 10 percent, respectively. We will be the operator of Constitution. The 124-mile Constitution pipeline will connect our gathering system in Susquehanna County, Pennsylvanfield facilities to provide incremental firm transportation capacity from New Jersey and Virginia, to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in New Yorkour Brunswick Lateral in Virginia. We plan to place the project into service during the second half of 2016, withfourth quarter of 2017, assuming timely receipt of all necessary regulatory approvals, and expect it to increased capacity of 6by 250 Mdth/d.
Virginia Southside In November
New York Bay In July 20135, we received approval fromfiled an application with the FERC to expand Transcos existing natural gas transmission system from New Jersey to a proposed power station in Virginia and delivery points in North Carolina. In December 2014, we placed a portion of the project into service, which enabled us to begin providing 250 Mdth/d of additional firm transportationto provide incremental firm transportation capacity from Pennsylvania to the Rockaway Delivery Lateral transfer point and the Narrows meter station in Richmond County, New York. We plan to place the project into service during the fourth quarter of 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 115 Mdth/d.
Redwater Expansion As part of a long-term agreement to provide gas processing
services through the mainline portion of the project on an interim basis, until the in-service date of the project as a whole. We plan to place the remainder of the projecto a second bitumen upgrader in Canadas oil sands near Fort McMurray, Alberta, we are increasing the capacity of the Redwater facilities where NGL/olefins mixtures will be fractionated into an ethane/ethylene mix, propane, polymer grade propylene, normal butane, an alkylation feed and condensate. This capacity increase is expected to be placed into service during the thirdfirst quarter of 20156. In total, the project is expected to increase capacity by 270Mdth/d.
Rock Springs In March 2015, we received approval from the FERC to expand Transcos existing natural gas transmission system from New Jersey to a proposed generation facility in Maryland. The project is planned to be placed into service in third quarter 2016, assuming timely receipt of all other necessary regulatory approvals, and is expected to increase capacity by 192 Mdth/d.
37
Williams NGL& Petchem Services Canadian PDH Facility We are planning to build a PDH facility in Alberta that will significantly increase production of polymer-grade propylene. Start-up for the PDH facility is expected to occur in the second half of 2019. The new PDH facility is expected to produce approximately 1.1 billion pounds annually, significantly increasing Williams production of polymer-grade propylene currently at 180 million pounds annually. Canadian NGL Infrastructure Expansion As part of a long-term agreement to provide gas processing to a second bitumen upgrader in Canadas oil sands near Fort McMurray, Alberta, we are building a new liquids extraction plant and an interconnection with the Boreal Pipeline, owned by our Williams Partners segment. The interconnection will enable transportation of the
44

Managements Discussion and Analysis (Continued)
Hillabee In November 2014, we filed an application with the FERC for approval of the initial phases of Transcos Hillabee Expansion project, which involves an expansion of its existing natural gas transmission system from Station 85 in west central Alabama to a proposed new interconnection with Sabal Trail Transmission's system in Alabama. The project will be constructed in phases, and all of the project expansion capacity will be leased to Sabal Trail Transmission. We plan to place the initial phases of the project into service during the second quarters of 2017 and 2020, assuming timely receipt of all necessNGL/olefins mixture on the Boreal pipeline from the new liquids extraction plant to the Redwater facilities, owned by our Williams Partners segment. We plan to place the new liquids extraction plant and interconnection with Boreal into service during the first quarter of 2016, and expect initial NGL/olefins recoveries of approximately 12 Mbbls/d. To mitigate ethane price risk associated with our processing services, we have a long-term agreement with a minimum price for ethane sales to a third-party regulatory approvals, and together they acustomer. Gulf Coast NGL and Olefin Infrastructure eExpected to increase capacity by 1,025 Mdth/d.
Gulf Trace In December 2014, we filed an application with the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from Station 65 in St. Helena Parish, Louisiana westward to a new interconnection with Sabine Pass Liquefaction in Cameron Parish, Louisiana. We plan to place the project into
ansion In November 2012, we acquired 10 liquids pipelines in the Gulf Coast region.The acquired pipelines will be combined with an organic build-out of several projects to expand our petrochemical services in that region.The projects include the construction and commissioning of pipeline systems capable of transporting various purity natural gas liquids and olefins products in the Gulf Coast region. The Texas Belle pipeline started providing isobutane service during the first half of 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 1,200 Mdth/d. Dalton In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from Station 210 in New Jersey to markets in northwest Georgia. We plan to place the project into service in 2017, assumquarter of 2015 and is expected to be available for natural gasoline service in the first quarter of 2016. Additional projects under development and/ or construction are expected to be placed into service in 2016 and 2017. Critical Accounting Estimates Goodwill The goodwill associated with the Access Midstream reporting unit at September 30, 2015 was $452 million, which was initially recorded during the third quarter of 2014 in conjunction with the ACMP Acquisition. As disclosed within the Critical Accounting Estimely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 448 Mdth/d. Garden State In February 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system to provide incremental firm transportation capacity from Station 210 in New Jersey to a new interconnection on our Trenton Woodbury Lateral in New Jersey. The project will be constructed in phases and is expected to increase capacity by 180 Mdth/d. We plan to place the initial phase of the project into service during the fourth quarter of 2016 and the remaining portion in the third quarter of 2017, assuming timely receipt of all necessary regulatory approvals. Virginia Southside II In March 2015, we filed an application with the FERC to expand Transcos existing natural gas transmission system together with greenfield facilities to provide incremental firm transportation capacity from New Jersey and Virginia to our Brunswick Lateral in Virginia. We plan to place the project into service durates discussion in Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations in Exhibit 99.1 of our Current Report on Form 8-K dated May 6, 2015, we performed an impairment evaluation of the goodwill associated with the reporting units representing the central and northeast regions within the Access Midstream segment as of December 31, 2014. Following the merger of WPZ and Access Midstream in February of 2015, the reporting unit for purposes of evaluating goodwill for impairment is the Access Midstream segment of WPZ.
During the third quarter of 2015, we observed a decline in WPZs unit price and increases in equity yields within the midstream industry. This served to increase our estimates of discount rates. Accordingly, we performed an interim assessment of the goodwill associated with this reporting unit as of September 30, 2015.
We estimated the fair value of the reporting unit identified above based on an income approach utilizing discount rates specific to the underlying businesses of Access Midstream. The weighted-average discount rate utilized was 9.4 percent. Our forecasts of future cash flows considered current market conditions and our perspective on how each business operation would perform and develop in future years. For this reporting unit, we have experienced an increase
ing the fourth quarter of 2017, assuming timely receipt of all necessary regulatory approvals, and expect it to increase capacity by 250 Mdth/d. New York Bay In July 2015, we filed an application with the FERC to expand Transcos existing naturadiscount rates utilized, offset by the benefit of increased future cash flows associated with growth of the businesses since their acquisition in 2014. We further corroborated our evaluation with a market capitalization analysis.
For the reporting unit evaluated, the estimated fair value exceeded its carrying amount and thus no impairment of goodwil
l gwas transmission system to provide incremental firm transportation capacity from Pennsylvania to the Rockaway Delivery Lateral transfer point anrecognized. For purposes of this measurement, the book basis of the reporting unit was reduced by the associated deferred tax liabilities. The fair value exceeded the Ncarrows meter station in Richmond County, New York. We plan to place the project into service during the fourth quarter of 2017, assuming timely receipt of all necessary regulatory approvals, and it is expected to increase capacity by 115 Mdth/d.
Redwater Expansion As part of a long-term agreement to provide gas processing services to a second bitumen upgrader in Canadas oil sands near Fort McMurray, Alberta, we are increasing the capacity of the Redwater facilities where NGL/olefins mixtures will be fractionated into an ethane/ethylene mix, propane, polymer grade propylene, normal butane, an alkylation feed and condensate. This capacity increase is expected to be placed into service during the fourth quarter of 2015.
38
ying value by approximately 20 percent.
Judgments and assumptions are inherent in our estimates of future cash flows, discount rates, and market measures utilized. The use of alternate judgments and assumptions could result in a different calculation of fair value, which could ultimately result in the recognition of an impairment charge in the consolidated financial statements.
We will complete our annual assessment of goodwill as of October 1 during the fourth quarter. This review will consider all goodwill, including $693 million of additional goodwill within Williams Partners.
Equity-method Investments In performing the interim assessment of goodwill as previously discussed, we observed that the fair value estimates of certain equity-method investments were below their associated carrying amounts. As a result, we recognized other-
45

Managements Discussion and Analysis (Continued)
Williams NGL& Petchem Services Canadian PDH Facility We are planning to build a PDH facility in Alberta that will significantly increase production of polymer-grade propylene. Start-up for the PDH facility is expected to occthan-temporary impairment charges of $458 million and $3 million related to our equity-method investments in the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, respectively. The historical carrying value of these investments was initially recorded based on estimated fair value dur ing the second half of 2019. The new PDH facility is expected to produce approxthird quarter of 2014 in conjunction with the ACMP Acquisition.
We attribute the declines in fair value pr
imaterily 1.1 billion pounds annually, significantly increasing Williams production of polymer-grade propylene currently at 180 million pounds annually. Canadian NGL Infrastructure Expansion As part of a long-term agreement to provide gas processing to a second bitumen upgrader in Canadas oil sands near Fort McMurray, Alberta, we are building a new liquids extraction plant and an interconnection with the Boreal Pipeline, owned by our Williams Partners segment. The interconnection will enable transportation of the NGL/olefins mixture on the Boreal pipeline from the new liquids extraction plant to the Redwater facilities, owned by our Williams Partners segment. We plan to place the new liquids extraction plant and interconnection with Boreal into service during the fourth quarter of 2015, and expect initial NGL/olefins recoveries of approximately 12 Mbbls/d. To mitigate ethane price risk associated with our processing services, we have a long-term agreement for ethane sales to a third-party customer. Gulf Coast NGL and Olefin Infrastructure Expansion In November 2012, we acquired 10 liquids pipelines in the Gulf Coast region.The acquired pipelines will be combined with an organic build-out of several projects to expand our petrochemical services in that region.The projects include the construction and commissioning of pipeline systems capable of transporting various purity natural gas liquids and olefins products in the Gulf Coast region. The Texas Belle pipeline started providing isobutane service in the first quarter of 2015 and is expected to be available for natural gasoline service in the first quarter of 2016. Additional projects under development and/ or constructioto the previously described increase in discount rates. For the Delaware basin gas gathering system and certain of the Appalachia Midstream Investments, discounts rates utilized were 11.8 percent and 8.8 percent, respectively. We estimate that an overall increase in the discount rates utilized of 50 basis points would have resulted in additional impairment charges of approximately $75 million.
Judgments and assumptions are inherent in our estimates of future cash flows, discount rates, and market measures utilized. 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.
At September 30, 2015, our Consolidated Balance Sheet includes approximately $8.2 billion of investments that are accounted for under the equity-method of accounting. We evaluate these investments for impairment when events or changes in circumstances indicate, in our managements judgment, that the carrying value of such investments may have experienced an other-than-temporary decline in value. We continue to monitor our equity-method investments for any indications that the carrying value may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, we compare our estimate of fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred. We generally estimate the fair value of our investments using an income approach where significant judgments and assumptions include expected future cash flows and the appropriate discount rate. In some cases, we may utilize a form of market approach to estimate the fair value of our investments.
If the estimated fair value is less than the carrying value and we consider the decline in value to be other-than-temporary, the excess of the carrying value over the fair value is recognized in the consolidated financial statements as an impairment charge. Events or changes in circumstances that may be indicative of an other-than-temporary decline in value will vary by investment, but may include:


Lower than expected cash distributions from investees;


Significant asset impairments or operating losses recognized by investees;


Significant delays in or lack of producer development or significant declines in producer volumes i
n mare expected to be placed into service in 2016 and 2017.
39
kets served by investees;


Significant delays in or failure to complete significant growth projects of investees.
46

Managements 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
sixnine months ended JuneSeptember30, 2015 , compared to the three and sixnine months ended JuneSeptember3,21 h eut foeain ysgetaedsusdi ute ealfloigti osldtdoeve icsin



Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
$Change*
%Change*
2015
2014
$Change*
%Change*

(Millions)
(Millions)

Revenues:

Service revenues
$
1,24139
$
825
+416
1,127
+112

+
510 %
$
2,4383,677
$
1,644
+794
2,771
+906

+
4833
%

Product sales
5
98
853
-255
60
942
-382

-
3041
%
1,11677
12,78325
-
6661,048
-3
78
%

Total revenues
1,
83799
1,678
3,555
2,069
5,354

35,42796

Costs and expenses:

Product costs
4
94
724
+230
26
807
+381

+
3247
%
956
1,493
+537
1,382
2,300
+918

+
3640
%

Operating and maintenance expenses
4
37
308
-12
03
412
+
9
-4+2 %
824
606
1,227
1,018

-2
1809
-
3621
%

Depreciation and amortization expenses
4
28
214
-214
32
369
-63

-1
007
%
855
428
1,287
797

-4
2790
-
6100
%

Selling, general, and administrative expenses
17
47
1
36
-38
-28
71
-6
-4

%
370
286
547
457

-
8490
-2
90
%

Net insurance recoveries Geismar Incident
(126
)
(42
)
+84
+200
%
(126
)
(161
)
-35
-22
%

Other (income) expense net
40
27
5
3

-
132
-
4867
%
5762
4
47
-1
35
-3
02
%

Total costs and expenses
1,44
73
1,
367
2,936
2,696
762
4,379
4,458


Operating income (loss)
3
9256
3
11
619
731
07
975
1,038


Equity earnings (losses)
9
3
37
+56
+151
2
66
+26
+39
%
236
55
+181
NM

Gain on remeasurement of equity-method investment
2,522
-2,522
-100
%
2,522
-2,522
-100

%
144
Impairment of equity-method investments
(461
)
-461
NM

(
1461 )
+155-461
NM

Other investing income (loss) net
9
18
-9
-50
11
+7
+64

%
9
32
27
43

-
2316
-
372
%

Interest expense
(2623
)
(
163210
)
-9953
-
6125
%
(776
)
(513
)
(303
)
-210
-69
-263
-51

%

Other income (expense) net
34
4
+30
20
10
+10
+100
%
70
15
+55

NM
50
5
+45
NM

Income (loss) from continuing operations before income taxes
266
207
309
454
(238
)
2,706
71
3,160


Provision (benefit) for income taxes
83
84
+1
(65
)
998
+1,063
NM
48
1,133
+1,085

+
196
%
113
135
+22
+16
%

Income (loss) from continuing operations
183
123
196
319
(173
)
1,708
23
2,027


Income (loss) from discontinued operations
4
-4
-100
%
4
-4
-100
%

Net income (loss)
183
127
196
323
(173
)
1,708
23
2,031


Less: Net income (loss) attributable to noncontrolling interests
69
24
-45
-188
%
(133
)
30
+163
NM

(121
80
+68
+85
%
)
110
+231
NM


Net income (loss) attributable to The Williams Companies, Inc.
$
114(40
)

$
103,678
$
1844 $
2431,921





*
+ = 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.
407
Managements Discussion and Analysis (Continued)
Three months ended
JuneSeptember30, 2015 vs. three months ended JuneSeptember30, 2014 Service revenues increased primarily due to contributions from operations acquired in the ACMP Acquisition in third quarter 2014. Additionallytransportation, production handling, and gathering, processing, and transportation fee revenue all increased fee revenue related to construction projects that have been placed into service, including Gulfstar One in the fourth quarter of 2014, and expansion projects placed in service by Transco in late 2014 and in 2015, and new well connections and the completion of various compression projects in. Revenues from operations associated with the ACMP Acquisition and the Nnortheast. A decrease in Canadian construction management revenues reflecting a shift to internal customer construction projects partially offset these increases. Product sales decreased primarily due to lower marketing sales driven by lower prices across all products, partially offset by higher non-ethane volumes. Equity NGL sales also decreased associated with sharp declines in NGL prices, partially offset by higher NGL volumes. These decreases were partially offset by higher olefin sales associated with the Geismar plant that returned to operations in late March 2015 region also increased due to higher volumes related to new well connects. Product sales decreased due to a decrease in marketing revenues primarily associated with lower prices across all products and lower volumes, as well as a decrease in revenues from our equity NGLs reflecting a decrease in NGL prices. These decreases were partially offset by an increase in olefin sales primarily due to resuming our Geismar operations. Product costs decreased primarily due to lowerdue to a decrease in marketing purchases relassociated towith lower per-unit costs partially offset by higher non-ethane volumes. Nand lower volumes and a decrease in natural gas purchases associated with the production of equity NGLs also decreased primarily relateddue to lower natural gas prices, partially offset by higher volumes. These decreases were partially offset by an increase in olefin feedstock purchases primarily related to the Geismar plant return to operations. Operating and maintenance expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, the return to operations of the Geismar plant, and new projects placed in service, as well as planned maintenance at our Canadian facilities. These increases are partially offset by a decrease in Canadian construction management expenses that reflects a shift to internal customer construction projects. Depreciation and amortization expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition and from. An increase in olefin feedstock purchases primarily due to resuming our Geismar operations partially offset these decreases. Depreciation and amortization expenses increased primarily due to depreciation on new projects placed in service, including Gulfstar One and the Geismar expansion. Selling, general, and administrative expenses increased primarily due to new expenses associated with increased growth in operations acquired in the ACMP Acquisition, including $13 million of merger and transition-related costs recognized in 2015, as well as $718 million of costs associated with exploring potentialour evaluation of strategic alternatives. Net insurance recoveries Geismar Incident changed favorably primarily due to the receipt ofThese increases were partially offset by a $126 million of insurance recoveries in 2015 as compared to the receipt of $50 million of insurance recoveries in 2014. Other (income) expense net within Operating income (loss) changed unfavorably primarily due to $24 million of impairments of certain assets at Williams Partners in 2015 compared to $17 million in 2014decrease in acquisition, merger, and transition expenses associated with the ACMP Acquisition. Other (income) expense net within Operating income (loss) changed unfavorably primarily due to the absence of a 2014 $12 million net gain related to a partial acreage dedication release. Operating income (loss) changed favorably primarily due to increased service revenues at Williams Partners related to construction projects placed in service, higher insurance recoveries related to the Geismar Incident, contributions from the operations acquired in the ACMP Acquisition, and $34 million higher olefin margins primarily due to $50 million ofvolumes related to new well connects from our gathering operations, $58 million higher olefin margins, and $18 million lower acquisition, maergins contributed by our Geismar plant that returned to operations in 2015er, and transition costs related to the merger and integration of ACMP. These increases were partially offset by higher operating, maintenance, and depreciation expenses related to construction projects placed in service and the start-up of the Geismar plant, $56$68 million lower NGL margins driven by lower prices, 2015 costs related to WPZs merger and integration of ACMP, and higher impairments as previously discussed. Equity earnings (losses) changed favorably primarily due to $42 million related to contributions from Appalachia Midstream Investments and UEOM acquired in the ACMP Acquisition and. Equity earnings (losses) changed favorably primarily due to a $258 million increase at Discovery primarily related to the completion of the Keathley Canyon Connector in early 2015. Interest expense increased due to an $86 million increase in Interest incurred primarily due to new debt issuances in 2014 and 2015 and new interest expense associated with debt assumed in conjunction with the ACMP Acquisition, partially offset by the absence of a $9 million ACMP Acquisition-related financing fee incurred in the second quarter of 2014 and lower interest due to 2015 debt retirements. In addition, Interest capitalized decreased $13 million and the absence of our $19 million share of compensation costs triggered by the ACMP Acquisition in July 2014. These favorable changes were partially offset by a $16 million impairment charge in 2015 associated with certain equity-method investments (See Note 4 Investing Activities of Notes to Consolidated Financial Statements). Gain on remeasurement of equity-method investment reflects the 2014 gain recognized as a result of remeasuring to fair value the equity-method investment that we held before we acquired a controlling interest in ACMP. Impairment of equity-method investments reflects a 2015 impairment charge associated with certain equity-method investments (see Note 4 Investing Activities of Notes to Consolidated Financial Statements). Interest expense increased due to a $35 million decrease in Interest capitalized primarily related to construction projects that have been placed into service, partially offset by new capitalized interest associated with assets acquired in the ACMP Acquisition. In addition, Interest incurred increased $18 million primarily due to new debt issuances in 2015, partially offset by lower interest associated with 2015 debt retirements. (See Note 2 Acquisitions and Note 910 Debt and Banking Arrangements of Notes to Consolidated Financial Statements.) Other income (expense) net below Operating income (loss) changed favorably primarily due to a $10 million benefit related to an increase in allowance for equity funds used during construction (AFUDC) associated with an increase in spending on various Transco expansion projects and Constitution.
4
18
Managements Discussion and Analysis (Continued)
Other income (expense) net below Operating income (loss) changed favorably primarily due to a $14 million gain on early debt retirement in April 2015, as well as a $12 million benefit related to an increase in allowance for equity funds used during construction (AFUDC) associated with an increase in spending on various Transco expansion projects and Constitution. Provision (benefit) for income taxes changed favorably primarily due to the absence of a second-quarter 2014 provision associated with a revision of our estimate of the undistributed earnings related to the contribution of certain Canadian operations to WPZ, partially offset by highProvision (benefit) for income taxes changed favorably primarily due to lower pretax income in 2015. See Note 56 Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rates compared to the federal statutory rate for both periods. The increasfavorable change in Net income (loss) attributable to noncontrolling interests related to our investment in WPZ is primarily due to improvedlower operating results at WPZ and higher noncontrolling interest ownership percentages, partially offset by the impact of increased income allocated to the WPZ general partner, held by us, associated with IDRs. In addition, there was an increase related to our investment in Gulfstar One associated with its start up in 2014 and an increase related to our investments in Cardinal and Jackalope due to the consolidation of these entities following the ACMP Acquisition in third quarter 2014. Six months ended Juneincreased income allocated to the WPZ general partner, held by us, associated with IDRs. Nine months ended September30, 2015 vs. sixnine months ended JuneSeptember30, 2014 Service revenues increased primarily due to contributions from operations acquired in additional revenues associated withe ACMP Acquisition operations during third quarter 2014. Additionally, production handling, gathering, processing, and transportation feee first half of 2015, increased revenues all increased related to construction projects that have been placed into service, includingssociated with the start-up of operations at Gulfstar One during the fourth quarter of 2014, expansionand an increase in Transcos natural gas transportation fees due to new projects placed in service by Transco in latein 2014 and in 2015, and new well connec. Revenues from operations associated with the ACMP Acquisitions and the completion of various compression projects in the Northeastnortheast region also increased due to higher volumes related to new well connects. A decrease in Canadian construction management revenues, reflecting a shift to internal customer construction projects, partially offset these increases. Product sales decreased primarily due to lower marketing sales driven bydue to a decrease in marketing revenues primarily associated with lower prices across all products, partially offset by higher non-ethane NGL volumes. Equity NGL sales also decreased associated with a d, and a decrease in revenues from our equity NGLs reflecltine ing lower NGL prices, partially offset by higher NGL volumes. These decreases weare partially offset by an increase in olefin sales primarily due to the resumption ofing our Geismar operations during 2015. Product costs decreased primarily due to lower marketing costs related to lower per-unit costs across all producdue to a decrease in marketing purchases primarily associated with a decrease in per-unit costs, partially offset by higher non-ethane volumes, as well asnd a decrease in natural gas purchases associated with the production of equity NGLs driven by lower per-unit natural gas costs as a result of the significant decline in energy commodity prices during the fourth quarter of 2014primarily due to decreased natural gas prices, partially offset by higher volumes. These decreases weare partially offset by an increase in olefin feedstock purchases primarily related to the Geismar plant return toassociated with resuming our Geismar operations. Operating and maintenance expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition, the return to operations of the Geismar plant in addition to new projects placed in serviincreased growth of operating activity in certain areas, increased maintenance, and planned maintenance at our Canadian facilitiesrepair expenses, and the return to operations of the Geismar plant. These increases are partially offset by a decrease in Canadian construction management expenses that reflect a shift to internal customer construction projects. Depreciation and amortization expenses increased primarily due to new expenses associated with operations acquired in the ACMP Acquisition and from depreciation on new projects placed in service, including Gulfstar One and the Geismar expansion. Selling, general, and administrative expenses increased primarily due to newadministrative expenses associated with operations acquired in the ACMP Acquisition, including $474 million ofhigher ACMP merger and transition-related costs recognized in 2015, as well a, partially offset by the absence of $15 million of acquisition costs incurred in 2014. In addition, 2015 includes $725 million of costs associated with exploring potentialour evaluation of strategic alternatives. These increases are partially offset by the absence of $19 million of project development costs incurred in 2014 related to the Bluegrass Pipeline reflecting 100 percent of such costs. The 50 percent noncontrolling interest share of these costs are presented in Net income attributable to noncontrolling interests. Net insurance recoveries Geismar Incident changed unfavorably primarily due to the receipt of $126 million of insurance recoveries in 2015 as compared to the receipt of $175 million of insurance recoveries in 2014. Other (income) expense net within Operating income changed unfavorably primarily due to $29 million of impairments of certain assets at Williams Partners in 2015 compared to $17 million in 2014, the absence of a $12 million net gain recognized in 2014 related to a partial acreage dedication release, as well as an unfavorable change in the deferral of asset retirement obligation-related depreciation to a regulatory asset. These changes are partially offset by a $12 million benefit related to insurance proceeds received in 2015 related to certain claims from prior years. Operating income (loss) changed unfavorably primarily due to higher depreciation, operating, and maintenance expenses related to construction projects placed in service and the start-up of the Geismar plant, $186 million lower
4
29
Managements Discussion and Analysis (Continued)
Other (income) expense net within Operating income changed unfavorably primarily due to $27 million of impairments of certain assets at Williams Partners in 2015 compared to $17 million in 2014. Operating income (loss) changed unfavorably primarily due to higher operating, maintenance, and depreciation expenses related to construction projects placed in service and the start-up of the Geismar plant, $118 million lower NGL margins driven by lower prices, 2015NGL margins driven by lower prices, lower insurance recoveries related to the Geismar Incident, higher costs related to WPZsthe merger and integration of ACMP, lower insurance recoveries related to the Geismar Incident, lower marketing margins, and higher impairments as previously discussed into WPZ, and 2015 strategic alternative expenses. These decreases were partially offset by increased service revenues at Williams Partners related to construction projects placed in service, contributions from the operations acquired in the ACMP Acquisition, the absence of 2014 Bluegrass project development costs, and $15$73 million higher olefin margins primarily due to $44 million of margins contributed by our Geismar plant that returned to operations in 2015, partially offset by lower olefin margins at our RGP splitter and at our Canadian operaand contributions from the operations acquired in the ACMP Acquisitions. Equity earnings (losses) changed favorably primarily due to the absence of $79 million of equity losses from Bluegrass Pipeline and Moss Lake in 2014 related primarily to the underlying write-off of previously capitalized project development costs. In addition, contributions from Appalachia Midstream Iand due to contributions from investments and UEOM acquired in the ACMP Acquisition increased 2015 equity earnings by $77 million and a $23 million increase at Discovery is primarily related to the completion of the Keathley Canyon Connector in early 2015. These increases are partially offset by the absence of 2014 equity earnings related to our former equity investment in ACMP and our share of impairments recorded by Laurel Mountain in 2015. In addition, equity earnings at Discovery increased $51 million primarily related to the completion of the Keathley Canyon Connector in early 2015. Gain on remeasurement of equity-method investment reflects the 2014 gain recognized as a result of remeasuring to fair value the equity-method investment that we held before we acquired a controlling interest in ACMP. Impairment of equity-method investments reflects a 2015 impairment charge associated with certain equity-method investments (see Note 4 Investing Activities of Notes to Consolidated Financial Statements). Other investing income (loss) net changed unfavorably primarily due to lower interest income associated with a receivable related to the sale of certain former Venezuela assets. Interest expense increased due to a $190208 million increase in Interest incurred primarily due to new debt issuances in 2014 and 2015 and new interest expense associated with debt assumed in conjunction with the ACMP Acquisition. This increase was partially offset by the absence of a $9 million of ACMP Acquisition transaction-related financing fee incurred in the second quarter of 2014 and lower interest due to 2015 debt retirements. In addition, Interest capitalized decreased $2055 million primarily related to construction projects that have been placed into service, partially offset by new capitalized interest attributable to ACMP. Other income (expense) net below Operating income (loss) changed favorably primarily due to a $236 million benefit related to an increase in allowance for equity funds used during construction (AFUDC) associated with an increase in spending on various Transco expansion projects and Constitution, as well as a $14 million gain on early debt retirement in April 2015. Provision (benefit) for income taxes changed favorably primarily due to lower pretax income. See Note 56 Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rates compared to the federal statutory rate for both periods. The decreasfavorable change in Net income (loss) attributable to noncontrolling interests related to our investment in WPZ is primarily due to lower operating results at WPZ, and the impact of increased income allocated to the WPZ general partner, held by us, associated with IDRs, and the impact of increased income allocated to WPZs Class D units, held by us, related to the accelerated amortization of a beneficial conversion feature in advance of the Merger. These are offset with an increase related to our investment in Gulfstar One associated with its start up in 2014, an increase related to our former investment in Bluegrass Pipeline associated with our partners share of 2014 project development costs expensed by Bluegrass Pipeline, and an increase related to our investments in Cardinal and Jackalope due to consolidation of these entities following the ACMP Acquisition in third quarter. These changes are partially offset by an increase related to our investment in Gulfstar One associated with its start up in 2014. Period-Over-Period Operating Results - Segments Beginning in the first quarter of 2015, we evaluate segment operating performance based upon Modified EBITDA . Note 134 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
43
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.
50

Managements Discussion and Analysis (Continued)
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. Wlim ates


Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions)

Se
gmentrvice eeus $
1,
830232
$
1,
0616 $
3,
541655
$
3,3092,592

Product sales
560
942
1,678
2,725

Segment revenues
1,792
2,008
5,333
5,317


Product costs
(426
)
(807
)
(1,383
)
(2,300
)


SOther segment costs and expenses
(
1,086530
)
(1,124508
)
(
2,1161,689
)
(21,28297
)

Net insurance recoveries Geismar Incident
126
42
126
161

Proportional Modified EBITDA of equity-method investments
18
35
62
319
11
150
504
26
6
Williams Partners Modified EBITDA
$
1,05321
$
596843
$
12,87091
$
1,304
Three months ended June 30, 2015 vs. three months ended June 30, 2014 Modified EBITDA increased primarily due to the acquisition of ACMP during the third quarter of 2014, resuming our Geismar operations, an increase in net insurance recoveries associated with the Geismar Incident, and initiating service of Gulfstar One during fourth quarter 2014. Partially offsetting these increases are decreases in NGL margins as a result of a significant decline in energy commodity prices that began during the fourth quarter of 2014. A more detailed discussion of Segment revenues and Segment costs and expenses follows. The increase in Segment revenues includes:
2,147


A $468 million increase in service revenues primarily due to $352 million additional revenues associated with the ACMP Acquisition during 2014, $66 million in increased revenues associated with the start-up of operations at Gulfstar One during the fourth quarter of 2014, and $31 million in higher fees associated with increased volumes and additional contributions from expanded processing facilities at Williams Partners northeast gathering and processing operations. Additionally, service revenues reflect a $38 million increase in natural gas transportation fees due to new Transco projects placed in service in 2014 and 2015.NGL margin
$
37
$
105
$
118
$
304


Olefin margin
85
27
155
82

A $65 million increase in olefin sales primarily due to resuming our Geismar operations. Marketing margin
7
(4
)
13
13
Three months ended September30, 2015 vs. three months ended September30, 2014 Modified EBITDA increased primarily due to new revenue related to construction projects placed in service including Gulfstar One during fourth quarter 2014, resuming our Geismar operations, and increased gathering volumes related to new well connects in addition to contributions related to the completion of the Keathley Canyon Connector at Discovery. Partially offsetting these increases are decreases in NGL margins as a result of a significant decline in energy commodity prices that began during the fourth quarter of 2014. The increase in Service revenues is primarily due to $62 million of new fees associated with the start-up of Gulfstar One operations during the fourth quarter of 2014, and a $51 million increase in natural gas transportation fees due to new Transco projects placed in service in 2014 and 2015. Additionally, gathering fees increased $37 million primarily due to increased volumes related to new well connects. The decrease in Product sales includes:



A $
245390 million decrease in marketing revenues primarily associated with lower prices across all products, partially offset by higher and lower ethane and crude oue mr hnofe nmreigprhss.

A $7793 million decrease in revenues from our equity NGLs reflecting a decrease of $89 million due to lower NGL prices, partially offset by a $12 million increase$94 million associated with highlower NGL volumes. The decrease in Segment costs and expenses includes:prices.


A $
249101 million deincrease in marketing purchasolefin sales primarily due to a decrease in per-unit costs, partially offset by higher volumes (substantially offset in marketing revenues).resuming our Geismar operations. The decrease in Product costs includes:


A $
2401 million decrease in the costs associated with the production of equity NGLs primarily due to decreased natural gas pricmarketing purchases primarily due to lower per-unit costs and lower volumes (substantially offset in marketing revenues).

A $
1425 million gain associated with early retirement of certain debtdecrease in natural gas purchases associated with the production of equity NGLs primarily due to lower natural gas prices.

A $
1243 million benefit related to an increase in AFUDC relatincrease in olefin feed sto an increase in spending on various Transco expansion projects and Constituck purchases primarily due to resuming our Geismar operations.
4451
Managements Discussion and Analysis (Continued)
The increase in Other segment costs and expenses includes:


A $
17638 million increase in operating costs primarily due to new expenses associated with operations acquired in the ACMP Acquisition, additional costs associated with resuming our Geismar operations and increased maintenance and repairincreased growth of operating activity in certain areas and higher repair and maintenance xess


A $
326 million increase in olefin fether costs that include the absence of a $12 million net gain recognized in 2014 relateds tock purchases primarily due to resuming our Geismar operation a partial acreage dedication release, offset by a $12 million benefit related to insurance proceeds received in 2015 related to certain claims from prior years


A $
128 million indecrease in SG&A primarily due to additional expenses associated with operations acquired in the ACMP Acquisitionadministrative expenses primarily due to $20 million lower acquisition, merger, and transition costs associated with the ACMP Acquisition and Merger, partially offset by increases associated with growth of operating activity in certain areas.

A
n increase in other costs including $24 million of impairments of certain assets in 2015 compared to $17 million in 2014 $10 million benefit related to a favorable change in AFUDC related to higher spending on various Transco expansion projects and Constitution. The increase in Proportional Modified EBITDA of equity-method investments is primarily due to investments acquired in the ACMP Acquisition and highera $35 million increase from Discovery earningsprimarily associated with increased fehigher fee revenues attributable to the completion of the Keathley Canyon Connector in the first quarter of 2015. Six months ended JuneAdditionally, Caiman II increased $7 million resulting from assets placed into service in 2014 and 2015. These increases are partially offset by a $13 million decrease at Appalachian Midstream Investments primarily related to our share of impairments in 2015 (see Note 4 Investing Activities of Notes to Consolidated Financial Statements). Nine months ended September30, 2015 vs. sixnine months ended JuneSeptember30, 2014 Modified EBITDA increased primarily due to the acquisition of ACMP during the third quarter of 2014, initiating service of Gulfstar One during the fourth quarter 2014 and increased fee revenue associated with contributions from new and expanded facilities, including Gulfstar One during the fourth quarter 2014, in addition to resuming our Geismar operations and contributions related to the completion of the Keathley Canyon Connector at Discovery. Partially offsetting these increases to mModified EBITDA is the reduction ofa decrease in NGL margins as a result of a significant decline in energy commodity prices beginning in the fourth quarter of 2014 and lower insurance recoveries related to the Geismar Incident and a de. The increase in NGL margins as a result of a significant declService revenues is primarily due to $666 million additional revenues associated with ACMP operations during the first half of 2015, $183 million ine in energy commodity prices beginncreased revenues associated with the start-up of operations at Gulfstar One during in the fourth quarter of 2014. A more detailed discussion of Segment revenues and Segment costs and expenses follows, and a $109 million increase in Transcos natural gas transportation fees due to new projects placed in service in 2014 and 2015. Additionally, service revenues reflect higher fees associated with increased volumes and additional contributions from expanded gathering operations, primarily at our operations in the Northeast. The indecrease in Segment revenuProduct sale nlds


A
n $897931 million indecrease in servicemarketing revenues primarily due to $666 million additional revenues associated with the ACMP Acquisition during 2014, $122 million in increased revenues associated with the start-up of operations at Gulfstar One during the fourth quarter of 2014, and $73 million in higher fees associated with increased volumes and additional contributions from expanded processing facilities at Williams Partners northeast gathering and processing operations. Additionally, service revenues reflect a $58 million increase in natural gas transportation fees due to new Transco projects placed in service in 2014 and 2015associated with lower prices across all products, partially offset by higher non-ethane volumes (offset in marketing purchases).

A $
58260 million indecrease in olefin sales primarily due to resuming our Geismar operations during 2015revenues from our equity NGLs reflecting a decrease of $303 million due to lower NGL prices, partially offset by a $43 million increase associated with higher NGL volumes.

A $
1538 million decrease in marketing revenues primarily associated with lower prices across all products, partially offset by higher volumes (substantially offset in marketing purchases)revenues associated with various other products.

A $1
6759 million deincrease in revenues from our equity NGLs reflecting a decrease of $206 million due to lower NGL prices, partially offset by a $39 million increase associated with higher NGL voolefin sales primarily due to resuming our Geismar operations during 2015. The decrease in Product costs inclumdes.:


A
n $9318 million decrease in revenues associated with various other products. The decrease in Segment costs and expenses includes:marketing purchases primarily due to a decrease in per-unit costs, partially offset by higher non-ethane volumes (offset in marketing revenues).
52
Managements Discussion and Analysis (Continued)



A $
5274 million decrease in marketing purchases primarily due to a decrease in per-unit costs, partially offset by higher volumes (more than offset in marketing revenuthe natural gas purchases associated with the production of equity NGLs reflecting a decrease of $99 million due to lower natural gas prices, partially offset by a $25 increase associated with higher volumes).

A
n $486 million deincrease in the costs associated with the production of equity NGLs primarily due to decreased natural gas pricolefin feedstock purchases primarily associated with resuming our Geismar operations. The increase in Other segment costs and expenses includes.:


A $
26343 million benefit related to an increase in AFUDC related to an increase in spending on various Transco expansion projects and Constitution.
45
Managements Discussion and Analysis (Continued)
increase in operating costs primarily due to new expenses associated with operations acquired in the ACMP Acquisition, increased growth of operating activity in certain areas, and increased maintenance and repair expenses in addition to increased expenses associated with the return to operation of the Geismar plant .


A
n $814 million gain associated with early retirement of certain debtincrease in administrative expenses primarily associated with operations acquired in the ACMP Acquisition, including $27 million higher merger and transition-related costs, partially offset by the absence of $15 million of acquisition-related costs incurred in 2014.

A
n $30618 million increase in operating costs primarily due to new expenses associated with operations acquired in the ACMP Acquisition, resuming operations at our Geismar facility and increased maintenance and repair expensether costs including $29 million of impairments of certain assets in 2015 compared to $17 million in 2014, the absence of a $12 million net gain recognized in 2014 related to a partial acreage dedication release and an unfavorable change in the deferral of asset retirement obligation-related depreciation to a regulatory asset. These increases are partially offset by a $12 million benefit related to insurance proceeds received in 2015 related to certain claims from prior years


A $
914 million increase in SG&A primarily due to additional expenses associated with operations acquired in the ACMP Acquisition, including $32 milliongain associated with early retirement of mcerger and transition-related costs recognizedtain debt n21.

A $
436 million increase in olefin feedstock purchases associated with resuming our Geismar operations.benefit related to an increase in AFUDC due to higher spending on various Transco expansion projects and Constitution. The decrease in Net insurance recoveries - Geismar Incident is primarily due to the 2015 receipt of $126 million of insurance proceeds compared to $175 million received in 2014, partially offset by the absence of covered insurable expenses in excess of our retentions (deductibles) related to the Geismar Incident in 2015 compared to $14 million in 2014. The increase in Proportional Modified EBITDA of equity-method investments is primarily due to a $172 million contribution during the first half of 2015 from investments acquired in the ACMP Acquisition and a $69 million increase from Discovery associated with higher fee revenues attributable to the completion of the Keathley Canyon Connector in the first quarter of 2015. Additionally, Caiman II increased $14 million resulting from assets placed into service in 2014 and 2015, partially offset by the absence of business interruption insurance proceeds received in the prior year, and OPPL increased $13 million due to higher transportation volumes. These increases are partially offset by a $13 million third-quarter decrease at Appalachia Midstream Investments as previously discussed, as well as a $12 million decrease at Aux Sable, which includes lower NGL margins, and a $10 million decrease at Laurel Mountain primarily due to our share of impairments and lower gathering fees due to lower gathering rates indexed to natural gas prices, partially offset by higher volumes and an increase in our ownership percentage compared to the prior year.
53
Managements Discussion and Analysis (Continued)
Williams NGL& Petchem Services



An increase in other costs including $27 million of impairments of certain assets in 2015 compared to $17 million in 2014. The increase in Proportional Modified EBITDA of equity-method investments is primarily due to investments acquired in the ACMP Acquisition and higher Discovery earnings associated with increased fees attributable to the completion of the Keathley Canyon Connector in the first quarter of 2015. Additionally, Caiman II reflects higher earnings of $8 million due to the return to service of a plant that was damaged for a period in 2014 and the results of assets placed into service in 2014 and 2015. Partially offsetting these increases were $14 million lower earnings at Laurel Mountain resulting primarily from $9 million of impairments, and lower gathering fees resulting from lower gathering rates indexed to natural gas prices. Williams NGL& Petchem Services



Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions)

Segment revenues
$
1
$
$
12
$

Segment costs and expenses
(4(6
)
(65
)
(915
)
(2934
)

Proportional Modified EBITDA of equity-method investments
(2
)
1
(7
98
)

Williams NGL & Petchem Services Modified EBITDA
$
(35
)
$
(84
)
$
(813
)
$
(1
0812
)
ThreNine months ended JuneSeptember30, 2015 vs. threnine months ended JuneSeptember30, 2014 The favorable change in Modified EBITDA is due primarily to the absence of equity losses from Bluegrass Pipeline and Moss Lake as well as costs incurred during the second quarter of 2014 related to the development of the Bluegrass Pipeline. Six months ended June30, 2015 vs. six months ended June30, 2014 The favorable change in Modified EBITDA is due primarily to the absence of equity losses fromour share of the write-off of previously capitalized project development costs at Bluegrass Pipeline and Moss Lake as well as costs incurred during the first quarter ofin 2014 relateding to the development of the Bluegrass Pipeline. Segment costs and expenses decreased primarily due to the absence of $19 million of project development costs during the first quarter ofincurred in 2014 relateding to the Bluegrass Pipeline and higher development costs related to other projects. The favorable change in Proportional Modified EBITDA of equity-method investments is due to the absence of our share of the write-off of previously capitalized project development costs at Bluegrass Pipeline and Moss Lake during the first quarter of 2014.
46
Managements Discussion and Analysis (Continued)
incurred in 2014. te



Three Months Ended
JuneSeptember 30,
SixNine Months Ended
JuneSeptember 0

2015
2014
2015
2014

(Millions)

Segment revenuesOther Modified EBITDA
$
47
$
66
$
73
$
125

Segment costs and expenses
(51
(17
)
(59
)
(77
)
(111
)

Proportional Modified EBITDA of equity-method investment
53
104

Other Modified EBITDA
$
(417
)
$
60
$
(4
(21
)
$
1
18
01
Three months ended September30, 2015 vs. three months ended September30, 2014 Modified EBITDA reflects the absence of our share of compensation costs triggered by the ACMP Acquisition of $19 million recognized in July 2014, substantially offset by $18 million of costs incurred in 2015 primarily related to evaluating our strategic alternatives and the Merger Agreement with Energy Transfer. Nine months ended September30, 2015 vs. nine months ended September30, 2014
Modified EBITDA decreased significantly as the results from the businesses acquired in the ACMP Acquisition are presented within Williams Partners for periods subsequent to the July 1, 2014, acquisition. For periods prior to that date, Other includes the proportional Modified EBITDA of $104 million of our former equity-method investment in ACMP. The decrease in Segment revenues and Segment costs and expenses reflect a shift from external service contracts to internal services provided by our Canadian construction management company, partially offset by costs associated with integration and re-alignment of resources with the ACMP transaction, and costs associated with exploring potential strategic alternatives. The three and six months ended June30, 2014 included Proportional Modified EBITDA of equity-method investment related to our investment in ACMP that we accounted for as an equity-method investment for the first half of 2014. (See Note 2 Acquisitions of Notes to Consolidated Financial Statements.)
47
for periods prior to that date, which was partially offset by our share of $19 million of compensation costs triggered by the ACMP Acquisition recognized in July 2014. Modified EBITDA also decreased by $25 million related to costs incurred in 2015 related to evaluating our strategic alternatives and the Merger Agreement with Energy Transfer, as well as $19 million of higher costs associated with integration and re-alignment of resources following the ACMP Acquisition and Merger.
54

Managements Discussion and Analysis (Continued)
Managements Discussion and Analysis of Financial Condition and Liquidity Outlook We seek to manage our businesses with a focus on applying conservative financial policy in order to maintain investment-grade credit metrics. We continue to transition to an overall business mix that is increasingly fee-based. Although our cash flows are impacted by fluctuations in energy commodity prices, that impact is somewhat mitigated by certain of our cash flow streams that are not directly impacted by short-term commodity price movements, including:


Fr eadadcpct eevto rnprainrvne ne ogtr otat;

Fee-based revenues from certain gathering and processing services. However, we are indirectly exposed to longer duration depressed energy commodity prices and the related impact on drilling activities and volumes available for gathering and processing services. W eiv ehv,o aeacs o h iaca eore n iudt eesr ome u eurmnsfrwrigcptl aia n netetepniue,dvdnsaddsrbtos etsriepyet,adtxpyet,wiemitiigasfiin ee flqiiy iudt ae norfrcse eeso ahfo rmoeain n te ore flqiiy eepc ohv ufcetlqiiyt aaeorbsnse n21.Oritra n xenlsucso osldtdlqiiyt udwrigcptlrqieet,cptladivsmn xedtrs etsriepyet,dvdnsaddsrbtos n a amnsicue


Cash and cash equivalents on hand;


Cash generated from operations, including cash distributions from WPZ and our equity-method investees based on our level of ownership and incentive distribution rights;


Cash proceeds from issuances of debt and/or equity securities;


Use of our credit facility. These sources are available to us at either the parent or subsidiary level, as applicable, and are expected to be available to certain of our subsidiaries, particularly equity and debt issuances. WPZ is expected to
be self-fundingfund its cash needs through its cash flows from operations, its credit facilityies n/rcmeca ae rga,adisacs ocptlmres eatcpt u oesgiiatue fcs ob:

Mitnneadepnincptlepniue;

Contributions to our equity-method investees to fund their expansion capital expenditures;


Interest on our long-term debt;


Quarterly dividends to our shareholders. Potential risks associated with our planned levels of liquidity and the planned capital and investment expenditures discussed above include those previously discussed in Company Outlook .
48
55
Managements Discussion and Analysis (Continued)
As of
JuneSeptember30, 2015 , we had a working capital deficit (current liabilities, inclusive of commercial paper outstanding and long-term debt due within one year, in excess of current assets) of $2.342594 billion . Excluding the impact of the $1.743530 billion in commercial paper outstanding, which we consider to be a reduction of WPZs credit facility capacity as noted in the table below, our working capital deficit is $599 m1.064 billion . Our available liquidity to cover this deficit sa olw:


JuneSeptember3,21

Available Liquidity
WPZ
WMB
Total

(Millions)

Cash and cash equivalents
$
18610
$
185
$
204125

Capacity available under our $1.5 billion credit facility (1)
1,1
250
1,1
250

Capacity available to WPZ under its $3.5 billion credit facility less amounts outstanding under its $3 billion commercial paper program (2)
1,
757
1,757
470
1,470

Capacity available to WPZ under its $1 billion short-term credit facility (3)
1,000
1,000


$
1,9432,580
$
1,16840
$
3,111720





(1)
The highest amount outstanding under our credit facility during 2015 was $45
05 million. At JuneSeptember30, 2015 , we were in compliance with the financial covenants associated with this credit facility. See Note 910 etadBnigArneet fNtst osldtdFnnilSaeet o diinlifraino u rdtfclt.

(2)
In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of WPZs credit facility inclusive of any outstanding amounts under its commercial paper program. WPZ has $1.
743530 billion of commercial paper outstanding at JuneSeptember 30, 2015. The highest amount outstanding under WPZs commercial paper program and credit facility during 2015 was $3.1 billion. At JuneSeptember30, 2015 , WPZ was in compliance with the financial covenants associated with this credit facility and the commercial paper program. See Note 910 Debt and Banking Arrangements of Notes to Consolidated Financial Statements for additional information on WPZs credit facility, and WPZs commercial paper program, and termin.


(3)
See Note 10 Debt and Banking Arrangements of Notes to Consolidated Financial Statements for additional inform
ation ofn WPZs short-term credit facility. Acquisition of WPZ Public Units We may issue approximately 275 million entered into August 26, 2015, and WPZs short-term facility terminated March 3, 2015.
On September 24, 2015, WPZ received a special distribution of $396 million from Gulfstream reflecting its proportional
shares of common stock associated with the agreement for the Acquisition of WPZ Public Units. In the event that agreement is terminated undthe proceeds from new debt issued by Gulfstream. The new debt was issued to refinance Gulfstreams current debt maturities and WPZ will contribute its proportional share of amounts necessary to fund those current maturities of $500 million on November 1, 2015, and $300 million on June 1, 2016. WPZ Incentive Distribution Rights Our ownership interest in WPZ includes the right to incentive distributions determined in accordance with WPZs partnership agreement. We have agreed to temporarily waive incentive distributions of $2.403 million per quarter in connection with WPZs acquisition of 13.03 per certain circumstances, we could bnt additional interest in UEOM on June 10, 2015. The waiver will continue through the quarter ending September 30, 2017. We are required to pay a $41028 million termination fee to WPZ, of which we currently own approximately 60 percent, including the interests of the general partner and IDRincentive distribution rights. Such termination fee would beill settled through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $102.5209 million per quarter). See Note 1 General, Description of Business, and Basis of Presentation of Notes to Consolidated Financial Statements for additional information on the Acquisition of WPZ Public Units. Debt Issuances and Retirements On April 15, 2015, WPZ paid $783 million, including a redemption premium, to retire $750 million of 5.875 percent senior notes due 2021. On March 3, 2015, WPZ completed a public offering of $1.25 billion of 3.6 percent senior unsecured notes due 2022, $750 million of 4 percent senior unsecured notes due 2025, and $1 billion of 5.1 percent senior unsecured notes due 2045. WPZ used the net proceeds to repay amounts outstanding under its commercial paper program and credit facility, to fund capital expenditurThe next distribution from WPZ in November 2015 will be reduced by $209 million related to this termination fee (see Note 1 General, Description of Business, and for general partnership purposes. WPZ retired $750 million of 3.8 percent senior unsecured notes that matured on February 15, 2015. Shelf Registrations On May 11, 2015, we filed a shelf registration statement, as a well-known seasoned issuer. The shelf registration statement includes a prospectus describing some of the general terms that may apply to the registered securities and
49
Basis of Presentation of Notes to Consolidated Financial Statements.)
56

Managements Discussion and Analysis (Continued)
the general manner in which they may be offered. This filing allows us or our selling securityholders, who will be named in a prospectus supplement, from time to time to offer to sell debt securities, preferred stock, common stock,Debt Issuances and Retirements On April 15, 2015, WPZ paid $783 million, including a redemption premium, to retire $750 million of 5.875 percent senior notes due 2021. On March 3, 2015, WPZ completed a public offering of $1.25 billion of 3.6 percent senior unsecured notes due 2022, $750 million of 4 puerchase contracts, warrants, or units. Each time we or a selling securityholder sells securities pursuant to such prospectus, we will provide a supplement to the prospectus that contains specific information about the offering and the specific terms of the securities offered. We may sell these securities directly to investors, or through agents, dealers, or underwriters as designated from time to time, or through a combination of these methods, on a continuous or delayed basis. As of June 30, 2015, no securities have been issued under this registration. On February 25, 2015, WPZent senior unsecured notes due 2025, and $1 billion of 5.1 percent senior unsecured notes due 2045. WPZ used the net proceeds to repay amounts outstanding under its commercial paper program and credit facility, to fund capital expenditures, and for general partnership purposes. WPZ retired $750 million of 3.8 percent senior unsecured notes that matured on February 15, 2015. Shelf Registrations On May 11, 2015, we filed a shelf registration statement, as a well-known seasoned issuer. On February 25, 2015, WPZ filed a shelf registration statement, as a well-known seasoned issuer and WPZ also filed a shelf registration statement for the offer and sale from time to time of common units representing limited partner interests in WPZ having an aggregate offering price of up to $1 billion. These sales will be made over a period of time and from time to time in transactions at prices which are market prices prevailing at the time of sale, prices related to market price or at negotiated prices. Such sales will be made pursuant to an equity distribution agreement between WPZ and certain banks who may act as sales agents or purchase for its own accounts as principals. As of JuneSeptember3,21 ocmo nt aebe sududrti eitain itiuin rmEut-ehdIvsesTeognztoa ouet fette nwihw aea qiymto neetgnrlyrqiedsrbto fteraalbecs otermmeso urel ai.I ahcs,aalbecs srdcd npr,b eevsaporaefroeaigterrsetv uiess rdtRtnsOraiiyt orwmnyi matdb u rdtrtnsadtecei aig fWZ h urn aig r sflos



Rating Agency
Outlook
Senior Unsecured Debt Rating
Corporate CreditRating


WMB:
Standard & Poors
Credit WatchStable
BB+
BB+

Moodys Investors Service
Ratings Under Review For Downgrade
Baa3
N/A

Fitch Ratings
Rating Watch PosiNegatv
BBB-
N/A


WPZ:
Standard & Poors
Credit WatchStable
BBB
BBB

Moodys Investors Service
Negative
Baa2
N/A

Fitch Ratings
StablRating Watch Negative BBB
N/A
As previously discussed, on
JuneSeptember 218, 2015, we publicly announcentered into a press release that our Board of Directors has authorized a process to explore a range of strategic alternatives after it had received and subsequently rejected an unsolicited proposal for us to be acquired in an all-equity transactionMerger Agreement with Energy Transfer and certain of its affiliates. Following this announcement, on June 22, 2015, the credit ratings agencies affirmed and/or revised the outlook and ratings as noted in the table above. While Fitch RatingsMoodys Investors Service made no changes to the outlook for either WMB or WPZ on this dateWPZ, the other agencies revised the outlook of both WMB and WPZ noting the uncertainty associated with these events.
Credit rating agencies perform independent analyses when assigning credit ratings. 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 rating might increase our future cost of borrowing and would require us to post additional collateral with third parties, negatively impacting our available liquidity. As of
June30, 2015 , we estimate that a downgrade to a rating below investment grade for us or WPZ could require us to post up to $1.1 million or $232million, respectively, in additional collateral with third parties.
5
07
Managements Discussion and Analysis (Continued)
September30, 2015 , we estimate that a downgrade to a rating below investment grade for us or WPZ could require us to post up to $1.5 million or $271million, respectively, in additional collateral with third parties. CptladIvsmn xedtrsEc forbsnse scptlitnie eurn netett prd rehneeitn prtosadcml ihsft n niomna euain.Tecptlrqieet fteebsnse oss rmrl f


Mitnnecptlepniue,wihaegnrlyntdsrtoay nldn:()aia xedtrsmd orpaeprilyo ul ercae sesi re omiti h xsigoeaigcpct forast n oetn hi sfllvs 2epniue hc r adtr n/resnilt opywt asadrgltosadmiti h eiblt foroeain;ad()eti elcneto xedtrs


Epnincptlepniue,wihaegnrlymr iceinr hnmitnnecptlepniue,icuig 1epniue oaqieadtoa sest rworbsns,t xadadugaepato ieiecpct n ocntutnwpat,pplnsadsoaefclte;ad()elcneto xedtrswihaentcasfe smitnneepniue.Tefloigtbepoie umr nomto eae oorata n xetdcptlepniue,prhsso uiess n otiuin oeut-ehdivsmnsfr21.Icue r rs nrae oorpoet,pat n qimn,icuigcagsrltdt conspybeadacudlaiiis



2015 Estimate
SixNine Months Ended
JuneSeptember 0 05
(Millions)

Maintenance
$
490
$
149261

Expansion
3,785
2,000691

Total
$
4,275
$
2,
149952
See Company Outlook - Expansion Projects for discussions describing the general nature of these expenditures.

ore Ue)o ah


SixNine Months Ended
JuneSeptember 0

2015
2014

(Millions)

Net cash provided (used) by:

Operating activities
$
1,4832,086
$
7591,104

Financing activities
483506
7,
356527

Investing activities
(2,
002707
)
(
7,9369,010
)

Increase (decrease) in cash and cash equivalents
$
(36115
)
$
1(379
) Operating activities The factors that determine operating activities are largely the same as those that affect Net income (loss) , with the exception of noncash expenses such asitems such as Gain on remeasurement of equity-method investment , Impairment of equity-method investments , Depreciation and amortization , and Provision (benefit) for deferred income taxes . Our Net cash provided (used) by operating activities was also impacted by net favorable changes in operating working capital and the inclusionabsence of contributions in 2015 from consolidating the businesses acquired in the ACMP Acquisition.from ACMP for the first six months of 2014.
58
Managements Discussion and Analysis (Continued)
iacn ciiisSgiiattascin nld:

$
942727 million in 2015 and $39 million in 2014 fntpoed rmWZ omrilppr


$226 million in 2014 net paid on WPZs commercial paper;
51
Managements Discussion and Analysis (Continued)


$1.895 billion net received in 2014 from our debt offerings;


$2.992 billion in 2015 and $2.740 ilo n21 e eevdfo Psdb feig;

$1.533 billion paid in 2015 on WPZs debt retirements;


$891.435 mbillion received in 2015 and $30670mlinrcie n21 rmorcei aiiybroig;

$
9151.430 billion paid in 2015 and $350 million paid in 20154 norcei aiiybroig;

$
1.832 b2.457 billion received in 2015 and $829 million received in 20154 rmWZ rdtfclt orwns


$2.
472597 billion paid in 2015 and $513 million paid in 2014 nWZ rdtfclt orwns


$3.378 billion received in 2014 from our equity offering;


$
871.356 mbillion in 2015 and $567986 million in 2014 paid for quarterly dividends on common stock;


$704 million in 2015 and $509 million in 2014 paid for dividends and distributions to noncontrolling interests;


$85 million in 2015 and $260 million in 2014 received in contributions from noncontrolling interests;


$396 million special distribution from Gulfstream in 2015. Investing activities Significant transactions include:


Capital expenditures of $2.425 billion in 2015 and $2.943 billion in 2014;


$112 million paid in 2015 to purchase a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility in the Eagle Ford shale;


$5.958 billion paid, net of cash acquired, in 2014 for the ACMP Acquisition;


$462 million in 2015 and $Purchases of and contributions to our equity-method investments of $5296 million in 2014 paid for dividends and distributions to noncontrolling interests5 and $345 million in 2014;

$57 million in 2015 and $122 million in 2014 received in contributions from noncontrolling interests. Investing activities Significant transactions includeDistributions from unconsolidated affiliates in excess of cumulative earnings of $251 million in 2015 and $165 million in 2014. Off-Balance Sheet Financing Arrangements and Guarantees of Debt or Other Commitments We have various other guarantees and commitments which are disclosed in Note 3 Variable Interest Entities , Note 12 Fair Value Measurements and Guarantees , and Note 13 Contingent Liabilities of Notes to Consolidated Financial Statements. We do not believe these guarantees or the possible fulfillment of them will prevent us from meeting our liquidity needs.
59
Item3 Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our current interest rate risk exposure is related primarily to our debt portfolio and has not materially changed during the first nine months of 2015 . Foreign Currency Risk Our foreign operations, whose functional currency is the local currency, are located in Canada. Net assets of our foreign operations were approximately $1.3 billion at both September30, 2015 and December31, 2014 . These investments have the potential to impact our financial position due to fluctuations in the local currency arising from the process of translating the local functional currency into the U.S. dollar. As an example, a 20 percent change in the functional currency against the U.S. dollar would have changed Total stockholders equity by approximately $172 million at September30, 2015 .
60
Item4 Controls and Procedures Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules13a - 15(e) and 15d - 15(e) of the Securities Exchange Act) (Disclosure Controls) or our internal control over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and conditions warrant. Evaluation of Disclosure Controls and Procedures An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these Disclosure Controls are effective at a reasonable assurance level. Changes in Internal Control Over Financial Reporting There have been no changes during the third quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting. PART II. OTHER INFORMATION Item1. Legal Proceedings Environmental Certain reportable legal proceedings involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment are described below. While it is not possible for us to predict the final outcome of the proceedings which are still pending, we do not anticipate a material effect on our consolidated financial position if we receive an unfavorable outcome in any one or more of such proceedings. In November 2013, we became aware of deficiencies with the air permit for the Ft. Beeler gas processing facility located in West Virginia. We notified the EPA and the West Virginia Department of Environmental Protection and are working to bring the Ft. Beeler facility into full compliance. At September30, 2015 , we have accrued liabilities of $140,000 for potential penalties arising out of the deficiencies. On November 7, 2014, the New Mexico Environment Departments Air Quality Bureau (Bureau) issued a Notice of Violation (NOV) to Williams Four Corners LLC (Williams Four Corners) for the El Cedro Gas Treating Plant alleging a failure by Williams Four Corners to limit emissions to the allowable emission rates in violation of permit requirements, and for the failure to timely file initial and excess emission reports. The NOV followed an April 2014 inspection at
61
the plant. During the third quarter of 2015, Williams Four Corners paid $30,111 to resolve the NOV and was notified by the Bureau on August 17, 2015, that it had satisfied all requirements under the settlement agreement. Other The additional information called for by this item is provided in Note 13 Contingent Liabilities of the Notes to Consolidated Financial Statements included under Part I, Item1. Financial Statements of this report, which information is incorporated by reference into this item. Item 1A. Risk Factors Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014, includes certain risk factors that could materially affect our business, financial condition, or future results. Those Risk Factors have not materially changed, except as set forth below: The pendency of the proposed ETC Merger could adversely affect our business and operations. In connection with the proposed ETC Merger, some of our customers or vendors may delay or defer decisions, which could negatively impact our revenues, earnings, cash flows and expenses, regardless of whether the proposed ETC Merger is completed. Similarly, our current and prospective employees may experience uncertainty about their future roles following the proposed ETC Merger, which may materially adversely affect our ability to attract and retain key personnel during the pendency of the proposed ETC Merger. If we fail to complete the proposed ETC Merger, it may be difficult and expensive to recruit and hire replacements for departed employees. The proposed ETC Merger, its effects and related matters may also distract our employees from day-to-day operations and require substantial commitments of time and resources. In addition, due to operating covenants in the Merger Agreement, we may be unable, during the pendency of the proposed ETC Merger, to pursue certain strategic transactions, undertake certain significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business. There can be no assurance when or even if the proposed ETC Merger will be completed. Completion of the proposed ETC Merger is subject to the satisfaction or waiver of a number of customary closing conditions, including approval of the proposed ETC Merger by our stockholders, receipt of required regulatory approvals in connection with the proposed ETC Merger, including the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and effectiveness of a registration statement on Form S-4 registering the ETC common shares (and attached CCRs) to be issued in connection with the proposed ETC Merger. There can be no assurance that we, ETC, and Energy Transfer will be able to satisfy the closing conditions or that closing conditions beyond their or our control will be satisfied or waived. We and Energy Transfer can mutually agree at any time to terminate the Merger Agreement, even if our stockholders have already voted to approve the Merger Agreement. We and Energy Transfer can also terminate the Merger Agreement under other specified circumstances. If the proposed ETC Merger is not completed, we will be subject to a number of risks, including the following
:

Capital expenditures of $1.654 billion in 2015 and $1.839 billion in 2014Because the current price of shares of our common stock may reflect a market premium based on the assumption that we will complete the proposed ETC Merger, a failure to complete the proposed ETC Merger could result in a decline in the price of shares of our common stock;

$112 million paid to purchase a gathering system comprised of approximately 140 miles of pipeline and a sour gas compression facility in the Eagle Ford shaleIn specified circumstances, we may be required to pay Energy Transfer a termination fee of $1.48 billion;

Purchases of and contributions to our equity-method investments of $483 million in 2015 and $246 million in 2014;We will not realize the benefits expected from being part of a larger combined organization;
62



Cash held for ACMP Acquisition of $5.995 billion in 2014. Off-Balance Sheet Financing Arrangements and Guarantees of Debt or Other Commitments We have various other guarantees and commitments which are disclosed in Note 3 Variable Interest Entities , Note 11 Fair Value Measurements and Guarantees , and Note 12 Contingent Liabilities of Notes to Consolidated Financial Statements. We do not believe these guarantees or the possible fulfillment of them will prevent us from meeting our liquidity needs.
52
Item3 Quantitative and Qualitative Disclosures About Market Risk Interest Rate Risk Our current interest rate risk exposure is related primarily to our debt portfolio and has not materially changed during the first six months of 2015 . Foreign Currency Risk Our foreign operations, whose functional currency is the local currency, are located in Canada. Net assets of our foreign operations were approximately $1.3 billion at both June30, 2015 and December31, 2014 . These investments have the potential to impact our financial position due to fluctuations in the local currency arising from the process of translating the local functional currency into the U.S. dollar. As an example, a 20 percent change in the functional currency against the U.S. dollar would have changed Total stockholders equity by approximately $168 million at June30, 2015 .
53
Item4 Controls and Procedures Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules13a - 15(e) and 15d - 15(e) of the Securities Exchange Act) (Disclosure Controls) or our internal control over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modification
We have incurred and expect to continue incurring a number of non-recurring ETC Merger-related expenses that must be paid even if the proposed ETC Merger is not completed. In addition, if the proposed ETC Merger is not completed, we may experience negative reactions from the financial markets and from our customers and employees. We also could be subject to litigation related to any failure to complete the proposed ETC Merger or to proceedings commenced against us to attempt to force us to perform our obligations under the Merger Agreement. The Merger Agreement contains provisions that could discourage a potential competing acquirer of us or could result in any competing proposal being at a lower price than it might otherwise be. The Merger Agreement contains provisions that, subject to certain exceptions, restrict our ability to solicit, encourage, facilitate or discuss competing third-party proposals to acquire all or a significant part of us. In addition, Energy Transfer will have an opportunity to negotiate with us in response to any competing proposal that may be made before our board of directors ais necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and copermitted to withdraw or qualify its recommendiations warrant. Evaluation of Disclosure Controls and Procedures An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these Disclosure Controls are effective at a reasonable assurance level. Changes in Internal Control Over Financial Reporting There have been no changes during the second quarter of 2015 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting. PART II. OTHER INFORMATION Item1. Legal Proceedings Environmental Certain reportable legal proceedings involving governmental authorities under federal, state and local laws regulating the discharge of materials into the environment are described below. While it is not possible for us to predict the final outcome of the proceedings which are still pending, we do not anticipate a material effect on our consolidated financial position if we receive an unfavorable outcome in any one or more of such proceedings. In November 2013, we became aware of deficiencies with the air permit for the Ft. Beeler gas processing facility located in West Virginia. We notified the EPA and the West Virginia Department of Environmental Protection and are working to bring the Ft. Beeler facility into full compliance. At June30, 2015 , we have accrued liabilities of $220,000 for potential penalties arising out of the deficiencies. On November 7, 2014, the New Mexico Environment Departments Air Quality Bureau (Bureau) issued a Notice of Violation (NOV) to Williams Four Cor. In some circumstances, upon termination of the Merger Agreement, we may be required to pay to Energy Transfer a termination fee of $1.48 billion. These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of us from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher value than the consideration proposed to be received or realized in the proposed ETC Merger, or might result in a potential competing acquirer proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances. The integration of our businerss LLC (Williams) for the El Cedro Gas Treating Plant alleging a failure by Williams to limit emissions to the allowable emission rates in violation of permit requirements, and for the failure to timely file initial and excess emission reports. The NOV followed an April 2014 inspection atfollowing the proposed ETC Merger will involve considerable risks and may not be successful. Achieving the plant. Williams
54
has provided Corrective Action Verification information to the Bureau and has entered into a First Amended Tolling Agreement to allow for additional timeuntil November 30, 2015for the parties to resolve the alleged violations. Other The additional information called for by this item is provided in Note 12 Contingent Liabilities of the Notes to Consolidated Financial Statements included under Part I, Item1. Financial Statements of this report, which information is incorporated by reference into this item. Item 1A. Risk Factors Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2014, includes certain risk factors that could materially affect our business, financial condition, or future results. Those Risk Factors have not materially changed, except as set forth below: Our receipt of the Unsolicited Proposal and review of strategic alternatives may be disruptive to our business. On June 21, 2015, we publicly announced in a press release that we had received the Unsolicited Proposal and rejected it. The Unsolicited Proposal was contingent upon the termination of our pending Acquisition of WPZ Public Units. Our Board of Directors has authorized a process to explore a range of strategic alternatives, which could include, among other things, a merger, a sale of us, or continuing to pursue our existing operating and growth plan. Exploring strategic alternatives may create a significant dist
icipated benefits of the proposed ETC Merger will depend in part upon whether Energy Transfer can integrate our businesses in an effective and efficient manner. If the proposed ETC Merger is consummated, Energy Transfer may not be able to accomplish this integration process successfully. Successfully achieving the benefits of the proposed ETC Merger would depend in part on the integration of assets, operaction for our management team and Board of Directors and require us to expend significant time and resources and incur expenses for advisors. Moreover, the review of strategic alternatives may disrupt our business by causing uncertainty among current and potential employees, suppliers, customers and investors. The selection and execution of a strategic alternative may lead to similar disruptions, and parties advocating for alternatives not selected may solicit support for such other alternatives, causing further disruption. Additionally, certain of our officers are subject to change in control agreements, pursuant to which the officers may be entitled to severance payments and benefits upon a termination of their employment by us without cause or by them for good reason in connection with a change of control of Williams (each as defined in the applicable agreement). The change of control arrangements may not be adequate to allow us to retain critical employees during a time when a change of control is being proposed or is imminent. These disruptions, alone or in combination, could negatively impact our business, financial condition, results of operations and our stock price. The consummation of the Acquisition of WPZ Public Units could be delayed or may fail to occur, and could negatively affect our stock price. Our Board of Directors has authorized a process to explore a range of strategic alternatives, which could include, amos, functions and personnel, the ultimate outcome of Energy Transfers operating strategy applied to our business and the ultimate ability to realize cost savings and synergies following the proposed ETC Merger. Any cost savings and synergies, as well as other revenue enhancement opportunities anticipated from the proposed ETC Merger, may not occur. In addition, there will be integration costs and non-recurring transaction costs associated with the proposed ETC Merger (such as fees paid to legal, financial, accounting and other advisors and other fees paid in connection with the proposed ETC Merger) and achieving other things, a merger, a sale of us, or continuing to pursue our existing operat expected cost savings and growth plan. During the review of strategic alternatives process, we continue to work towards the completion of the Acquisition of WPZ Public Units. The announcement that we received the Unsolicited Proposal may make it more difficult to obtain the approval of our stockholders, which could prevent the consummation of the Acquisition of WPZ Public Units. The consummation of the Acquisition of WPZ Public Units is also subject to the satisfaction or waiver of conditions to clossynergies associated therewith, and such costs may be significant. Stockholder litigation could prevent or delay the closing of the proposed ETC Merger or otherwise negatively impact our business and operations. We may incur additional costs ing contained in the merger agreement, including the approval of onection with the defense or settlement of the currently pending and any future stockholders. The satisfaction of such conditions to closing are not always litigation in connection within the parties control and, in some cases, are dependent on the actions of third parties including the SEC. In addition, the merger agreement provides certain termination rights that, in specified circumstances, give either or both of us and WPZ the ability to terminate the merger agreement. The failure to satisfy or waive a closing condition or the occurrence of an event giving rise to a termination right could delay or prevent the consummation of the Acquisition of WPZ Public Units. If the Acquisition of WPZ Public Units is not consummated, the market price of our common stock could decline. If the merger agreement is terminated under certain specified circumstances, we may be required to pay a termination fee of $410 million to WPZ, which would be settled through a reduction of quarterly incentive distributions we are entitled to receive from WPZ (such reduction not to exceed $102.5 million per quarter).
55
The Unsolicited Proposal is contingent upon the termination of the Acquisition of WPZ Public Units. If the Acquisition of WPZ Public Units is consummated, some third parties could be discouraged from considering or proposing an acquisition of us, including the third party that submitted the Unsolicited Proposal, which may cause the market price of our common stock to decline.
56
roposed ETC Merger. Such litigation may adversely affect our ability to complete the proposed ETC Merger. Such litigation, as well as stockholder litigation relating to our previously proposed acquisition of publicly held WPZ common units representing limited partner interests which was subsequently terminated, could also have an adverse effect on our financial condition and results of operations.
63

Item6.Exhibits



Exhibit No.
Description


Exhibit 2.1
Agreement and Plan of Merger dated as of May 12, 2015, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P., and WPZ GP LLC (filed on May
13, 2015 as Exhibit 2.1 to The Williams Companies, Inc.s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 2.2
Agreement and Plan of Merger dated as of September 28, 2015, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC and Energy Transfer Equity GP, LLC (filed on October1
, 2015 as Exhibit 2.1 to The Williams Companies, Inc.s current report on Form 8-K (File No. 01014 n noprtdhri yrfrne.
Exhibit3.1
Amended and Restated Certificate of Incorporation as supplemented (filed on May 26, 2010, as Exhibit 3.1 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 3.2
By-Laws (filed on August 2
74, 20145, as Exhibit 3.1 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.1
Credit Agreement dated as of August 26, 2015, among Williams Partners L.P., the lenders named therein, and Barclays Bank PLC as Administrative Agent (incorporated by reference to Exhibit 10.1 to Williams Partners L.P.s Current Report on Form 8-K (File No. 001-34831) filed on August 28, 2015).

*#Exhibit 10.2
Form of 2015 Short-Term Non-Equity Incentive Award Agreement among The Williams Companies Inc. and certain employees and officers.

*#Exhibit 10.3
Form of 2015 Non-Equity Incentive Award Agreement among The Williams Companies Inc. and certain employees and officers.

Exhibit 10.4
Termination Agreement and Release, dated as of September 28, 2015, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P. and WPZ GP LLC (incorporated by reference to Exhibit 10.1 to Current Report on Form8-K (File No. 001-04174) of The Williams Companies, Inc. filed with the Securities and Exchange Commission on September28, 2015
)

*xii 2 Computation of Ratio of Earnings to Combined Fixed Charges.

*Exhibit 31.1
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*Exhibit 31.2
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

**Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*xii11IS XBRL Instance Document.

*Exhibit101.SCH
XBRL Taxonomy Extension Schema.

*Exhibit101.CAL
XBRL Taxonomy Extension Calculation Linkbase.
64



Exhibit No.
Description


*Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase.

*Exhibit 101.LAB
XBRL Taxonomy Extension Label Linkbase.

*Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase.



*Filed herewith. **Furnished herewith. #Management contract or compensatory plan or arrangement.


Pursuant to Item 601(b)(2) of Regulation S-K, the registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon request.
657
SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



T HE W ILLIAMS C OMPANIES , I NC .

(Registrant)


/s/ T ED T. T IMMERMANS

Ted T. Timmermans

Vice President, Controller and Chief Accounting Officer (Duly Authorized Officer and Principal Accounting Officer) July30October29,21
EXHIBIT INDEX



Exhibit No.
Description


Ehbt21 Agreement and Plan of Merger dated as of May 12, 2015, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P., and WPZ GP LLC (filed on May13, 2015 as Exhibit 2.1 to The Williams Companies, Inc.s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 2.2
Agreement and Plan of Merger dated as of September 28, 2015, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC and Energy Transfer Equity GP, LLC (filed on October1, 2015 as Exhibit 2.1 to The Williams Companies, Inc.s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit3.1
Amended and Restated Certificate of Incorporation as supplemented (filed on May 26, 2010, as Exhibit 3.1 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 3.2
By-Laws (filed on August 2
74, 20145, as Exhibit 3.1 to The Williams Companies, Inc.s current report on Form8-K (File No. 001-04174) and incorporated herein by reference).

Exhibit 10.1
Credit Agreement dated as of August 26, 2015, among Williams Partners L.P., the lenders named therein, and Barclays Bank PLC as Administrative Agent (incorporated by reference to Exhibit 10.1 to Williams Partners L.P.s Current Report on Form 8-K (File No. 001-34831) filed on August 28, 2015).

*#Exhibit 10.2
Form of 2015 Short-Term Non-Equity Incentive Award Agreement among The Williams Companies Inc. and certain employees and officers.

*#Exhibit 10.3
Form of 2015 Non-Equity Incentive Award Agreement among The Williams Companies Inc. and certain employees and officers.

Exhibit 10.4
Termination Agreement and Release, dated as of September 28, 2015, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P. and WPZ GP LLC (incorporated by reference to Exhibit 10.1 to Current Report on Form8-K (File No. 001-04174) of The Williams Companies, Inc. filed with the Securities and Exchange Commission on September28, 2015
)

*xii 2 Computation of Ratio of Earnings to Combined Fixed Charges.

*Exhibit 31.1
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

*xii 12 Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

**Exhibit 32
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Exhibit101.INS
XBRL Instance Document.

*Exhibit101.SCH
XBRL Taxonomy Extension Schema.

*Exhibit101.CAL
XBRL Taxonomy Extension Calculation Linkbase.



Exhibit No.
Description


*Exhibit 101.DEF
XBRL Taxonomy Extension Definition Linkbase.

*Exhibit 101.LAB
XBRL Taxonomy Extension Label Linkbase.

*Exhibit 101.PRE
XBRL Taxonomy Extension Presentation Linkbase.



*Filed herewith. **Furnished herewith. #Management contract or compensatory plan or arrangement.


Pursuant to Item 601(b)(2) of Regulation S-K, the registrant agrees to furnish supplementally a copy of any omitted exhibit or schedule to the SEC upon request.