Thu Aug 5, 2004

NEW YORK (Reuters) - Williams Cos. Inc. (WMB.N: Quote, Profile, Research) , the natural gas producer, on Thursday posted a quarterly loss, weighed down by charges from the early retirement of debt.

The Tulsa, Oklahoma, company, which cut its debt by about $1.5 billion in the quarter, also said it set a new tender offer on Thursday for $800 million in debt.

Williams is trying to cut total long-term debt to less than $8 billion by the end of 2005. It ended the quarter with total long-term debt of about $9.8 billion.

Williams hopes to return to it core businesses of natural gas production and pipeline operations after struggling during a downturn in the U.S. power sector in recent years.

Williams posted a second-quarter net loss of $18.2 million, or 3 cents per share, versus net income of $269.7 million, or 46 cents, a year earlier. The most recent quarter included about $97 million in pretax charges for premiums, fees and expenses related to retiring debt early.

The company's key natural gas businesses posted a decline in profit from a year earlier, when results were propped up by a gain on the sale of some exploration and production properties.

The company reported second-quarter income from ongoing operations of 12 cents a share, versus the analysts average estimate of 8 cents per share, according to Reuters Research.

Williams has sold assets to trim debt accumulated during its foray into the merchant electricity business, but has had difficulty liquidating its remaining power assets.

James Elliot, a portfolio manager at Burnham Asset Management, said Williams is "progressing in the right direction -- their earnings are getting stronger, and they're following their game plan."

The company forecast ongoing earnings of 20 cents to 40 cents a share for the full year, up from its previous forecast of 14 cents to 37 cents a share. That compared to the average analyst estimate of 37 cents a share.

Williams also reiterated its plan to generate $1 billion to $1.3 billion in cash flow from operations this year.

Shares of Williams rose 45 cents, or 4 percent, to $12.23 Thursday morning on the New York Stock Exchange. (Additional reporting by Carolyn Koo and Deepa Babington)

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