UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2008

The Williams Companies, Inc.

(Exact name of registrant as specified in its charter)

Delaware		1-4174		73-0569878
(State or other jurisdiction of incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)
One Williams Center, Tulsa, Oklahoma				74172
(Address of principal executive offices)				(Zip Code)

Registrant’s telephone number, including area code: 918/573-2000

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240-14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02. Results of Operations and Financial Condition.

     On August 7, 2008, The Williams Companies, Inc. (“Williams” or the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2008. A copy of the press release and its accompanying financial highlights and reconciliation schedules are furnished as a part of this current report on Form 8-K as Exhibit 99.1 and is incorporated herein in its entirety by reference.

     The press release and accompanying financial highlights and reconciliation schedules are being furnished pursuant to Item 2.02, Results of Operations and Financial Condition. The information furnished is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing under the Securities Act of 1933, as amended.

Item 9.01. Financial Statements and Exhibits.

	(a)		None
	(b)		None
	(c)		None
	(d)		Exhibits

	Exhibit 99.1		Copy of Williams’ press release dated August 7, 2008, and its accompanying highlights and reconciliation schedules, publicly announcing its second quarter 2008 financial results.

     Pursuant to the requirements of the Securities Exchange Act of 1934, Williams has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

INDEX TO EXHIBITS

EXHIBIT
NUMBER		DESCRIPTION
Exhibit 99.1		Copy of Williams’ press release dated August 7, 2008, and its accompanying highlights and reconciliation schedules, publicly announcing its second quarter 2008 financial results.

NYSE: WMB

Date:                     Aug. 7, 2008

Williams Reports Second-Quarter 2008 Financial Results

	•		Key Measure – Recurring Adjusted EPS – Up 58% in 2Q, 69% Year-to-Date
	•		Net Income is $437 Million for 2Q 2008, $937 Million Year-to-Date
	•		Domestic Natural Gas Production Growth Remains Robust – Up 24% in 2Q
	•		Growth Opportunities Abundant Across All Businesses

Quarterly Summary Financial Information		2Q 2008									2Q 2007
Per share amounts are reported on a fully diluted basis		millions				per share					millions				per share
Income from continuing operations		$	419			$	0.70				$	243			$	0.40
Income from discontinued operations			18				0.03					190				0.31
Net income		$	437			$	0.73				$	433			$	0.71
Recurring income from continuing operations*		$	397			$	0.67				$	221			$	0.36
After-tax mark-to-market adjustments			9				0.01					43				0.07
Recurring income from continuing operations — after mark-to-market adjustments*		$	406			$	0.68				$	264			$	0.43

Year-To-Date Summary Financial Information		YTD 2008									YTD 2007
Per share amounts are reported on a fully diluted basis		millions				per share					millions				per share
Income from continuing operations		$	835			$	1.40				$	413			$	0.68
Income from discontinued operations			102				0.17					154				0.25
Net income		$	937			$	1.57				$	567			$	0.93
Recurring income from continuing operations*		$	740			$	1.24				$	387			$	0.63
After-tax mark-to-market adjustments			7				0.01					67				0.11
Recurring income from continuing operations — after mark-to-market adjustments*		$	747			$	1.25				$	454			$	0.74

          TULSA, Okla. – Williams (NYSE:WMB) announced second-quarter 2008 unaudited net income of $437 million, or $0.73 per share on a diluted basis, compared with net income of $433 million, or $0.71 cents per share on a diluted basis, for second-quarter 2007.

          Year-to-date through June 30, Williams reported net income of $937 million, or $1.57 per share on a diluted basis, compared with net income of $567 million, or $0.93 per share on a diluted basis for the first six months of 2007.

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 1 of 10

          Strong performances in the company’s exploration & production and midstream businesses were the key drivers of the increase in the second-quarter and year-to-date results. Key factors were higher net realized average natural gas prices and strong natural gas production growth, as well as natural gas liquid (NGL) margins remaining at historically high levels. The results also benefited from a gain on the sale of certain international interests.

          Lower income from discontinued operations partially offset these benefits to net income during the second-quarter and year-to-date periods. The lower results from discontinued operations in second-quarter 2008 primarily reflect the absence of income recognized in second-quarter 2007 related to the sale of the company’s former power business.

Recurring Results Adjusted for Effect of Mark-to-Market Accounting

          Recurring income from continuing operations, after adjustments to remove the effect of mark-to-market accounting for certain hedges and other derivatives in Gas Marketing Services, was $406 million, or $0.68 per share for second-quarter 2008. On the same adjusted basis, recurring income from continuing operations was $264 million, or $0.43 per share, for second-quarter 2007.

          For the first half of 2008, recurring income from continuing operations after mark-to-market adjustments was $747 million, or $1.25 per share; compared with $454 million, or $0.74 per share for the first half of 2007.

          The significant increases in the recurring adjusted results reflect strong performances in the company’s natural gas businesses driven by higher net realized average prices on increased production as well as strong NGL margins. Higher operating costs partially offset these benefits.

          A reconciliation of the company’s income from continuing operations to recurring income from continuing operations and mark-to-market adjustments is available at www.williams.com and as an attachment to this news release.

CEO Perspective

          “Natural gas is playing an increasingly vital role in our nation’s energy picture, and Williams operates a portfolio of natural gas assets that are best-in-class,” said Steve Malcolm, chairman, president and chief executive officer. 

          “Our energy-producing businesses enjoy the competitive advantages of scale in established, growing production basins. Our pipelines connect those long-lived producing areas to fast-growing markets along the Eastern Seaboard, in Florida and in the Pacific Northwest.

          “There are abundant growth opportunities across our businesses and we have a solid track record of crisp execution. Our focus continues to be delivering earnings growth and driving long-term value creation,” Malcolm said.

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 2 of 10

Business Segment Performance: Consolidated Segment Profit Up 60% in Second Quarter

          Consolidated results include segment profit for Williams’ businesses – Exploration & Production, Midstream Gas & Liquids, Gas Pipeline and Gas Marketing Services as well as results reported in the Other segment.

Consolidated Segment Profit (Loss)		2Q									YTD
Amounts in millions		2008				2007					2008				2007
Exploration & Production		$	496			$	209				$	926			$	397
Midstream Gas & Liquids			295				251					556				405
Gas Pipeline			179				180					359				330
		$	970			$	640				$	1,841			$	1,132
Gas Marketing Services			(46	)			(63	)				(25	)			(93	)
Other			(1	)			—					—				—
Consolidated Segment Profit		$	923			$	577				$	1,816			$	1,039

Recurring Consolidated Segment Profit (Loss)
After Mark-to-Market Adjustments*		2Q									YTD
Amounts in millions		2008				2007					2008				2007
Exploration & Production		$	471			$	209				$	783			$	397
Midstream Gas & Liquids			293				251					554				397
Gas Pipeline			170				157					350				307
		$	934			$	617				$	1,687			$	1,101
Gas Marketing after MTM Adjustments			(31	)			7					(13	)			15
Other			(1	)			—					—				—
Recurring Consolidated Segment Profit After Mark-to-Market Adjustments		$	902			$	624				$	1,674			$	1,116

          For second-quarter 2008, Williams’ businesses reported consolidated segment profit of $923 million, compared with $577 million for second-quarter 2007. Improved results in Exploration & Production and Midstream drove the 60-percent increase.

          Year-to-date through June 30, Williams’ businesses reported consolidated segment profit of $1.82 billion, compared with $1.04 billion for the same period in 2007. Strong results in Exploration & Production, Midstream and Gas Pipeline drove the significant increase in year-to-date consolidated segment profit. The year-to-date period also benefited from the previously noted gain on the sale of certain international interests.

          On a basis adjusted to remove the effect of nonrecurring items and mark-to-market accounting, Williams’ recurring consolidated segment profit was $902 million in second-quarter 2008, compared with $624 million for second-quarter 2007, an increase of 45 percent.

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 3 of 10

          For the first half of 2008 on the same basis, Williams’ recurring consolidated segment profit was $1.67 billion, compared with $1.12 billion for the first half of 2007.

Exploration & Production: Higher Net Realized Prices, Robust Production Growth Drive Higher Segment Profit

          Exploration & Production includes natural gas production and development in the U.S. Rocky Mountains, San Juan Basin and Mid-Continent, and oil and gas development in South America.

          The business reported segment profit of $496 million for second-quarter 2008, compared with second-quarter 2007 segment profit of $209 million, an increase of 137 percent.

          Year-to-date through June 30, Exploration & Production reported segment profit of $926 million, compared with $397 million for the first six months of 2007.

          Higher net realized average prices and strong growth in domestic natural gas production volumes were the primary drivers of the significant increases in segment profit for both the second-quarter and year-to-date periods. Results for the second-quarter and year-to-date 2008 periods also benefited from pre-tax gains on the sale of certain international interests of $30 million and $148 million, respectively.

          Increased development within the Piceance, Powder River and Fort Worth basins drove the growth in domestic production volumes, as the company surpassed 1.1 billion cubic feet equivalent (Bcfe) per day in domestic production during the second quarter. In the Piceance Basin of western Colorado – the company’s cornerstone for production and reserves growth – average daily production increased 26 percent for the second quarter. In the Powder River Basin in Wyoming, the company’s second-largest production area, average daily production increased 41 percent for the quarter.

Quarterly Average Daily Production		2Q
Amounts in million cubic feet equivalent of natural gas (MMcfe)		2008				2007					Growth rate
Piceance Basin			659				522					26	%
Powder River Basin			234				166					41	%
Other Basins			266				257					4	%
U.S. Interests only			1,110				898					24	%
U.S. & International Interests			1,159				945					23	%

          During second-quarter 2008, Williams’ net realized average price for U.S. production was $8.056 per thousand cubic feet of natural gas equivalent (Mcfe), which was 49 percent higher than the $5.39 per Mcfe realized in second-quarter 2007.

          The benefits of higher net realized average prices and higher production volumes in the second-quarter and year-to-date periods were partially offset by increased depreciation, depletion and amortization, higher operating taxes, and higher lease operating expenses.

          Williams is updating Exploration & Production’s segment profit guidance released on June 25 for 2008 and 2009. Increased expected production levels, including the effects of beginning the development of the

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 4 of 10

company’s recent acquisitions in the Piceance Basin and the Barnett Shale, are driving the updated forecast.

          In 2008, Williams now expects recurring segment profit to range from $1.4 billion to $1.7 billion, updated from the June 25 guidance range of $1.35 billion to $1.7 billion. For 2009, the company now expects a range of $1.275 billion to $1.775 billion, updated from June 25 guidance of $1.250 billion to $1.75 billion.

          The company is also updating its capital expenditure guidance ranges for Exploration & Production for both 2008 and 2009. The increase in capital expenditure guidance for both 2008 and 2009 are due to the previously announced acquisition in the Barnett Shale.

          In 2008, Williams is now forecasting a range of $1.975 billion to $2.175 billion in capital expenditures, up from June 25 guidance of $1.8 billion to $2 billion. For 2009, the company now expects capital expenditures of $1.725 billion to $1.925 billion, up from June 25 guidance of $1.625 billion to $1.825 billion.

Midstream Gas & Liquids: Continued Solid Earnings Growth

          Midstream provides natural gas gathering and processing, NGL fractionation and storage services and olefins production. For second-quarter 2008, the business reported segment profit of $295 million, compared with segment profit of $251 million for second-quarter 2007.

          For the first six months of 2008, Midstream’s segment profit was $556 million, compared with $405 million for the same time period in 2007.

          Midstream’s growth in segment profit during the second quarter is primarily due to greater contribution from the olefins business, higher NGL unit margins and higher fee-based revenues across all regions. The acquisition of an additional interest in the Geismar plant in July 2007 helped drive the greater contribution from the olefins business. Higher operating costs partially offset these benefits.

          Higher NGL margins, associated with favorable market commodity pricing on NGLs, were the primary driver of the segment profit growth in the year-to-date period.

          Williams markets NGLs via equity volumes the company retains as payment-in-kind under certain processing contracts. Midstream’s 2008 NGL equity volumes for both the quarter and year-to-date periods are comparable to the same periods of 2007.

Gas Pipeline: New Transco Rates, Expansion Projects Drive Year-to-Date Segment Profit Growth

          Gas Pipeline, which primarily delivers natural gas to markets along the Eastern Seaboard, in Florida and in the Pacific Northwest, reported second-quarter 2008 segment profit of $179 million, compared with $180 million for second-quarter 2007.

          Year-to-date through June 30, Gas Pipeline reported segment profit of $359 million, compared with

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 5 of 10

$330 million for the same period in 2008.

          On a recurring basis, Gas Pipeline’s second-quarter 2008 segment profit was $170 million, compared with $157 million for second-quarter 2007, an increase of 8 percent.

          Increased revenues from two expansion projects placed into service in fourth-quarter 2007, partially offset by higher costs, contributed to the higher recurring segment profit in the second quarter.

          Also on a recurring basis, Gas Pipeline’s segment profit for the first half of 2008 was $350 million, compared with $307 million for the first half of 2007.

          Increased revenues from new rates on the Transco system and the two expansion projects were the primary drivers of the higher recurring segment profit in the year-to-date period. Higher costs partially offset these benefits.

Gas Marketing Services: Supporting Natural Gas Businesses with Marketing, Risk Management

          Gas Marketing Services is responsible for supporting Williams’ natural gas businesses by providing marketing and risk management services. These services primarily include marketing and hedging the gas produced by Exploration & Production, and procuring fuel and shrink gas and hedging natural gas liquids for Midstream.

          In addition, Gas Marketing manages various natural-gas related contracts, such as transportation, storage, and related hedges, and proprietary trading positions, and provides marketing services to third-parties, such as producers. The segment also manages certain legacy natural gas contracts and positions that previously were reported in the former power business, which have been reduced to a minimal level.

          Gas Marketing reported a second-quarter 2008 segment loss of $46 million, compared with a segment loss of $63 million in second-quarter 2007.

          For the first six months of 2008, Gas Marketing reported a segment loss of $25 million, compared with a segment loss of $93 million for the same period in 2007.

          The reduction in segment loss for both the second-quarter and year-to-date periods was primarily due to reduced mark-to-market losses associated with derivative contracts with a future delivery date that are not accounted for using hedge accounting. The favorable change was largely the result of reduced losses in 2008 from legacy contracts that are no longer outstanding. This benefit was partially offset in both periods by a decrease in accrual gross margin.

          Although not significant for second-quarter or year-to-date 2008 results, the company expects in the future to have some level of mark-to-market volatility in Gas Marketing Services, primarily from natural gas storage and transportation hedging.

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 6 of 10

Gas Marketing Recurring Segment Profit (Loss)
Adjusted for Mark-to-Market Effect*		2Q									YTD
Amounts in millions		2008				2007					2008				2007
Segment loss			($46	)			($63	)				($25	)			($93	)
Nonrecurring adjustments			—				—					—				—
Recurring segment loss			($46	)			($63	)				($25	)			($93	)
Mark-to-market adjustments			15				70					12				108
Recurring segment profit (loss) after MTM adjustments			($31	)		$	7					($13	)		$	15

          Williams is adjusting its guidance for Gas Marketing in 2008 and 2009. The company now expects Gas Marketing’s 2008 recurring segment results, adjusted for the effect of mark-to-market accounting, to range from a loss of $50 million to a loss of $30 million. Previous guidance was a loss of $30 million to breakeven.

          For 2009, Williams’ new guidance for recurring segment results, adjusted for the effect of mark-to-market accounting, is a loss of $20 million to a profit of $20 million. Previous guidance was a loss of $40 million to breakeven.

Segment Profit, Capital Expenditure Guidance Updated

          Guidance for consolidated segment profit includes results for Exploration & Production, Midstream and Gas Pipeline, as well as Gas Marketing and the Other segment. All consolidated segment profit and earnings per share ranges are presented on a recurring basis adjusted for the effect of mark-to-market accounting.

          For 2008, Williams has updated its consolidated segment profit guidance to a range of $3.15 billion to $3.65 billion and earnings per share of $2.35 to $2.80. The previous ranges were $3.1 billion to $3.65 billion in consolidated segment profit and earnings per share of $2.30 to $2.80. The updated range for 2008 reflects the previously referenced update in Exploration & Production.

          For 2009, Williams has updated its consolidated segment profit guidance to a range of $2.925 billion to $3.825 billion and earnings per share of $2.10 to $2.95. The previous ranges were $2.9 billion to $3.8 billion for consolidated segment profit and earnings per share of $2.05 to $2.90. The updated range for 2009 reflects the previously referenced update in Exploration & Production.

          Williams is updating its capital expenditure guidance for 2008 and 2009, reflecting the previously referenced increases in Exploration & Production.

          The new range for 2008 is $3.2 billion to $3.55 billion, up from the previous range of $3.025 billion to $3.375 billion.

          For 2009, the new range is $2.725 billion to $3.125 billion, up from the previous range of $2.625 billion to $3.025 billion.

          As noted in its June 25 guidance update, Williams is now providing capital expenditure expectations for potential future projects it is investigating that are not yet included in capital expenditure guidance. The inclusion

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 7 of 10

of potential future project expectations is designed to provide investors with Williams’ current views on total potential capital in the given year.

          The company has identified $100 million to $300 million in potential future projects for 2008 and $200 million to $500 million in potential future projects for 2009.

Commodity Price, NGL Margin Outlook

          The following chart provides Williams’ outlook for natural gas and crude oil prices as well as expected average NGL margins in 2008 and 2009. The company’s outlook is unchanged from its June 25 guidance.

Un-hedged Commodity
Price Assumptions		2008		2009
Natural Gas:
Basin Prices
Average Rockies		$7.30 - $8.10		$6.60 - $8.10
Average San Juan/Mid-Continent		$7.70 - $9.00		$7.00 - $9.00
NYMEX (reference only)		$9.00 - $10.50		$8.00 - $10.50
Crude Oil: WTI (reference only)		$100 - $120		$80 - $120
Average NGL Margins: ($/gallon)		$0.57 - $0.68		$0.43 - $0.71

Williams Completes Stock Repurchase Program

          In July 2007, Williams announced that its board of directors authorized the repurchase of up to $1 billion of the company’s common stock with no expiration date.

          As of July 16, 2008, the company has completed the program, purchasing approximately 28.8 million shares for approximately $1 billion.

Today’s Analyst Call

          Management will discuss second-quarter 2008 results during a live webcast beginning at 9:30 a.m. EDT today. Participants are encouraged to access the webcast and access slides for viewing, downloading and printing at www.williams.com.

          A limited number of phone lines also will be available at (877) 558-9190. International callers should dial (706) 902-3248. Replays of the second-quarter webcast, in both streaming and downloadable podcast formats, will be available for two weeks at www.williams.com following the event.

Form 10-Q

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 8 of 10

          The company will file its Form 10-Q with the Securities and Exchange Commission today. The document will be available on both the SEC and Williams websites.

About Williams (NYSE: WMB)

Williams, through its subsidiaries, finds, produces, gathers, processes and transports natural gas.  Williams’ operations are concentrated in the Pacific Northwest, Rocky Mountains, Gulf Coast, and Eastern Seaboard. More information is available at http://www.williams.com. Go to http://www.b2i.us/irpass.asp?BzID=630&to=ea&s=0 to join our e-mail list.

Contact:		Jeff Pounds
		Williams (media relations)
		(918) 573-3332
		Travis Campbell
		Williams (investor relations)
		(918) 573-2944
		Richard George
		Williams (investor relations)
		(918) 573-3679
		Sharna Reingold
		Williams (investor relations)
		(918) 573-2078

# # #

Williams’ reports, filings, and other public announcements might contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. You typically can identify forward-looking statements by the use of forward-looking words, such as “anticipate,” believe,” “could,” “continue,” “estimate,” “expect,” “forecast,” “may,” “plan,” “potential,” “project,” “schedule,” “will,” and other similar words. These statements are based on our intentions, beliefs, and assumptions about future events and are subject to risks, uncertainties, and other factors. Actual results could differ materially from those contemplated by the forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such statements, other factors could cause our actual results to differ materially from the results expressed or implied in any forward-looking statements. Those factors include, among others: changes in general economic conditions and changes in the industries in which Williams conducts business; changes in federal or state laws and regulations to which Williams is subject, including tax, environmental and employment laws and regulations; the cost and outcomes of legal and administrative claims proceedings, investigations, or inquiries; the results of financing efforts, including our ability to obtain financing on favorable terms, which can be affected by various factors, including our credit ratings and general economic conditions; the level of creditworthiness of counterparties to our transactions; the amount of collateral required to be posted from time to time in our transactions; the effect of changes in accounting policies; the ability to control costs; the ability of each business unit to successfully implement key systems, such as order entry systems and service delivery systems; the impact of future federal and state regulations of business activities, including allowed rates of return, the pace of deregulation in retail natural gas market, and the resolution of other regulatory matters; changes in environmental and other laws and regulations to which Williams and its subsidiaries are subject or other external factors over which we have no control; changes in foreign economies, currencies, laws and regulations, and political climates, especially in Canada, Argentina, Brazil, and Venezuela, where Williams has direct investments; the timing and extent of changes in commodity prices, interest rates, and foreign currency exchange rates; the weather and other natural phenomena; the ability of Williams to develop or access expanded markets and product offerings as well as their ability to maintain existing markets; the ability of Williams and its subsidiaries to obtain governmental and regulatory approval of various expansion projects; future utilization of pipeline capacity, which can depend on energy prices, competition from other pipelines and alternative fuels, the general level of natural gas and petroleum product demand, decisions by customers not to renew expiring natural gas transportation contracts; the accuracy of estimated hydrocarbon reserves and seismic data; and global and domestic economic repercussions from terrorist activities and the government’s response to such

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 9 of 10

terrorist activities. In light of these risks, uncertainties, and assumptions, the events described in the forward-looking statements might not occur or might occur to a different extent or at a different time than we have described. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In regard to the company’s reserves in Exploration & Production, the SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves. We have used certain terms in this news release, such as “probable” reserves and “possible” reserves and “new opportunities potential” reserves that the SEC’s guidelines strictly prohibit us from including in filings with the SEC. The SEC defines proved reserves as estimated quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known reservoirs under the assumed economic conditions. Probable and possible reserves are estimates of potential reserves that are made using accepted geological and engineering analytical techniques, but which are estimated with reduced levels of certainty than for proved reserves. Possible reserve estimates are less certain than those for probable reserves. New opportunities potential is an estimate of reserves for new areas for which we do not have sufficient information to date to raise the reserves to either the probable category or the possible category. New opportunities potential estimates are even less certain than those for possible reserves.

Reference to “total resource portfolio” includes proved, probable and possible reserves as well as new opportunities potential.

Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the Securities and Exchange Commission on Feb. 26, 2008, and our quarterly reports on Form 10-Q available from our offices or from our website at www.williams.com.

Williams (NYSE: WMB) Second-Quarter 2008 Financial Results — Aug. 7, 2008		Page 10 of 10

Financial Highlights and Operating Statistics

(UNAUDITED)

Final

June 30, 2008

Reconciliation of Income from Continuing Operations to Recurring Earnings
(UNAUDITED)

		2007																				2008
(Dollars in millions, except per-share amounts)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				Year
Income from continuing operations available to common stockholders		$	170			$	243			$	228			$	206			$	847			$	416			$	419			$	835
Income from continuing operations — diluted earnings per common share		$	0.28			$	0.40			$	0.38			$	0.34			$	1.40			$	0.70			$	0.70			$	1.40
Nonrecurring items:
Exploration & Production
Accrual for royalty litigation contingency		$	—			$	—			$	—			$	4			$	4			$	—			$	—			$	—
Gain on sale of Peru interests			—				—				—				—				—				(118	)			(30	)			(148	)
Reserve for receivables from bankrupt counterparty			—				—				—				—				—				—				5				5
Total Exploration & Production nonrecurring items			—				—				—				4				4				(118	)			(25	)			(143	)
Gas Pipeline
Change in estimate related to a regulatory liability — NWP			—				(17	)			—				—				(17	)			—				—				—
Payments received for terminated firm transportation agreement — NWP			—				(6	)			(12	)			—				(18	)			—				—				—
Gain on sale of excess inventory gas — TGPL			—				—				—				—				—				—				(9	)			(9	)
Total Gas Pipeline nonrecurring items			—				(23	)			(12	)			—				(35	)			—				(9	)			(9	)
Midstream Gas & Liquids
Reversal of a maintenance accrual			(8	)			—				—				—				(8	)			—				—				—
Income from a favorable litigation outcome			—				—				—				(12	)			(12	)			—				—				—
Reserve for international receivables			—				—				—				9				9				—				—				—
Impairment of Carbonate Trend pipeline			—				—				—				10				10				—				—				—
Involuntary conversion gain related to Ignacio gas processing plant			—				—				—				—				—				—				(3	)			(3	)
Reserve for receivables from bankrupt counterparty			—				—				—				—				—				—				1				1
Total Midstream Gas & Liquids nonrecurring items			(8	)			—				—				7				(1	)			—				(2	)			(2	)
Gas Marketing Services
Accrual for litigation contingencies			—				—				—				20				20				—				—				—
Total Gas Marketing Services nonrecurring items			—				—				—				20				20				—				—				—
Nonrecurring items included in segment profit (loss)			(8	)			(23	)			(12	)			31				(12	)			(118	)			(36	)			(154	)
Nonrecurring items below segment profit (loss)
Early debt retirement costs (Corporate)			—				—				—				19				19				—				—				—
Interest related to Gulf Liquids litigation contingency ( Interest accrued — Midstream)			1				1				1				—				3				—				—				—
Interest income related to contract termination gain noted above (Investing income — Gas Pipeline — NWP)			—				—				(2	)			—				(2	)			—				—				—
Interest related to royalty litigation contingency noted above (Interest accrued — E&P)			—				—				—				1				1				—				—				—
Rounding			—				1				(1	)			—				—				—				—				—
			1				2				(2	)			20				21				—				—				—
Total nonrecurring items			(7	)			(21	)			(14	)			51				9				(118	)			(36	)			(154	)
Tax effect for above items (1)(2)			(3	)			1				(5	)			13				6				(45	)			(14	)			(59	)
Adjustment for nonrecurring tax-related items(3)			—				—				—				23				23				—				—				—
Recurring income from continuing operations available to common stockholders		$	166			$	221			$	219			$	267			$	873			$	343			$	397			$	740
Recurring diluted earnings per common share		$	0.27			$	0.36			$	0.36			$	0.44			$	1.44			$	0.57			$	0.67			$	1.24
Weighted-average shares — diluted (thousands)			611,470				613,172				610,651				604,243				609,866				598,627				596,187				597,404

Consolidated Statement of Income
(UNAUDITED)

		2007																				2008
(Dollars in millions, except per-share amounts)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				Year
Revenues		$	2,368			$	2,824			$	2,860			$	2,506			$	10,558			$	3,224			$	3,729			$	6,953
Segment costs and expenses:
Costs and operating expenses			1,843				2,180				2,222				1,834				8,079				2,373				2,747				5,120
Selling, general and administrative expenses			102				108				107				154				471				111				131				242
Other (income) expense — net			(18	)			(18	)			(2	)			20				(18	)			(117	)			(35	)			(152	)
Total segment costs and expenses			1,927				2,270				2,327				2,008				8,532				2,367				2,843				5,210
Equity earnings			21				23				52				41				137				36				37				73
Total segment profit			462				577				585				539				2,163				893				923				1,816
Reclass equity earnings			(21	)			(23	)			(52	)			(41	)			(137	)			(36	)			(37	)			(73	)
General corporate expenses			(40	)			(36	)			(40	)			(45	)			(161	)			(42	)			(42	)			(84	)
Operating income			401				518				493				453				1,865				815				844				1,659
Interest accrued			(172	)			(172	)			(171	)			(170	)			(685	)			(165	)			(165	)			(330	)
Interest capitalized			5				7				9				11				32				8				16				24
Investing income			52				66				78				61				257				55				55				110
Early debt retirement costs			—				—				—				(19	)			(19	)			—				—				—
Minority interest in income of consolidated subsidiaries			(14	)			(25	)			(29	)			(22	)			(90	)			(39	)			(63	)			(102	)
Other income (expense) — net			2				2				8				(1	)			11				5				—				5
Income from continuing operations before income taxes			274				396				388				313				1,371				679				687				1,366
Provision for income taxes			104				153				160				107				524				263				268				531
Income from continuing operations			170				243				228				206				847				416				419				835
Income (loss) from discontinued operations			(36	)			190				(30	)			19				143				84				18				102
Net income		$	134			$	433			$	198			$	225			$	990			$	500			$	437			$	937
Diluted earnings (loss) per common share:
Income from continuing operations		$	0.28			$	0.40			$	0.38			$	0.34			$	1.40			$	0.70			$	0.70			$	1.40
Income (loss) from discontinued operations			(0.06	)			0.31				(0.05	)			0.03				0.23				0.14				0.03				0.17
Net income		$	0.22			$	0.71			$	0.33			$	0.37			$	1.63			$	0.84			$	0.73			$	1.57
Weighted-average number of shares used in computation (thousands)			611,470				613,172				610,651				604,243				609,866				598,627				596,187				597,404
Common shares outstanding at end of period (thousands)			598,492				599,781				593,016				586,148				586,148				584,025				579,117				579,117
Market price per common share (end of period)		$	28.46			$	31.62			$	34.06			$	35.78			$	35.78			$	32.98			$	40.31			$	40.31
Common dividends per share		$	0.09			$	0.10			$	0.10			$	0.10			$	0.39			$	0.10			$	0.11			$	0.21

Reconciliation of Segment Profit to Recurring Segment Profit
(UNAUDITED)

		2007																				2008
(Dollars in millions)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				Year
Segment profit (loss):
Exploration & Production		$	188			$	209			$	169			$	190			$	756			$	430			$	496			$	926
Gas Pipeline			150				180				183				160				673				180				179				359
Midstream Gas & Liquids			154				251				300				367				1,072				261				295				556
Gas Marketing Services			(30	)			(63	)			(67	)			(177	)			(337	)			21				(46	)			(25	)
Other			—				—				—				(1	)			(1	)			1				(1	)			—
Total segment profit		$	462			$	577			$	585			$	539			$	2,163			$	893			$	923			$	1,816
Nonrecurring adjustments:
Exploration & Production		$	—			$	—			$	—			$	4			$	4			$	(118	)		$	(25	)		$	(143	)
Gas Pipeline			—				(23	)			(12	)			—				(35	)			—				(9	)			(9	)
Midstream Gas & Liquids			(8	)			—				—				7				(1	)			—				(2	)			(2	)
Gas Marketing Services			—				—				—				20				20				—				—				—
Other			—				—				—				—				—				—				—				—
Total segment nonrecurring adjustments		$	(8	)		$	(23	)		$	(12	)		$	31			$	(12	)		$	(118	)		$	(36	)		$	(154	)
Recurring segment profit (loss):
Exploration & Production		$	188			$	209			$	169			$	194			$	760			$	312			$	471			$	783
Gas Pipeline			150				157				171				160				638				180				170				350
Midstream Gas & Liquids			146				251				300				374				1,071				261				293				554
Gas Marketing Services			(30	)			(63	)			(67	)			(157	)			(317	)			21				(46	)			(25	)
Other			—				—				—				(1	)			(1	)			1				(1	)			—
Total recurring segment profit		$	454			$	554			$	573			$	570			$	2,151			$	775			$	887			$	1,662

Exploration & Production
(UNAUDITED)

		2007																				2008
(Dollars in millions)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				Year
Revenues:
Production		$	413			$	449			$	399			$	464			$	1,725			$	617			$	826			$	1,443
Gas management			55				67				63				87				272				104				133				237
Net nonqualified hedge derivative income (loss)			(2	)			(5	)			8				(17	)			(16	)			(2	)			(14	)			(16	)
International			15				16				16				17				64				17				19				36
Other			2				12				13				21				48				12				12				24
Total revenues			483				539				499				572				2,093				748				976				1,724
Segment costs and expenses:
Depreciation, depletion and amortization (including International)			114				131				139				151				535				166				182				348
Lease and other operating expenses			44				49				54				58				205				60				61				121
Operating taxes			34				35				30				22				121				49				69				118
Exploration expense			7				5				4				4				20				2				1				3
Third party gathering expense			9				7				9				8				33				10				13				23
Selling, general and administrative expenses (including International)			36				32				35				45				148				37				44				81
Gas management expenses			55				67				63				87				272				104				133				237
International (excluding DD&A and SG&A)			4				6				7				7				24				6				10				16
Other (income) expense — net			(3	)			3				(1	)			5				4				(113	)			(27	)			(140	)
Total segment costs and expenses			300				335				340				387				1,362				321				486				807
Equity earnings			5				5				10				5				25				3				6				9
Reported segment profit			188				209				169				190				756				430				496				926
Nonrecurring adjustments			—				—				—				4				4				(118	)			(25	)			(143	)
Recurring segment profit		$	188			$	209			$	169			$	194			$	760			$	312			$	471			$	783
Operating statistics
Domestic:
Total domestic net volumes (Bcfe)			76.1				81.7				85.2				90.1				333.1				92.2				101.0				193.2
Net domestic volumes per day (MMcfe/d)			845				898				926				979				913				1,013				1,110				1,061
Net domestic realized price ($/Mcfe)(1)		$	5.318			$	5.390			$	4.587			$	5.057			$	5.078			$	6.580			$	8.056			$	7.351
Production taxes per Mcfe		$	0.440			$	0.439			$	0.343			$	0.253			$	0.364			$	0.529			$	0.683			$	0.610
Lease and other operating expense per Mcfe		$	0.574			$	0.598			$	0.639			$	0.645			$	0.616			$	0.653			$	0.606			$	0.628