What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-21 compared with 2023-02-27 · 620 added, 507 removed, 1437 unchanged (44% of the section changed)

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Report of Independent Registered Public Accounting Firm

The Stockholders and the Board of Directors of

To the Stockholders and the Board of Directors of

The Williams Companies, Inc.

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We have audited the accompanying consolidated balance sheet of The Williams Companies, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and the financial statement schedule listed in the index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, based on our audits and the report of other auditors, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of income, comprehensive income (loss), changes in equity and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2023 and 2022, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

We did not audit the 2020 financial statements of Gulfstream Natural Gas System, L.L.C.

(Gulfstream), a limited liability corporation in which the Company has a 50 percent interest.

In the consolidated financial statements, the Company’s investment in Gulfstream was $204 million as of December 31, 2020, and the Company’s equity earnings in the net income of Gulfstream were $77 million in 2020.

Those financial statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Gulfstream for 2020, is based solely on the report of other auditors.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 21, 2024 expressed an unqualified opinion thereon.

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Pension and Other Postretirement Benefit Obligations

Description of the Matter At December 31, 2022, the Company’s aggregate pension and other postretirement benefit obligations were $1,092 million and were exceeded by the fair value of pension and other postretirement plan assets of $1,370 million, resulting in overfunded pension and other postretirement benefit obligations of $278 million.

As explained in Note 7 to the consolidated financial statements, the Company utilized key assumptions to determine the pension and other postretirement benefit obligations.

Auditing the pension and other postretirement benefit obligations is complex and required the involvement of specialists due to the judgmental nature of the actuarial assumptions (e.g., discount rates and cash balance interest crediting rate) used in the measurement process.

These assumptions have a significant effect on the projected benefit obligations.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls relating to the measurement and valuation of the pension and other postretirement benefit obligations, including controls over management’s review of the pension and other postretirement obligations, the significant actuarial assumptions, and the data inputs.

To test the pension and other postretirement benefit obligations, our audit procedures included, among others, evaluating the methodologies used, the significant actuarial assumptions discussed above, and the underlying data used by the Company.

Pension Benefit Obligation

Description of the Matter At December 31, 2023, the Company’s aggregate pension benefit obligation was $1,006 million and was exceeded by the fair value of pension plan assets of $1,167 million, resulting in an overfunded pension benefit obligation of $161 million.

As explained in Note 7 to the consolidated financial statements, the Company utilized key assumptions to determine the pension benefit obligation.

Auditing the pension benefit obligation is complex and required the involvement of specialists due to the judgmental nature of the actuarial assumptions (e.g., discount rates and cash balance interest crediting rate) used in the measurement process.

These assumptions have a significant effect on the projected benefit obligation.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls relating to the measurement and valuation of the pension benefit obligation, including controls over management’s review of the pension benefit obligation, the significant actuarial assumptions and the data inputs.

To test the pension benefit obligation, our audit procedures included, among others, evaluating the methodologies used, the significant actuarial assumptions discussed above, and the underlying data used by the Company.

We compared the actuarial assumptions used by management to historical trends and evaluated the changes in the funded status from prior year.

In addition, we involved our actuarial specialists to assist with our procedures.

For example, we evaluated management’s methodology for determining the discount rates that reflect the maturity and duration of the benefit payments and are used to measure the pension and other postretirement benefit obligations.

As part of this assessment, we independently developed a range of yield curves, we compared the projected cash flows to prior year, and compared the current year benefits paid to the prior year projected cash flows.

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February 21, 2024

Report of Independent Registered Public Accounting Firm

To the Management Committee and Members of Gulfstream Natural Gas System, L.L.C.:

Opinion on the Financial Statements

We have audited the statements of earnings, comprehensive income, changes in members’ equity and cash flows of Gulfstream Natural Gas System, L.L.C.

(the “Company”) for the year ended December 31, 2020, including the related notes (collectively referred to as the “financial statements”) (not presented herein).

In our opinion, the financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these financial statements in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

February 27, 2023

We have served as the Company’s auditor since 2018.

The Williams Companies, Inc.

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Product sales 2,779 4,556 4,536

Net gain (loss) on commodity derivatives ( 387 ) ( 148 ) ( 5 )

Net gain (loss) from commodity derivatives

956 ( 387 ) ( 148 )

Total revenues 10,907 10,965 10,627

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Selling, general, and administrative expenses 665 636 558

Impairment of certain assets (Note 15)

Impairment of goodwill (Note 15)

Gain on sale of business (Note 3 )

Other (income) expense – net ( 30 ) 28 16

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Operating income (loss) 4,311 3,018 2,631

Equity earnings (losses) (Note 8)

Impairment of equity-method investments (Note 15)

— — ( 1,046 )

Equity earnings (losses)

Other investing income (loss) – net 108 16 7

Interest incurred ( 1,167 ) ( 1,190 ) ( 1,192 )

Interest capitalized 20 11 20

Interest expense

( 1,236 ) ( 1,147 ) ( 1,179 )

Net gain from Energy Transfer litigation judgment (Note 17)

Other income (expense) – net 99 18 6

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Provision (benefit) for income taxes 1,005 425 511

Income (loss) from continuing operations 3,400 2,117 1,562

Income (loss) from discontinued operations (Note 17)

Net income (loss) 3,303 2,117 1,562

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Net income (loss) available to common stockholders $ 3,176 $ 2,046 $ 1,514

Amounts attributable to The Williams Companies, Inc.

available to common stockholders:

Income (loss) from continuing operations $ 3,273 $ 2,046 $ 1,514

Income (loss) from discontinued operations (Note 17)

Net income (loss) available to common stockholders

$ 3,176 $ 2,046 $ 1,514

Basic earnings (loss) per common share:

Income (loss) from continuing operations $ 2.69 $ 1.68 $ 1.25

Income (loss) from discontinued operations ( .08 ) — —

Net income (loss) available to common stockholders $ 2.61 $ 1.68 $ 1.25

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Diluted earnings (loss) per common share:

Income (loss) from continuing operations $ 2.68 $ 1.67 $ 1.24

Income (loss) from discontinued operations ( .08 ) — —

Net income (loss) available to common stockholders $ 2.60 $ 1.67 $ 1.24

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Other comprehensive income (loss):

Designated cash flow hedging activities:

Designated interest rate cash flow hedging activities:

Net unrealized gain (loss) from derivative instruments, net of taxes of ($ 8 ), $ 1 , and $ 14 in 2023, 2022, and 2021, respectively

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Cash and cash equivalents $ 2,150 $ 152

Trade accounts and other receivables 2,729 1,986

Allowance for doubtful accounts ( 6 ) ( 8 )

Trade accounts and other receivables – net 2,723 1,978

Trade accounts and other receivables (net of allowance of $ 3 at December 31, 2023 and $ 6 at December 31, 2022)

Inventories 274 320

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Accumulated other comprehensive income (loss) — ( 24 )

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

Treasury stock, at cost ( 39 million shares at December 31, 2023 and 35 million shares at December 31, 2022 of common stock)

( 1,180 ) ( 1,050 )

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Stock-based compensation and related common stock issuances, net of tax — 3 93 — — — 96 — 96

Purchase of partial interest in consolidated subsidiary (Note 8)

— — — — — — — ( 3 ) ( 3 )

Contributions from noncontrolling interests — — — — — — — 18 18

Purchases of treasury stock

— — — — — ( 9 ) ( 9 ) — ( 9 )

Other — — — ( 12 ) — — ( 12 ) — ( 12 )

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Contributions from noncontrolling interests — — — — — — — 18 18

Purchase of treasury stock — — — — — ( 9 ) ( 9 ) — ( 9 )

Purchases of treasury stock

— — — — — ( 130 ) ( 130 ) — ( 130 )

Other — — 1 ( 16 ) ( 1 ) — ( 16 ) — ( 16 )

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Distributions from equity-method investees (Note 8) 796 865 757

Impairment of goodwill (Note 15)

Impairment of equity-method investments (Note 15)

Impairment of certain assets (Note 15)

Net unrealized (gain) loss from derivative instruments 249 109 —

Net unrealized (gain) loss from commodity derivative instruments ( 660 ) 249 109

Gain on sale of business (Note 3) ( 129 ) — —

Inventory write-downs 30 161 15

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Accrued and other current liabilities ( 19 ) 209 58

Changes in current and noncurrent derivative assets and liabilities 94 ( 277 ) ( 4 )

Changes in current and noncurrent commodity derivative assets and liabilities 200 94 ( 277 )

Other, including changes in noncurrent assets and liabilities ( 246 ) ( 216 ) 1

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Proceeds from issuance of common stock 6 54 9

Purchases of treasury stock ( 130 ) ( 9 ) —

Common dividends paid ( 2,179 ) ( 2,071 ) ( 1,992 )

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Capital expenditures (1) ( 2,516 ) ( 2,253 ) ( 1,239 )

( 2,253 ) ( 1,239 ) ( 1,239 )

Dispositions - net ( 51 ) ( 30 ) ( 8 )

( 30 ) ( 8 ) ( 36 )

Contributions in aid of construction 12 52 37

Proceeds from sale of business (Note 3) 346 — —

Purchases of businesses, net of cash acquired (Note 3) ( 1,568 ) ( 933 ) ( 151 )

( 933 ) ( 151 ) —

Purchases of and contributions to equity-method investments (Note 8) ( 141 ) ( 166 ) ( 115 )

( 166 ) ( 115 ) ( 325 )

Other – net 39 7 48

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When we refer to our equity investees by name, we are referring exclusively to their businesses and operations.

Share Repurchase Program

In September 2021, our Board of Directors authorized a share repurchase program with a maximum dollar limit of $ 1.5 billion.

Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions, or in such other manner as determined by our management.

Our management will also determine the timing and amount of any repurchases based on market conditions and other factors.

The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or discontinued at any time.

This share repurchase program does not have an expiration date.

There were $ 9 million and no repurchases under the program in 2022 and 2021, respectively.

Description of Business

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Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services, consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources.

All remaining business activities, including our upstream operations, as well as corporate activities are included in Other.

Transmission & Gulf of Mexico is comprised of our interstate natural gas pipelines, Transcontinental Gas Pipe Line Company, LLC (Transco) and Northwest Pipeline LLC (Northwest Pipeline), and their related natural gas storage facilities, as well as natural gas gathering and processing and crude oil production handling and transportation assets in the Gulf Coast region, including a 51 percent interest in Gulfstar One LLC (Gulfstar One) (a consolidated variable interest entity, or VIE), a 50 percent equity-method investment in Gulfstream Natural Gas System, L.L.C.

All remaining business activities, including our upstream operations and corporate activities, are included in Other.

Transmission & Gulf of Mexico is comprised of our interstate natural gas pipelines, Transcontinental Gas Pipe Line Company, LLC (Transco), Northwest Pipeline LLC (Northwest Pipeline), and MountainWest Pipelines Holding Company (MountainWest) (see Note 3 – Acquisitions and Divestitures), and their related natural gas storage facilities, as well as natural gas gathering and processing and crude oil production handling and transportation assets in the Gulf Coast region, including a 51 percent interest in Gulfstar One LLC (Gulfstar One) (a consolidated variable interest entity, or VIE), a 50 percent equity-method investment in Gulfstream Natural Gas System, L.L.C.

(Gulfstream), and a 60 percent equity-method investment in Discovery Producer Services LLC (Discovery).

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(Cardinal) (a consolidated VIE) which operates in Ohio, a 69 percent equity-method investment in Laurel Mountain Midstream, LLC (Laurel Mountain), a 50 percent equity-method investment in Blue Racer Midstream LLC (Blue Racer), and Appalachia Midstream Services, LLC, a wholly owned subsidiary that owns equity-method investments with an approximate average 66 percent interest in multiple gas gathering systems in the Marcellus Shale region (Appalachia Midstream Investments).

This segment also includes our NGL storage facilities, an undivided 50

West is comprised of our gas gathering, processing, and treating operations in the Rocky Mountain region of Colorado and Wyoming, the Barnett Shale region of north-central Texas, the Eagle Ford Shale region of south Texas, the Haynesville Shale region of east Texas and northwest Louisiana, the Mid-Continent region which includes the Anadarko and Permian basins, and the Denver-Julesberg Basin (DJ Basin) of Colorado which includes Rocky Mountain Midstream Holdings LLC (RMM), a former 50 percent equity-method investment in which we acquired the remaining ownership interest in November 2023 (see Note 3 – Acquisitions and Divestitures ) .

This segment also includes our NGL storage facilities, an undivided 50 percent interest in an NGL fractionator near Conway, Kansas, a 50 percent equity-method investment in Overland Pass Pipeline Company LLC (OPPL), a 20 percent equity-method investment in Targa Train 7 LLC (Targa Train 7) (a nonconsolidated VIE), and a 15 percent equity-method investment in Brazos Permian II, LLC (Brazos Permian II) (a nonconsolidated VIE).

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

percent interest in an NGL fractionator near Conway, Kansas, a 50 percent equity-method investment in Overland Pass Pipeline Company LLC (OPPL), a 50 percent equity-method investment in Rocky Mountain Midstream Holdings LLC (RMM), a 20 percent equity-method investment in Targa Train 7 LLC (Targa Train 7) (a nonconsolidated VIE), and a 15 percent equity-method investment in Brazos Permian II, LLC (Brazos Permian II) (a nonconsolidated VIE).

Gas & NGL Marketing Services is comprised of our NGL and natural gas marketing and trading operations, which includes risk management and transactions related to the storage and transportation of natural gas and natural gas liquids (NGLs) on strategically positioned assets.

Gas & NGL Marketing Services is comprised of our natural gas liquid (NGL) and natural gas marketing and trading operations, which includes risk management and transactions related to the storage and transportation of natural gas and NGLs on strategically positioned assets.

Basis of Presentation

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Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to our continuing operations.

Significant risks and uncertainties

We believe that the carrying value of certain of our property, plant, and equipment and intangible assets, notably certain acquired assets accounted for as business combinations between 2012 and 2014, may be in excess of current fair value.

However, the carrying value of these assets, in our judgment, continues to be recoverable.

It is reasonably possible that future strategic decisions, including transactions such as monetizing assets or contributing assets to new ventures with third parties, as well as unfavorable changes in expected producer activities, could impact our assumptions and ultimately result in impairments of these assets.

Such transactions or developments may also indicate that certain of our equity-method investments have experienced other-than-temporary declines in value, which could result in impairment.

Summary of Significant Accounting Policies

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We apply the equity method of accounting to investments over which we exercise significant influence but do not control.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

investment (cash inflows from investing activities) based on the nature of the activities of the equity-method investee that generated the distribution.

Distributions received from equity-method investees are presented in our Consolidated Statement of Cash Flows according to the nature of the distributions approach, which classifies distributions received from equity-method investees as either returns on investment (cash inflows from operating activities) or returns of investment (cash inflows from investing activities) based on the nature of the activities of the equity-method investee that generated the distribution.

Use of estimates

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• Depreciation and/or amortization of long-lived assets, which are comprised of property, plant, and equipment, and intangible assets;

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

• Depreciation and/or amortization of equity-method investment basis differences;

• Asset retirement obligations (AROs);

• Measurement of fair value of derivatives;

• Measurement of fair value of commodity derivatives;

• Pension and postretirement valuation variables;

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Regulatory accounting

Transco and Northwest Pipeline are regulated by the Federal Energy Regulatory Commission (FERC), and their rates are established by the FERC.

Transco, Northwest Pipeline, and MountainWest are regulated by the Federal Energy Regulatory Commission (FERC), and their rates are established by the FERC.

Therefore, we have determined that it is appropriate under Accounting Standards Codification (ASC) Topic 980, “Regulated Operations,” (ASC 980) that certain costs that would otherwise be charged to expense should be deferred as regulatory assets, based on the expected recovery from customers in future rates.

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nonregulated operations are only allowed to capitalize the cost of debt funds related to construction activities, while a component for equity is prohibited.

The components of our regulatory assets and liabilities include the effects of deferred taxes on equity funds used during construction, AROs, shipper imbalance activity, fuel and power cost differentials, depreciation, negative salvage, pension and other postretirement benefits, trackers, customer tax refunds, and rate allowances for deferred income taxes at a historically higher federal income tax rate.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

components of our regulatory assets and liabilities relate to the effects of deferred taxes on equity funds used during construction, AROs, shipper imbalance activity, fuel and power cost differentials, depreciation, negative salvage, pension and other postretirement benefits, customer tax refunds, and rate allowances for deferred income taxes at a historically higher federal income tax rate.

Our current and noncurrent regulatory asset and liability balances at December 31, 2023 and 2022 are as follows:

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thus, in our judgment, the construction activities do not represent an ongoing major and central operation of our gas pipeline businesses and are not within the scope of ASC Topic 606, “Revenue from Contracts with Customers”.

Accordingly, cost reimbursements are treated as a reduction to the cost of the constructed asset, which are referred to as Contributions in aid of construction in our Consolidated Statement of Cash Flows.

Accordingly, cost reimbursements are treated as a reduction to the cost of the constructed asset.

For our midstream businesses, reimbursement and service contracts with customers are viewed together as providing the same commercial objective, as we have the ability to negotiate the mix of consideration between reimbursements and amounts billed over time.

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Revenues from our regulated interstate natural gas pipeline businesses, which are subject to regulation by certain state and federal authorities, including the FERC, include both firm and interruptible transportation and storage contracts.

Firm transportation and storage agreements provide for a daily or monthly reservation charge based on the pipeline or storage capacity reserved, and a commodity charge

Firm transportation and storage agreements provide for a daily or monthly reservation charge based on the pipeline or storage capacity reserved, and a commodity charge based on the volume of natural gas delivered/stored, each at rates specified in our FERC tariffs or based on negotiated contractual rates, with contract terms that are generally long-term in nature.

Most of our long-term contracts contain an evergreen provision, which allows the contracts to be extended for periods primarily up to one year in length an indefinite number of times following the specified contract term and until terminated generally by either us or the customer.

Interruptible transportation and storage agreements provide for a volumetric charge based on actual commodity transportation or storage utilized in the period in which those

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

based on the volume of natural gas delivered/stored, each at rates specified in our FERC tariffs or based on negotiated contractual rates, with contract terms that are generally long-term in nature.

Interruptible transportation and storage agreements provide for a volumetric charge based on actual commodity transportation or storage utilized in the period in which those services are provided, and the contracts are generally limited to one-month periods or less.

services are provided, and the contracts are generally limited to one-month periods or less.

Our performance obligations related to our interstate natural gas pipeline businesses include the following:

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Midstream businesses:

Revenues from our non-regulated gathering, processing, transportation, and storage midstream businesses include contracts for natural gas gathering, processing, treating, compression, transportation, and other related services with contract terms that are generally long-term in nature and may extend up to the production life of the associated reservoir.

Revenues from our nonregulated gathering, processing, transportation, and storage midstream businesses include contracts for natural gas gathering, processing, treating, compression, transportation, and other related services with contract terms that are generally long-term in nature and may extend up to the production life of the associated reservoir.

Additionally, our midstream businesses generate revenues from fees charged for storing customers’ natural gas and NGLs, generally under prepaid contracted storage capacity contracts.

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These services represent an integrated package of services and are considered a single distinct performance obligation for which we recognize revenues as the services are provided to the customer.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

We generally earn a contractually stated fee per unit for the volume of product transported, gathered, processed, or stored.

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however, certain contracts contain variable rates that are subject to change based on commodity prices, levels of throughput, or an annual adjustment based on a formulaic cost of service calculation.

In addition, we have contracts with contractually stated fees that decline over the contract term, such as declines based on the passage of time periods or achievement of cumulative throughput amounts.

In addition, we have contracts with contractually stated fees that decline over the contract term, such as declines based on the passage of time periods or achievement of cumulative

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

throughput amounts.

For all of our contracts, we allocate the transaction price to each performance obligation based on the judgmentally determined relative standalone selling price.

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We purchase natural gas for storage when the current market price paid to buy and transport natural gas plus the cost to store and finance the natural gas is less than an estimated, forward market price that can be received in the future, resulting in positive net product sales.

Commodity-based exchange-traded futures

Commodity-based exchange-traded futures contracts and over-the-counter (OTC) contracts are used to sell natural gas at that future price to substantially protect the natural gas revenues that will ultimately be realized when the stored natural gas is sold.

Additionally, we enter into transactions to secure transportation capacity between delivery points in order to serve our customers and various markets.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

contracts and over-the-counter (OTC) contracts are used to sell natural gas at that future price to substantially protect the natural gas revenues that will ultimately be realized when the stored natural gas is sold.

Additionally, we enter into transactions to secure transportation capacity between delivery points in order to serve our customers and various markets.

The physical purchase, transportation, storage, and sale of natural gas are accounted for on a weighted-average cost or accrual basis, as appropriate, unlike the fair value basis utilized for the derivatives used to mitigate the natural gas price risk associated with the storage and transportation portfolio.

The physical purchase, transportation, storage, and sale of natural gas are accounted for on a weighted-average cost or accrual basis, as appropriate, unlike the fair value basis utilized for the commodity derivatives used to mitigate the natural gas price risk associated with the storage and transportation portfolio.

Monthly demand charges are incurred for the contracted storage and transportation capacity and payments associated with asset management agreements, and these demand charges and payments are recognized in our Consolidated Statement of Income in the period they are incurred.

As we are acting as an agent for our natural gas marketing customers and engage in energy trading activities, our natural gas marketing revenues are presented net of the related costs of those activities.

Prior to the 2022 integration of our legacy gas marketing operations with the acquired Sequent Acquisition operations (see Note 3 – Acquisitions), our legacy gas marketing operations were reported on a gross basis.

Prior to the 2022 integration of our legacy gas marketing operations with the acquired Sequent Acquisition operations (see Note 3 – Acquisitions and Divestitures), our legacy gas marketing operations were reported on a gross basis.

Contract Assets

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As a result, we recognize noncash interest expense based on the effective interest method and revenue (noncash) is recognized when the underlying asset is placed into service utilizing a units of production or straight-line methodology over the life of the corresponding customer contract.

Derivative instruments and hedging activities

Commodity derivative instruments and hedging activities

We are exposed to commodity price risk.

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These instruments consist primarily of swaps, futures, and forward contracts involving short- and long-term purchases and sales of energy commodities.

We purchase natural gas for storage when the current market price paid

Additionally, we enter into transactions to secure transportation capacity between delivery points in order to serve our customers and various markets.

Commodity-based exchange-traded futures contracts and OTC contracts are used to capture the price differential or spread between the locations

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

to buy and transport natural gas plus the cost to store and finance the natural gas is less than an estimated, forward market price that can be received in the future.

Additionally, we enter into transactions to secure transportation capacity between delivery points in order to serve our customers and various markets.

Commodity-based exchange-traded futures contracts and OTC contracts are used to capture the price differential or spread between the locations served by the capacity in order to substantially protect the natural gas revenues that will ultimately be realized when the physical flow of natural gas between receipt and delivery points occurs.

Some commodity-related derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the natural gas marketing operations.

served by the capacity in order to substantially protect the natural gas revenues that will ultimately be realized when the physical flow of natural gas between receipt and delivery points occurs.

Some commodity derivative contracts require physical delivery as opposed to financial settlement, and this type of derivative is both common and prevalent within the natural gas marketing operations.

These contracts generally meet the definition of derivatives and are typically not designated as hedges for accounting purposes.

When a commodity-related derivative contract is settled physically, any cumulative unrealized gain or loss is reversed, and the contract price is recognized in the respective line item in our Consolidated Statement of Income representing the actual price of the underlying goods being delivered.

Unrealized gains and losses on physically settled commodity-related derivative contracts for commodity sales transactions are recognized in Net gain (loss) on commodity derivatives in our Consolidated Statement of Income.

Realized and unrealized gains and losses on non-designated commodity-related derivative contracts for commodity sales transactions that are financially settled are reported in Net gain (loss) on commodity derivatives in our Consolidated Statement of Income.

Net gains and losses on derivatives for shrink gas purchases for processing plants are reported in Net processing commodity expenses in our Consolidated Statement of Income.

When a commodity derivative contract is settled physically, any cumulative unrealized gain or loss is reversed, and the contract price is recognized in the respective line item in our Consolidated Statement of Income representing the actual price of the underlying goods being delivered.

Unrealized gains and losses from physically settled commodity derivative contracts for commodity sales transactions are recognized in Net gain (loss) from commodity derivatives in our Consolidated Statement of Income.

Realized and unrealized gains and losses from non-designated commodity derivative contracts for commodity sales transactions that are financially settled are reported in Net gain (loss) from commodity derivatives in our Consolidated Statement of Income.

Net gains and losses from derivatives for shrink gas purchases for processing plants are reported in Net processing commodity expenses in our Consolidated Statement of Income.

We experience significant earnings volatility from the fair value accounting required for the derivatives used to hedge a portion of the economic value of the underlying transportation and storage portfolio as well as upstream related production.

However, the unrealized fair value measurement gains and losses are generally offset by valuation changes in the economic value of the underlying production or transportation and storage contracts, which is not recognized until the underlying transaction occurs.

(See Note 16 – Derivatives.)

(See Note 16 – Commodity Derivatives.)

We report the fair value of derivatives, except those for which the normal purchases and normal sales exception has been elected, in Derivative assets;

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We also regularly assess whether the hedged forecasted transaction is probable of occurring.

If a derivative ceases to be or is no longer expected to be highly effective, or if we believe

If a derivative ceases to be or is no longer expected to be highly effective, or if we believe the likelihood of occurrence of the hedged forecasted transaction is no longer probable, hedge accounting is discontinued prospectively, and future changes in the fair value of the derivative are recognized currently in Net gain (loss) from commodity derivatives in our Consolidated Statement of Income.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

the likelihood of occurrence of the hedged forecasted transaction is no longer probable, hedge accounting is discontinued prospectively, and future changes in the fair value of the derivative are recognized currently in Net gain (loss) on commodity derivatives in our Consolidated Statement of Income.

For commodity derivatives designated as a cash flow hedge, the change in fair value of the derivative is reported in Accumulated other comprehensive income (loss) (AOCI) in our Consolidated Balance Sheet and reclassified into earnings in the period in which the hedged item affects earnings.

Gains or losses deferred in AOCI associated with terminated derivatives, derivatives that cease to be highly effective hedges, derivatives for which the forecasted transaction is reasonably possible but no longer probable of occurring, and cash flow hedges that have been otherwise discontinued remain in AOCI until the hedged item affects earnings.

If it becomes probable that the forecasted transaction designated as the hedged item in a cash flow hedge will not occur, any gain or loss deferred in AOCI is recognized in Net gain (loss) on commodity derivatives in our Consolidated Statement of Income at that time.

If it becomes probable that the forecasted transaction designated as the hedged item in a cash flow hedge will not occur, any gain or loss deferred in AOCI is recognized in Net gain (loss) from commodity derivatives in our Consolidated Statement of Income at that time.

The change in likelihood of a forecasted transaction is a judgmental decision that includes qualitative assessments made by us.

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Interest is capitalized on borrowed funds and, where regulation by the FERC exists, on internally generated funds (equity AFUDC).

The latter is included in Other income (expense) – net below Operating income (loss) in our Consolidated Statement of Income.

The former is included in Interest expense and the latter is included in Other income (expense) – net below Operating income (loss) in our Consolidated Statement of Income.

The rates used by regulated companies are calculated in accordance with FERC rules.

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Diluted earnings (loss) per common share in our Consolidated Statement of Income primarily includes any dilutive effect of nonvested restricted stock units and stock options.

Diluted earnings (loss) per common share may also include any dilutive effect of our preferred stock.

Diluted earnings (loss) per common share is calculated using the treasury-stock method.

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We monitor the credit quality of our counterparties through review of collection trends, credit ratings, and other analyses, such as bankruptcy monitoring.

Financial assets from our natural gas transmission and storage business, gathering, processing and transportation business, marketing

Financial assets from our natural gas transmission business, natural gas storage business, gathering, processing and transportation business, marketing business, and upstream operations are segregated into separate pools for evaluation due to different counterparty risks inherent in each business.

Changes in counterparty risk factors could lead to reassessment of the composition of our financial assets as separate pools or the need for additional pools.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

business, and upstream operations are segregated into separate pools for evaluation due to different counterparty risks inherent in each business.

Changes in counterparty risk factors could lead to reassessment of the composition of our financial assets as separate pools or the need for additional pools.

We calculate our allowance for credit losses incorporating an aging method.

calculate our allowance for credit losses incorporating an aging method.

In estimating our expected credit losses, we utilize historical loss rates over many years, which include periods of both high and low commodity prices.

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We do not have a material amount of significantly aged receivables at December 31, 2023 and 2022.

Inventories in our Consolidated Balance Sheet primarily consist of natural gas in underground storage, NGLs, and materials and supplies and primarily are stated at the lower of cost or net realizable value.

Inventories in our Consolidated Balance Sheet primarily consist of NGLs, materials and supplies, and natural gas in underground storage and primarily are stated at the lower of cost or net realizable value.

The cost of inventories is primarily determined using the average-cost method.

Any lower of cost or net realizable value adjustments are included in Product sales (for natural gas marketing inventory as these sales are presented net of the related costs) or in Product costs for NGL inventory.

Any lower of cost or net realizable value adjustments are included in Product sales in our Consolidated Statement of Income (for natural gas marketing inventory as these sales are presented net of the related costs) or in Product costs in our Consolidated Statement of Income for NGL inventory.

Property, plant, and equipment

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We base the carrying value of these assets on estimates, assumptions, and judgments relative to capitalized costs, useful lives, and salvage values.

As regulated entities, Northwest Pipeline and Transco provide for depreciation using the straight-line method at FERC-prescribed rates.

As regulated entities, Transco, Northwest Pipeline, and MountainWest provide for depreciation using the straight-line method at FERC-prescribed rates.

Depreciation for nonregulated entities is provided primarily on the straight-line method over estimated useful lives, except for certain offshore facilities that apply an accelerated depreciation method.

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For our upstream properties, the ARO is recorded based on our working interest in the underlying properties.

As regulated entities, Northwest Pipeline and Transco offset the depreciation of the underlying asset that is attributable to capitalized ARO cost to a regulatory asset as we expect to recover these amounts in future rates.

As regulated entities, Transco, Northwest Pipeline, and MountainWest offset the depreciation of the underlying asset that is attributable to capitalized ARO cost to a regulatory asset as we expect to recover these amounts in future rates.

We measure changes in the liability due to passage of time by applying an interest rate to the liability balance.

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Measurements of AROs include, as a component of future expected costs, an estimate of the price that a third party would demand, and could expect to receive, for bearing the uncertainties inherent in the obligations, sometimes referred to as a market-risk premium.

Intangible assets

Our intangible assets included within Intangible assets – net of accumulated amortization in our Consolidated Balance Sheet are primarily related to gas gathering, processing, and fractionation customer relationships.

Our intangible assets are generally amortized on a straight-line basis over the period in which these assets contribute to our cash flows.

Goodwill included within Intangible assets – net of accumulated amortization in our Consolidated Balance Sheet, as of December 31, 2023, represents the excess of the consideration, plus the fair value of any noncontrolling interest or any previously held equity interest, over the fair value of the net assets acquired.

It is not subject to amortization but is evaluated annually as of October 1 for impairment or more frequently if impairment indicators are present that would indicate it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

As part of the evaluation, we compare our estimate of the fair value of the reporting unit with its carrying value, including goodwill.

If the carrying value of the reporting unit exceeds its fair value, an impairment charge is recorded for the difference (not to exceed the carrying value of goodwill).

Judgments and assumptions are inherent in our management’s estimates of fair value.

Other identifiable intangible assets

Our other identifiable intangible assets included within Intangible assets – net of accumulated amortization in our Consolidated Balance Sheet are primarily related to gas gathering, processing, and fractionation customer relationships.

Our other identifiable intangible assets are generally amortized on a straight-line basis over the period in which these assets contribute to our cash flows.

We evaluate these assets for changes in the expected remaining useful lives and would reflect any changes prospectively through amortization over the revised remaining useful life.

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This evaluation is performed at the lowest level for which separately identifiable cash flows exist.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

For assets identified to be disposed of in the future and considered held for sale, we compare the carrying value to the estimated fair value less the cost to sell to determine if recognition of an impairment is required.

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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 our consolidated financial statements as an impairment charge.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Judgment and assumptions are inherent in our estimate of undiscounted future cash flows and an asset’s or investment’s fair value.

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When permitted under our lease agreements, we may sublease certain unused office space for fixed periods that could extend up to the length of the original lease agreement.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Pension and other postretirement benefits

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The year-end discount rates are determined considering a yield curve comprised of high-quality corporate bonds and the timing of the expected benefit cash flows of each plan.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

market projections for the asset classes in which the portfolio is invested, as well as the weighting of each asset class.

The expected long-term rates of return on plan assets are determined by combining a review of the historical returns within the portfolio, the investment strategy included in the plans’ investment policy statement, and capital market projections for the asset classes in which the portfolio is invested, as well as the weighting of each asset class.

Unrecognized actuarial gains and losses are deferred and recorded in AOCI or, for Transco and Northwest Pipeline, as a regulatory asset or liability, until amortized as a component of net periodic benefit cost (credit).

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Proceeds and payments related to borrowings under our revolving credit facility are reflected in the financing activities in our Consolidated Statement of Cash Flows on a gross basis.

Proceeds and payments related to borrowings under our commercial paper program are reflected in the financing activities in our Consolidated Statement of Cash Flows on a net basis, as the outstanding notes generally have maturity dates less than three months from the date of issuance.

Proceeds and payments related to borrowings under our commercial paper program are reflected in the financing activities in our Consolidated

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Statement of Cash Flows on a net basis, as the outstanding notes generally have maturity dates less than three months from the date of issuance.

(See Note 12 – Debt and Banking Arrangements.)

Accounting standards issued but not yet adopted

In November 2023, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which requires disclosure of significant segment expenses and expanded interim disclosures.

This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted.

We do not expect adoption of ASU 2023-07 will have a material impact on our financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes:

Improvements to Income Tax Disclosures , which requires disclose of specific categories in the rate reconciliation and additional information for reconciling items that meet a quantitative threshold.

This ASU is effective for fiscal years beginning after December 15, 2024, and early adoption is permitted.

We do not expect adoption of ASU 2023-09 will have a material impact on our financial statements.

Share Repurchase Program

In September 2021, our Board of Directors authorized a share repurchase program with a maximum dollar limit of $ 1.5 billion.

Repurchases may be made from time to time in the open market, by block purchases, in privately negotiated transactions, or in such other manner as determined by our management.

Our management will also determine the timing and amount of any repurchases based on market conditions and other factors.

The share repurchase program does not obligate us to acquire any particular amount of common stock, and it may be suspended or discontinued at any time.

This share repurchase program does not have an expiration date.

There were $ 130 million, $ 9 million, and no repurchases under the program in 2023, 2022, and 2021, respectively, which are included in our Consolidated Statement of Changes in Equity.

Significant Risks and Uncertaintie s

However, the carrying value of these assets, in our judgment, continues to be recoverable.

Such transactions or developments may also indicate that certain of our equity-method investments have experienced other-than-temporary declines in value, which could result in impairment.

Note 2 – Variable Interest Entities

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As of December 31, 2023, we consolidate the following VIEs:

We own a 65 percent interest in the Northeast JV, a subsidiary that is a VIE due to certain of our voting rights being disproportionate to our obligation to absorb losses and substantially all of the Northeast JV’s activities being

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

performed on our behalf.

We are the primary beneficiary because we have the power to direct the activities that most significantly impact the Northeast JV’s economic performance.

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Future expansion activity is expected to be funded with capital contributions from us and the other equity partner on a proportional basis.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

We own a 51 percent interest in Gulfstar One, a subsidiary that, due to certain risk-sharing provisions in its customer contracts, is a VIE.

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We are the primary beneficiary because we have the power to direct the activities that most significantly impact Cardinal’s economic performance.

Future expansion activity is expected to be funded with capital contributions from us and the other equity partner.

The following table presents amounts included in the Consolidated Balance Sheet that are only for the use or obligation of our consolidated VIEs:

In order to meet contractual gas gathering commitments, we may fund more than our proportional share of future expansion activity, which could ultimately impact relative ownership.

The following table presents amounts included in our Consolidated Balance Sheet that are only for the use or obligation of our consolidated VIEs:

Assets (liabilities):

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Our maximum exposure to loss is limited to the carrying value of our investment.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Brazos Permian II

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Our maximum exposure to loss is limited to the carrying value of our investment.

Note 3 – Acquisitions

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Note 3 – Acquisitions and Divestitures

Gulf Coast Storage Acquisition

On January 3, 2024, we closed on the acquisition of 100 percent of a strategic portfolio of natural gas storage facilities and pipelines, located in Louisiana and Mississippi, from Hartree Partners LP (Gulf Coast Storage Acquisition) for $ 1.95 billion, subject to working capital and post-closing adjustments.

The purpose of this acquisition was to expand our natural gas storage footprint in the Gulf Coast region.

The Gulf Coast Storage Acquisition was funded with cash on hand and $ 100 million of deferred consideration that does not accrue interest and is payable one year from the acquisition date.

Acquisition-related costs for the Gulf Coast Storage Acquisition of $ 1 million are reported within our Transmission & Gulf of Mexico segment and included in Selling, general, and administrative expenses in our Consolidated Statement of Income during 2023.

We plan on accounting for the Gulf Coast Storage Acquisition as a business combination, which requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their acquisition date fair values.

The valuation techniques used consisted of the cost approach for property, plant, and equipment.

The following table presents the preliminary allocation of the acquisition date fair value of the major classes of the assets acquired, which will be included in our Transmission & Gulf of Mexico segment, and liabilities assumed at January 3, 2024.

The allocation is considered preliminary because the valuation work has not been completed due to the ongoing review of the valuation results and validation of significant inputs and assumptions.

Preliminary fair value measurements were made for certain acquired assets and liabilities, primarily property, plant, and equipment;

however, adjustments to those measurements may be made in subsequent periods, up to one year from the acquisition date, as new information related to facts and circumstances as of the acquisition date may be identified.

The fair value of accounts receivable acquired, included in Other current assets in the following table, equals contractual amounts receivable.

Cash and cash equivalents $ 46

Other current assets 18

Property, plant, and equipment – net 2,042

Other noncurrent assets 2

Total assets acquired

Current liabilities $ ( 10 )

Noncurrent liabilities

Total liabilities assumed $ ( 117 )

Net assets acquired $ 1,991

DJ Basin Acquisitions

Cureton Acquisition

On November 30, 2023, we closed on the acquisition of 100 percent of Cureton Front Range, LLC (Cureton Acquisition), whose operations are located in the DJ Basin, for $ 546 million, subject to working capital and post-closing adjustments.

The purpose of this acquisition was to expand our gathering and processing footprint and create operational synergies for our operations in the DJ Basin.

The Cureton Acquisition was funded with cash on hand.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

During the period from the acquisition date of November 30, 2023 to December 31, 2023, the operations acquired in the Cureton Acquisition contributed Revenues of $ 35 million and Modified EBITDA (as defined in Note 18 – Segment Disclosures) of $ 7 million.

Acquisition-related costs for the Cureton Acquisition of $ 6 million are reported within our West segment and included in Selling, general, and administrative expenses in our Consolidated Statement of Income during 2023.

We accounted for the Cureton Acquisition as a business combination.

The valuation techniques used consisted of the cost approach for property, plant, and equipment and the income approach for valuation of other intangible assets.

The following table presents the preliminary allocation of the acquisition date fair value of the major classes of the assets acquired, which are presented in our West segment, and liabilities assumed at November 30, 2023.

The allocation is considered preliminary because the valuation work has not been completed due to the ongoing review of the valuation results and validation of significant inputs and assumptions.

Preliminary fair value measurements were made for certain acquired assets and liabilities, primarily property, plant, and equipment and other intangible assets;

The fair value of accounts receivable acquired, included in Other current assets in the following table, equals contractual amounts receivable.

Cash and cash equivalents $ 2

Other current assets 21

Property, plant, and equipment – net 437

Intangible assets – net of accumulated amortization 117

Other noncurrent assets 4

Total identifiable assets acquired $ 581

Current liabilities $ ( 25 )

Noncurrent liabilities

Total liabilities assumed $ ( 41 )

Net identifiable assets acquired $ 540

Goodwill included in Intangible assets – net of accumulated amortization

Net assets acquired $ 546

Other intangible assets recognized in the Cureton Acquisition are related to contractual customer relationships from gas gathering and processing agreements with our customers.

The basis for determining the value of these intangible assets is estimated future net cash flows to be derived from acquired contractual customer relationships discounted using a risk-adjusted discount rate.

These intangible assets are being amortized on a straight-line basis over an initial period of 20 years which represents the term over which the contractual customer relationships are expected to contribute to our cash flows.

Approximately 24 percent of the expected future revenues from these contractual customer relationships are impacted by our ability and intent to renew or renegotiate existing customer contracts.

We expense costs incurred to renew or extend the terms of our gas gathering contracts with customers.

Based on the estimated future revenues during the current contract periods (as estimated at the time of the acquisition), the weighted-average period prior to the next renewal or extension of the existing contractual customer relationships is approximately 10 years.

See Note 10 – Goodwill and Other Intangible Assets.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

RMM Acquisition

As of December 31, 2022, we owned a 50 percent interest in RMM which we accounted for as an equity-method investment.

On November 30, 2023, we closed on the acquisition of the remaining 50 percent interest in RMM (RMM Acquisition) for $ 704 million.

As a result of acquiring this additional interest, we obtained control of and now consolidate RMM.

The purpose of this acquisition was to expand our gathering and processing footprint and create operational synergies for our operations in the DJ Basin.

Substantially all of the RMM purchase price is not due to the seller until the first quarter of 2025, does not accrue interest until the fourth quarter of 2024, and may be repaid early without penalty.

It was recorded as a deferred consideration obligation at fair value using an income approach, which resulted in a discount to the contractual amount due which will be imputed as interest expense over the term of the obligation.

The obligation is presented within long-term debt owed by our wholly owned subsidiary Williams Rocky Mountain Midstream Holdings LLC.

During the period from the acquisition date of November 30, 2023 to December 31, 2023, RMM contributed Revenues of $ 53 million and Modified EBITDA of $ 12 million.

We accounted for the RMM Acquisition as a business combination.

The book value of our existing equity-method investment prior to the acquisition date of November 30, 2023 was $ 406 million.

We recognized a $ 30 million gain on remeasuring our existing equity-method investment to fair value included in Other investing income (loss) – net in our Consolidated Statement of Income during 2023.

The valuation techniques used consisted of the income approach for our previous equity-method investment in RMM and the valuation of other intangible assets, and the cost approach for property, plant, and equipment.

The net assets acquired primarily reflect the noncash consideration transferred, which includes the fair value of both our previous equity-method investment and the deferred consideration obligation.

The allocation is considered preliminary because the valuation work has not been completed due to the ongoing review of the valuation results and validation of significant inputs and assumptions.

Preliminary fair value measurements were made for certain acquired assets and liabilities, primarily property, plant, and equipment and other intangible assets;

The fair value of accounts receivable acquired, included in Other current assets in the following table, equals contractual amounts receivable.

Cash and cash equivalents $ 28

Other current assets 4

Investments 20

Property, plant, and equipment – net 1,041

Intangible assets – net of accumulated amortization 61

Other noncurrent assets 12

Total identifiable assets acquired $ 1,166

Current liabilities $ ( 44 )

Noncurrent liabilities

Total liabilities assumed $ ( 147 )

Net identifiable assets acquired $ 1,019

Goodwill included in Intangible assets – net of accumulated amortization

Net assets acquired $ 1,076

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Goodwill recognized in the RMM Acquisition relates primarily to enhancing and diversifying our basin positions as well as delivering operational synergies, including increasing volumes on our existing processing facilities and increasing revenues on our NGL transportation, fractionation, and storage assets, and is reported within our West segment.

Substantially all of the goodwill is deductible for tax purposes.

Other intangible assets recognized in the RMM Acquisition are related to contractual customer relationships from gas gathering and processing agreements with our customers.

Approximately 18 percent of the expected future revenues from these contractual customer relationships are impacted by our ability and intent to renew or renegotiate existing customer contracts.

We expense costs incurred to renew or extend the terms of our gas gathering contracts with customers.

See Note 10 – Goodwill and Other Intangible Assets.

MountainWest Acquisition

On February 14, 2023, we closed on the acquisition of 100 percent of MountainWest, which includes FERC-regulated interstate natural gas pipeline systems and natural gas storage capacity (MountainWest Acquisition), for $ 1.08 billion of cash, funded with available sources of short-term liquidity, and retaining $ 430 million outstanding principal amount of MountainWest long-term debt.

For 2023, $ 1.024 billion is presented in Purchases of businesses, net of cash acquired in our Consolidated Statement of Cash Flows reflecting the cash purchase price, reduced for post-closing adjustments and the cash acquired as presented in the purchase price allocation.

The purpose of the MountainWest Acquisition was to expand our existing transmission and storage infrastructure footprint into major markets in Utah, Wyoming, and Colorado.

During the period from the acquisition date of February 14, 2023 to December 31, 2023, the operations acquired in the MountainWest Acquisition contributed Revenues of $ 225 million and Modified EBITDA of $ 122 million, which includes $ 27 million of transition-related costs.

Acquisition-related costs for the MountainWest Acquisition of $ 16 million are reported within our Transmission & Gulf of Mexico segment and included in Selling, general, and administrative expenses in our Consolidated Statement of Income during 2023.

We accounted for the MountainWest Acquisition as a business combination.

The valuation techniques used consisted of the cost approach for nonregulated property, plant, and equipment, as well as the market approach for the assumed long-term debt consistent with the valuation technique discussed in Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk.

MountainWest’s regulated operations are accounted for pursuant to ASC 980.

The fair value of assets and liabilities subject to rate making and cost recovery provisions were determined utilizing the income approach.

MountainWest’s expected return on rate base is consistent with expected returns of similarly situated assets, resulting in carryover basis of these assets and liabilities equaling their fair value.

The following table presents the preliminary allocation of the acquisition date fair value of the major classes of the assets acquired, which are presented in our Transmission & Gulf of Mexico segment, and liabilities assumed at February 14, 2023.

The fair value of accounts receivable acquired equals contractual amounts receivable.

After the March 31, 2023, financial statements were issued, we identified adjustments to the preliminary purchase price allocation, primarily resulting in an increase of $ 19 million in trade accounts and other receivables and decreases of $ 73 million in property, plant, and equipment and $ 60 million in other noncurrent liabilities.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Cash and cash equivalents $ 23

Trade accounts and other receivables 33

Other current assets 26

Investments 20

Property, plant, and equipment – net 1,019

Other noncurrent assets 33

Total identifiable assets acquired $ 1,154

Current liabilities $ ( 47 )

Long-term debt (Note 12)

Other noncurrent liabilities ( 95 )

Total liabilities assumed $ ( 507 )

Net identifiable assets acquired $ 647

Goodwill included in Intangible assets – net of accumulated amortization

Net assets acquired $ 1,047

Goodwill recognized in the MountainWest Acquisition relates primarily to enhancing and diversifying our basin positions and the long-term value associated with rate regulated businesses and is reported within our Transmission & Gulf of Mexico segment.

Substantially all of the goodwill is deductible for tax purposes.

Trace Acquisition

On April 29, 2022, we closed on the acquisition of 100 percent of Gemini Arklatex, LLC through which we acquired the Haynesville Shale region gas gathering and related assets of Trace Midstream (Trace) for $ 972 million of cash funded with cash on hand and proceeds from issuance of commercial paper (Trace Acquisition).

On April 29, 2022, we closed on the acquisition of 100 percent of Gemini Arklatex, LLC through which we acquired the Haynesville Shale region gas gathering and related assets of Trace Midstream for $ 972 million of cash funded with cash on hand and proceeds from issuance of commercial paper (Trace Acquisition).

The purpose of the Trace Acquisition was to expand our footprint into the east Texas area of the Haynesville Shale region, increasing in-basin scale in one of the largest growth basins in the country.

During the period from the acquisition date of April 29, 2022 to December 31, 2022, the operations acquired in the Trace Acquisition contributed Revenues of $ 148 million and Modified EBITDA (as defined in Note 18 – Segment Disclosures) of $ 73 million.

Acquisition-related costs for the Trace Acquisition for the period from the acquisition date of April 29, 2022 to December 31, 2022 of $ 8 million are reported within our West segment and included in Selling, general, and administrative expenses in our Consolidated Statement of Income.

We accounted for the Trace Acquisition as a business combination, which requires, among other things, that identifiable assets acquired and liabilities assumed be recognized at their acquisition date fair values.

The valuation techniques used consisted of the income approach (excess earnings method) for valuation of intangible assets and depreciated replacement costs for property, plant, and equipment.

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 West segment, and liabilities assumed at April 29, 2022.

Acquisition-related costs for the Trace Acquisition of $ 8 million are reported within our West segment and were included in Selling, general, and administrative expenses in our Consolidated Statement of Income during 2022.

We accounted for the Trace Acquisition as a business combination.

The following table presents the allocation of the acquisition date fair value of the major classes of the assets acquired, which are presented in our West segment, and liabilities assumed at April 29, 2022.

The fair value of accounts receivable acquired equals contractual amounts receivable.

The valuation techniques used consisted of the income approach for valuation of intangible assets and the cost approach for property, plant, and equipment.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Cash and cash equivalents $ 39

Trade accounts and other receivables – net 18

Trade accounts and other receivables

Property, plant, and equipment – net 448

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Net assets acquired $ 972

Intangible assets

Intangible assets recognized in the Trace Acquisition are related to contractual customer relationships from gas gathering agreements with our customers.

The basis for determining the value of these intangible assets is estimated future net cash flows to be derived from acquired contractual customer relationships discounted using a risk-adjusted

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

discount rate.

Other intangible assets recognized in the Trace Acquisition are related to contractual customer relationships from gas gathering agreements with our customers.

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See Note 10 – Intangible Assets.

See Note 10 – Goodwill and Other Intangible Assets.

Sequent Acquisition

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The purpose of the Sequent Acquisition was to expand our natural gas marketing activities as well as optimize our pipeline and storage capabilities with expansions into new markets to reach incremental gas-fired power generation, liquified natural gas exports, and future renewable natural gas and other emerging opportunities.

During the period from the acquisition date of July 1, 2021 to December 31, 2021, results for the operations acquired in the Sequent Acquisition included net Product sales of $( 43 ) million (including $ 80 million of purchases from affiliates), Net gain (loss) on commodity derivatives of $( 43 ) million, and unfavorable Modified EBITDA of $ 112 million.

Both the Revenues and Modified EBITDA amounts reflect a net unrealized loss on commodity derivatives in Net gain (loss) on commodity derivatives of $( 109 ) million for the period.

During the period from the acquisition date of July 1, 2021 to December 31, 2021, results for the operations acquired in the Sequent Acquisition included net Product sales of $( 43 ) million (including $ 80 million of purchases from affiliates), Net gain (loss) from commodity derivatives of $( 43 ) million, and unfavorable Modified EBITDA of $ 112 million.

Both the Revenues and Modified EBITDA amounts reflect a net unrealized loss from commodity derivatives in Net gain (loss) from commodity derivatives of $( 109 ) million for the period.

Acquisition-related costs for the Sequent Acquisition for the period from the acquisition date of July 1, 2021 to December 31, 2021 of $ 5 million are reported within our Gas & NGL Marketing Services segment and were included in Selling, general, and administrative expenses in our Consolidated Statement of Income for the year ended December 31, 2021.

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We accounted for the Sequent Acquisition as a business combination.

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 Gas & NGL Marketing Services segment, and liabilities assumed at July 1, 2021.

The following table presents the allocation of the acquisition date fair value of the major classes of the assets acquired, which are presented in our Gas & NGL Marketing Services segment, and liabilities assumed at July 1, 2021.

The fair value of accounts receivable acquired equals contractual amounts receivable.

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The fair value of the inventory acquired was based on the market price of the natural gas in underground storage at the acquisition date.

See Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for the valuation techniques used to measure fair value of derivative assets and liabilities.

See Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for the valuation techniques used to measure fair value of commodity derivative assets and liabilities.

Cash and cash equivalents $ 8

Trade accounts and other receivables – net 498

Trade accounts and other receivables 498

Inventories 121

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See Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies for our policy regarding netting receivables and payables.

Intangible assets

Intangible assets are primarily related to transportation and storage capacity contracts.

Other intangible assets

Other intangible assets are primarily related to transportation and storage capacity contracts.

The basis for determining the value of these intangible assets was estimated future net cash flows to be derived from acquired transportation and storage capacity contracts that provide future economic benefits due to their market location, discounted using an industry weighted-average cost of capital.

This intangible asset is being amortized based on the expected benefit period over which the underlying contracts are expected to contribute to our cash flows ranging from 1 year to 8 years.

As a result, we expect a significant portion of the amortization to be recognized within the first few years of this range.

See Note 10 – Intangible Assets.

As a result, a significant portion of the amortization will be recognized within the first few years of this range.

See Note 10 – Goodwill and Other Intangible Assets.

Commodity derivatives

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To manage this volatility, we use various contracts in our marketing and trading activities that generally meet the definition of derivatives.

We enter into commodity-related derivatives to economically hedge exposures to natural gas and retain exposure to price changes that can, in a volatile energy market, be material and can adversely affect our results of operations;

see Note 1 – General, Description of

We enter into commodity derivatives to economically hedge exposures to natural gas and retain exposure to price changes that can, in a volatile energy market, be material and can adversely affect our results of operations;

see Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies for our accounting policy for commodity derivatives.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Business, Basis of Presentation, and Summary of Significant Accounting Policies for our accounting policy for derivatives.

Supplemental Pro Forma

The following pro forma Revenues and Net income (loss) attributable to The Williams Companies, Inc.

in 2022, 2021, and 2020, are presented as if the Trace Acquisition had been completed on January 1, 2021, and the Sequent Acquisition had been completed on January 1, 2020.

These pro forma amounts are not necessarily indicative of what the actual results would have been if the Trace Acquisition and Sequent Acquisition had in fact occurred on the dates or for the periods indicated, nor do they purport to project Revenues or Net income (loss) attributable to The Williams Companies, Inc.

for 2023, 2022, and 2021, are presented as if the Gulf Coast Storage Acquisition had been completed on January 1, 2023, the DJ Basin Acquisitions and MountainWest Acquisition had been completed on January 1, 2022, the Trace Acquisition had been completed on January 1, 2021, and the Sequent Acquisition had been completed on January 1, 2020.

These pro forma amounts are not necessarily indicative of what the actual results would have been if the acquisitions had in fact occurred on the dates or for the periods indicated, nor do they purport to project Revenues or Net income (loss) attributable to The Williams Companies, Inc.

for any future periods or as of any date.

These amounts do not give effect to any potential cost savings, operating synergies, or revenue enhancements to result from the transaction or the potential costs to achieve these cost savings, operating synergies, and revenue enhancements.

These amounts do not give effect to any potential cost savings, operating synergies, or revenue enhancements to result from the transactions or the potential costs to achieve these cost savings, operating synergies, and revenue enhancements.

Year Ended December 31, 2023

As Reported Pro Forma Trace (1) Pro Forma Combined

As Reported Pro Forma Gulf Coast Storage

Pro Forma DJ Basin (1)

Pro Forma MountainWest (1)

Pro Forma Combined

Revenues $ 10,907 $ 202 $ 270 $ 35 $ 11,414

2 unchanged sentences

Year Ended December 31, 2022

As Reported Pro Forma Trace Pro Forma Sequent (2) Pro Forma Combined

As Reported Pro Forma DJ Basin

Pro Forma MountainWest Pro Forma Trace (1)

Pro Forma Combined

Revenues $ 10,965 $ 218 $ 265 $ 45 $ 11,493

2 unchanged sentences

Year Ended December 31, 2021

As Reported Pro Forma Sequent Pro Forma Combined

As Reported Pro Forma Trace Pro Forma Sequent (1)

Pro Forma Combined

Revenues $ 10,627 $ 118 $ 188 $ 10,933

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1,517 42 4 1,563

(1) Excludes results from operations acquired in the Trace Acquisition for the period beginning on the acquisition date of April 29, 2022, as these results are included in the amounts as reported.

(2) Excludes results from operations acquired in the Sequent Acquisition for the period beginning on the acquisition date of July 1, 2021, as these results are included in the amounts as reported.

(1) Excludes results from operations acquired in the acquisition for the period beginning on the acquisition date, as these results are included in the amounts as reported.

NorTex Asset Purchase

On August 31, 2022, we purchased a group of assets in north Texas, primarily natural gas storage facilities and pipelines, from NorTex Midstream Holdings, LLC (NorTex Asset Purchase) for approximately $ 424 million.

These assets are included in the Transmission & Gulf of Mexico segment.

These assets are included in our Transmission & Gulf of Mexico segment.

Sale of Certain Gulf Coast Liquids Pipelines

On September 29, 2023, we completed the sale of various petrochemical and feedstock pipelines and associated contracts in the Gulf Coast region for $ 348 million.

As a result of this sale, we recorded a gain of $ 129 million in 2023 in our Transmission & Gulf of Mexico segment.

The gain is reflected in Gain on sale of business in our

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Consolidated Statement of Income.

The results of operations for this disposal group, excluding the gain noted, were not significant for the reporting periods.

Note 4 – Related Party Transactions

Transactions with Equity-Method Investees

We have expenses associated with our equity-method investees of $ 1.346 billion, $ 948 million, and $ 348 million for 2022, 2021, and 2020, respectively in our Consolidated Statement of Income.

We have costs and expenses associated with our equity-method investees of $ 776 million, $ 1.346 billion, and $ 948 million for 2023, 2022, and 2021, respectively in our Consolidated Statement of Income.

Substantially all of these expenses are included in Product costs .

We also have revenue from our equity-method investees of $ 5 million, $ 76 million, and $ 46 million for 2023, 2022, and 2021, respectively.

In addition, w e have $ 17 million and $ 9 million included in Accounts receivable and $ 87 million and $ 89 million included in Accounts payable in our Consolidated Balance Sheet with our equity-method investees at December 31, 2022 and 2021, respectively.

In addition, w e have $ 2 million and $ 17 million included in Trade accounts and other receivables and $ 33 million and $ 87 million included in Accounts payable in our Consolidated Balance Sheet with our equity-method investees at December 31, 2023 and 2022, respectively.

We have operating agreements with certain equity-method investees.

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Two members of our Board of Directors are also executive officers at certain of our counterparties.

We recorded $ 180 million in Product sales and $ 86 million in Product costs in our Consolidated Statement of Income from these companies for the purchase and sale of natural gas for 2022.

We recorded $ 90 million and $ 180 million in Product sales and $ 25 million and $ 86 million in Product costs in our Consolidated Statement of Income from these companies for the purchase and sale of natural gas for 2023 and 2022, respectively.

The Williams Companies, Inc.

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The following table presents our revenue disaggregated by major service line:

Transco Northwest Pipeline Gulf of Mexico Midstream and Storage Northeast

Regulated Interstate Transportation

Gulf of Mexico Midstream

Midstream West Midstream Gas & NGL Marketing Services Other Eliminations Total

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Regulated interstate natural gas transportation and storage $ 3,334 $ — $ — $ — $ — $ — $ ( 60 ) $ 3,274

$ 2,696 $ 443 $ — $ — $ — $ — $ — $ ( 72 ) $ 3,067

Gathering, processing, transportation, fractionation, and storage:

Monetary consideration — 443 1,782 1,478 — — ( 170 ) 3,533

— — 365 1,395 1,476 — — ( 164 ) 3,072

Commodity consideration — 38 5 103 — — — 146

— — 64 14 182 — — — 260

10 — 27 233 54 3 — ( 19 ) 308

Other 19 11 87 12 1 — ( 15 ) 115

Total service revenues 3,353 492 1,874 1,593 1 — ( 245 ) 7,068

2,706 443 456 1,642 1,712 3 — ( 255 ) 6,707

Product sales 140 120 132 441 4,615 442 ( 962 ) 4,928

Total revenues from contracts with customers 3,493 612 2,006 2,034 4,616 442 ( 1,207 ) 11,996

2,885 443 707 1,776 2,553 10,771 706 ( 2,068 ) 17,773

Other revenues (1) 38 15 27 101 4,294 64 ( 2 ) 4,537

24 4 10 26 8 7,929 ( 55 ) ( 11 ) 7,935

Other adjustments (2) — — — — ( 6,032 ) — 406 ( 5,626 )

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Regulated interstate natural gas transportation and storage $ 3,139 $ — $ — $ — $ — $ — $ ( 72 ) $ 3,067

$ 2,547 $ 441 $ — $ — $ — $ — $ — $ ( 33 ) $ 2,955

Gathering, processing, transportation, fractionation, and storage:

3 unchanged sentences

10 11 102 12 3 — ( 16 ) 122

10 — 22 195 52 3 1 ( 19 ) 264

Total service revenues 3,149 456 1,642 1,712 3 — ( 255 ) 6,707

2,557 441 418 1,510 1,415 3 1 ( 182 ) 6,163

Product sales 179 251 134 841 10,768 706 ( 1,813 ) 11,066

Total revenues from contracts with customers 3,328 707 1,776 2,553 10,771 706 ( 2,068 ) 17,773

2,645 441 687 1,609 2,058 6,407 334 ( 1,397 ) 12,784

Other revenues (1) 28 10 26 8 7,929 ( 55 ) ( 11 ) 7,935

10 3 8 25 ( 32 ) 2,632 11 ( 13 ) 2,644

Other adjustments (2) — — — — ( 15,467 ) — 724 ( 14,743 )

2 unchanged sentences

Notes to Consolidated Financial Statements – (Continued)

Transco Northwest Pipeline Gulf of Mexico Midstream and Storage Northeast

Regulated Interstate Transportation

Gulf of Mexico Midstream

Midstream West Midstream Gas & NGL Marketing Services Other Eliminations Total

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Regulated interstate natural gas transportation and storage $ 2,988 $ — $ — $ — $ — $ — $ ( 33 ) $ 2,955

$ 2,404 $ 449 $ — $ — $ — $ — $ — $ ( 7 ) $ 2,846

Gathering, processing, transportation, fractionation, and storage:

3 unchanged sentences

10 8 78 9 3 1 ( 16 ) 93

10 — 27 164 35 32 1 ( 16 ) 253

Total service revenues 2,998 418 1,510 1,415 3 1 ( 182 ) 6,163

2,414 449 396 1,450 1,362 32 1 ( 120 ) 5,984

Product sales 88 269 99 643 6,404 333 ( 1,215 ) 6,621

Total revenues from contracts with customers 3,086 687 1,609 2,058 6,407 334 ( 1,397 ) 12,784

2,494 449 510 1,507 1,514 1,634 1 ( 456 ) 7,653

Other revenues (1) 13 8 25 ( 32 ) 2,632 11 ( 13 ) 2,644

10 — 9 22 9 ( 3 ) 33 ( 14 ) 66

Other adjustments (2) — — — — ( 4,828 ) — 27 ( 4,801 )

Total revenues $ 3,099 $ 695 $ 1,634 $ 2,026 $ 4,211 $ 345 $ ( 1,383 ) $ 10,627

______________________________

(1) Revenues not derived from contracts with customers primarily consist of physical product sales related to derivative contracts, realized and unrealized gains and losses associated with our derivative contracts, which are reported in Net gain (loss) on commodity derivatives in the Consolidated Statement of Income, management fees that we receive for certain services we provide to operated equity-method investments, and leasing revenues associated with our headquarters building.

(1) Revenues not derived from contracts with customers primarily consist of physical product sales related to commodity derivative contracts, realized and unrealized gains and losses associated with our commodity derivative contracts, which are reported in Net gain (loss) from commodity derivatives in our Consolidated Statement of Income, management fees that we receive for certain services we provide to operated equity-method investments, and leasing revenues associated with our headquarters building.

(2) Other adjustments reflect certain costs of Gas & NGL Marketing Services’ risk management activities.

As we are acting as agent for natural gas marketing customers or engage in energy trading activities, the resulting revenues are presented net of the related costs of those activities in the Consolidated Statement of Income (see Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies).

(3) Certain contractual reimbursements of operating and maintenance costs totaling $ 186 million and $ 171 million for 2022 and 2021, respectively, previously included in Other are now presented in Monetary consideration to conform to the current presentation.

Contract Assets

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Minimum volume commitments invoiced ( 176 ) ( 201 )

( 201 ) ( 174 )

Balance at end of year $ 36 $ 29

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Significant financing component 9 9

Contract liability acquired 2 1

Contract liability acquired (disposed) – net 115 2

Recognized in revenue ( 276 ) ( 274 )

( 274 ) ( 210 )

Balance at end of year $ 1,081 $ 1,043

Remaining Performance Obligations

Remaining performance obligations primarily include reservation charges on contracted capacity for our gas pipeline firm transportation contracts with customers, storage capacity contracts, long-term contracts containing minimum volume commitments associated with our midstream businesses, and fixed payments associated with offshore production handling.

Remaining performance obligations primarily include reservation charges on contracted capacity for our gas pipeline firm transportation contracts with customers, storage capacity contracts, long-term contracts containing MVC associated with our midstream businesses, and fixed payments associated with offshore production handling.

For our interstate natural gas pipeline businesses, remaining performance obligations reflect the rates for such services in our current FERC tariffs for the life of the related contracts;

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Note 6 – Provision (Benefit) for Income Taxes

The Provision (benefit) for income taxes includes:

The Provision (benefit) for income taxes from continuing operations includes:

Year Ended December 31,

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Federal $ 3 $ ( 25 ) $ ( 1 )

( 6 ) 2 ( 29 )

State 21 19 3

Federal 872 424 421

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Provision (benefit) for income taxes $ 1,005 $ 425 $ 511

Reconciliations from the Provision (benefit) at statutory rate to recorded Provision (benefit) for income taxes are as follows:

Reconciliations from the Provision (benefit) at statutory rate from continuing operations to recorded Provision (benefit) for income taxes are as follows:

Year Ended December 31,

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Provision (benefit) for income taxes $ 1,005 $ 425 $ 511

Income (loss) before income taxes includes less than $ 1 million of foreign income in 2022, and $ 2 million and $ 1 million of foreign loss in 2021 and 2020, respectively.

The State deferred income tax rate change benefit of $ 92 million is related to a decrease in our estimate of the deferred state income tax rate (net of federal effect) driven primarily by the enacted decline in the Pennsylvania state income tax rate over the next several years.

The State deferred income tax rate change benefit of $ 25 million and $ 92 million in 2023 and 2022, respectively, is related to a decrease in our estimate of the deferred state income tax rate (net of federal effect) driven primarily by the enacted decline in the Pennsylvania state income tax rate over the next several years.

During the course of audits of our business by domestic and foreign tax authorities, we frequently face challenges regarding the amount of taxes due.

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These attributes generally expire between 2024 and 2042 with some carryovers having indefinite carryforward periods.

Federal loss carryovers at the end of 2022 include deferred tax assets on net operating loss carryovers of $ 705 million with no expiration date.

Deferred tax assets on charitable contributions of $ 25 million are expected to be utilized by us prior to expiring between 2023 and 2027.

Cash payments for income taxes (net of refunds) were $ 13 million in 2022.

Cash refunds for income taxes (net of payments) were $ 45 million and $ 40 million in 2021 and 2020, respectively.

During the second quarter of 2022, we finalized settlements for 2011 through 2014 on certain contested matters with the Internal Revenue Service (IRS) that resulted in a 2022 year-to-date tax benefit of approximately $ 45 million.

In 2022, we received cash refunds related to these settlements totaling $ 7 million.

Federal loss carryovers at December 31, 2023 reflect deferred tax assets on net operating loss carryovers with no expiration date.

Cash payments for income taxes (net of refunds) were $ 31 million and $ 13 million in 2023 and 2022, respectively.

Cash refunds for income taxes (net of payments) were $ 45 million in 2021.

During the fourth quarter of 2023, we closed the audit for 2018 and made a $ 5 million payment.

We recognize related interest and penalties as a component of Provision (benefit) for income taxes .

Total interest and penalties recognized as part of income tax provision were benefits of $ 3 million in 2022 and $ 1 million in each of 2021 and 2020.

There are no interest or penalties relating to uncertain tax positions accrued as of December 31, 2022 and $ 4 million of interest was accrued as of December 31, 2021.

No significant interest and penalties were recognized for any period presented.

There are no interest or penalties relating to uncertain tax positions accrued as of December 31, 2023 and December 31, 2022.

Consolidated U.S.

Federal income tax returns are open to IRS examination for years after 2019.

As of December 31, 2022, examination of 2018 is currently in process, with the statute extended to September 30, 2023.

We do not expect material changes in our financial position resulting from this examination.

The statute of limitations for most states expires one year after expiration of the IRS statute.

1 unchanged sentence

Notes to Consolidated Financial Statements – (Continued)

Note 8 – Investing Activities

Ownership Interest at December 31, 2023

Equity method:

Appalachia Midstream Investments (1) $ 2,886 $ 2,975

Blue Racer 50 % 398 383

OPPL 50 % 387 386

Discovery 60 % 361 345

Gulfstream 50 % 210 220

Laurel Mountain 69 % 184 205

Other Various 188 139

$ 4,637 $ 5,065

(1) Includes equity-method investments in multiple gathering systems in the Marcellus Shale region with an approximate average 66 percent interest.

(2) RMM is a wholly owned subsidiary as of November 30, 2023.

See Note 3 – Acquisitions and Divestitures.

Basis differential

The carrying value of our Appalachia Midstream Investments exceeds our portion of the underlying net assets by approximately $ 1.1 billion at December 31, 2023 and 2022.

These differences were assigned at the acquisition date to property, plant, and equipment and customer relationship intangible assets.

Certain of our other equity-method investments have a carrying value less than our portion of the underlying equity in the net assets primarily due to other than temporary impairments that we have recognized but that were not required to be recognized in the investees’ financial statements.

These differences total approximately $ 773 million and $ 1.1 billion at December 31, 2023 and 2022, respectively, and were assigned to property, plant, and equipment and customer relationship intangible assets.

Differences in the carrying value of our equity-method investments and our portion of the equity in the underlying net assets are generally amortized over the remaining useful lives of the associated underlying assets and included in Equity earnings (losses) within our Consolidated Statement of Income.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Purchases of and contributions to equity-method investments

We generally fund our portion of significant expansion or development projects of these investees through additional capital contributions.

These transactions increased the carrying value of our investments and included:

Year Ended December 31,

2023 2022 2021

Appalachia Midstream Investments $ 59 $ 83 $ 84

Discovery 40 41 —

Aux Sable Liquid Products LP

Cardinal Pipeline Company, LLC — 16 —

Gulfstream — 14 26

$ 141 $ 166 $ 115

Other investing income (loss) – net

The following table presents certain items reflected in Other investing income (loss) – net in our Consolidated Statement of Income:

Year Ended December 31,

2023 2022 2021

Interest income

$ 79 $ 15 $ 7

Gain on remeasurement of RMM investment (Note 3)

Other investing income (loss) – net $ 108 $ 16 $ 7

Dividends and distributions

The organizational documents of entities in which we have an equity-method investment generally require distribution of available cash to members on at least a quarterly basis.

These transactions reduced the carrying value of our investments and included:

Year Ended December 31,

2023 2022 2021

Appalachia Midstream Investments $ 405 $ 415 $ 433

Gulfstream 98 89 90

Discovery 49 49 44

Laurel Mountain

Other 35 65 39

$ 796 $ 865 $ 757

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Summarized Financial Position and Results of Operations of All Equity-Method Investments

Assets (liabilities):

Current assets

Noncurrent assets

11,058 12,701

Current liabilities

( 358 ) ( 632 )

Noncurrent liabilities

( 3,619 ) ( 3,789 )

Year Ended December 31,

2023 2022 2021

Gross revenue $ 3,714 $ 5,520 $ 4,688

Operating income 966 1,268 1,191

Net income 748 1,102 1,006

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Note 7 – Employee Benefit Plans

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Net actuarial loss (gain) (1) 68 ( 162 ) ( 4 ) ( 45 )

( 12 ) ( 4 ) — —

Net increase (decrease) in benefit obligation 66 ( 193 ) ( 7 ) ( 48 )

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( 71 ) ( 78 ) ( 13 ) ( 12 )

( 12 ) ( 4 ) — —

Net increase (decrease) in fair value of plan assets 50 ( 219 ) 9 ( 34 )

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Accumulated benefit obligation $ 998 $ 930

(1) 2022 amounts are due primarily to the following factors:

Pension benefits - discount rate assumptions, partially offset by change in interest crediting rate assumption;

(1) 2023 amounts are due primarily to changes in the following factors:

Pension Benefits - interest crediting rate assumption and discount rate assumptions.

2022 amounts are due primarily to changes in the following factors:

Pension Benefits - discount rate assumptions, partially offset by interest crediting rate assumption;

Other Postretirement Benefits - discount rate assumption.

2021 amounts are due primarily to the following factors:

Pension Benefits - discount rate assumptions, partially offset by experience-related items;

Other Postretirement Benefits - discount rate assumption and experience-related items.

The Williams Companies, Inc.

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( 57 ) ( 44 ) ( 43 ) ( 10 ) ( 10 ) ( 10 )

Amortization of net actuarial loss

Amortization of net actuarial loss (gain)

5 12 14 ( 3 ) — —

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Net periodic benefit cost (credit) (1) $ 17 $ 30 $ 30 $ ( 5 ) $ ( 2 ) $ ( 2 )

(1) Components other than Service cost are included in Other income (expense) – net below Operating income (loss) in the Consolidated Statement of Income .

(1) Components other than Service cost are included in Other income (expense) – net below Operating income (loss) in our Consolidated Statement of Income .

The Williams Companies, Inc.

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Net actuarial gain (loss) arising during the year $ ( 5 ) $ ( 14 ) $ 40 $ 3 $ 14 $ 29

Amortization of net actuarial loss 12 14 21 — — —

Amortization of net actuarial loss (gain)

5 12 14 ( 2 ) — —

Net actuarial loss from settlements — 3 1 — — —

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Cash management funds $ 45 $ — $ 45 $ 105 $ — $ 105

Equity securities 42 19 61 39 10 49

Government debt securities 58 18 76 8 3 11

Corporate debt securities — 284 284 — 39 39

Mutual fund - Municipal bonds — — — 59 — 59

Other 1 4 5 — — —

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(1) Level 1 includes assets with fair values based on quoted prices in active markets for identical assets.

Cash management funds, equity securities traded on U.S.

exchanges, U.S.

Treasury securities, and mutual funds are included in this level.

Cash management funds and U.S.

Treasury securities are included in this level.

(2) Level 2 includes assets with fair values determined by using significant other observable inputs.

This level includes equity securities traded on active foreign exchanges and fixed income securities, other than U.S.

This level includes fixed income securities, other than U.S.

Treasury securities, that are valued primarily using pricing models which incorporate observable inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads.

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Postretirement

2023 $ 84 $ 13

2028-2032 389 52

In 2024, we expect to contribute approximately $ 2 million to our pension plans and approximately $ 3 million to our other postretirement benefit plan.

Note 8 – Investing Activities

Ownership Interest at December 31, 2022

Equity method:

Appalachia Midstream Investments (1) $ 2,975 $ 3,056

RMM 50 % 395 401

OPPL 50 % 386 388

Blue Racer 50 % 383 377

Discovery 60 % 345 328

Gulfstream 50 % 220 215

Laurel Mountain 69 % 205 226

Other Various 139 130

$ 5,065 $ 5,127

(1) Includes equity-method investments in multiple gathering systems in the Marcellus Shale region with an approximate average 66 percent interest.

Basis differential

The carrying value of our Appalachia Midstream Investments exceeds our portion of the underlying net assets by approximately $ 1.1 billion and $ 1.2 billion at December 31, 2022 and 2021, respectively.

These differences were assigned at the acquisition date to property, plant, and equipment and customer relationship intangible assets.

These differences total approximately $ 1.1 billion and $ 1.2 billion at December 31, 2022 and 2021, respectively, and were assigned to property, plant, and equipment and customer relationship intangible assets.

Differences in the carrying value of our equity-method investments and

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

our portion of the equity in the underlying net assets are generally amortized over the remaining useful lives of the associated underlying assets and included in Equity earnings (losses) within our Consolidated Statement of Income.

Purchases of and contributions to equity-method investments

We generally fund our portion of significant expansion or development projects of these investees through additional capital contributions.

These transactions increased the carrying value of our investments and included:

Year Ended December 31,

2022 2021 2020

Appalachia Midstream Investments $ 83 $ 84 $ 116

Discovery 41 — —

Cardinal Pipeline Company, LLC 16 — —

Gulfstream 14 26 3

Blue Racer (1) — 3 157

Other 12 2 49

$ 166 $ 115 $ 325

(1) See following discussion in the section Acquisition of additional interests in BRMH below.

Acquisition of additional interests in BRMH

As of December 31, 2019, we effectively owned a 29 percent indirect interest in Blue Racer through our 58 percent interest in Blue Racer Midstream Holdings, LLC (BRMH), whose primary asset is a 50 percent interest in Blue Racer.

In November 2020, we paid $ 157 million, net of cash acquired, to acquire an additional 41 percent ownership interest in BRMH before acquiring the remaining interest of BRMH in September 2021.

As such, we control and consolidate BRMH, reporting the 50 percent interest in Blue Racer as an equity-method investment.

Since substantially all of the fair value of the BRMH assets acquired is concentrated in a single asset, the investment in Blue Racer, and we previously held a noncontrolling interest in BRMH, we recorded the November 2020 and September 2021 additional purchases of interests as asset acquisitions.

Prior to November 2021 BRMH was named Caiman Energy II, LLC and was accounted for as an equity-method investment.

Dividends and distributions

The organizational documents of entities in which we have an equity-method investment generally require distribution of available cash to members on at least a quarterly basis.

These transactions reduced the carrying value of our investments and included:

Year Ended December 31,

2022 2021 2020

Appalachia Midstream Investments $ 415 $ 433 $ 357

Laurel Mountain 112 33 31

Gulfstream 89 90 93

Blue Racer (1) 49 47 47

Discovery 49 44 21

OPPL 34 26 50

Other 65 39 15

$ 865 $ 757 $ 653

(1) See previous discussion in the section Acquisition of additional interests in BRMH above.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Equity Earnings (Losses)

Equity earnings (losses) in 2020 includes a $ 78 million loss associated with the first-quarter full impairment of goodwill recognized by our investee RMM, which was allocated entirely to our member interest per the terms of the membership agreement.

Also included in 2020 are losses of $ 11 million, $ 26 million, and $ 10 million for our share of asset impairments at Laurel Mountain, Appalachia Midstream Investments, and Blue Racer, respectively.

Impairments of Equity-Method Investments

See Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for information regarding impairments of our equity-method investments of $ 1,046 million for 2020.

Summarized Financial Position and Results of Operations of All Equity-Method Investments

Assets (liabilities):

Current assets

Noncurrent assets

12,701 13,211

Current liabilities

( 632 ) ( 435 )

Noncurrent liabilities

( 3,789 ) ( 3,774 )

Year Ended December 31,

2022 2021 2020

Gross revenue $ 5,520 $ 4,688 $ 2,625

Operating income 1,268 1,191 508

Net income 1,102 1,006 459

Note 9 – Property, Plant, and Equipment

The following table presents nonregulated and regulated Property, plant, and equipment – net as presented on the Consolidated Balance Sheet for the years ended:

The following table presents nonregulated and regulated Property, plant, and equipment – net as presented in our Consolidated Balance Sheet for the years ended:

Useful Life (1)

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Depreciation rates and estimated useful lives for regulated assets are prescribed by the FERC.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Depreciation and amortization expense for Property, plant, and equipment – net was $ 1.660 billion, $ 1.498 billion, and $ 1.496 billion in 2023, 2022, and 2021, respectively.

Interest capitalized was $ 54 million, $ 20 million, and $ 11 million in 2023, 2022, and 2021, respectively.

Regulated Property, plant, and equipment – net includes approximately $ 389 million and $ 428 million at December 31, 2023 and 2022, respectively, related to amounts in excess of the original cost of the regulated facilities within our gas pipeline businesses as a result of our prior acquisitions.

1 unchanged sentence

Current FERC policy does not permit recovery through rates for amounts in excess of original cost of construction.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Asset Retirement Obligations

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At the end of the useful life of each respective asset, we are legally obligated to dismantle offshore platforms and appropriately abandon offshore pipelines, to remove certain components of gas transmission facilities from the ground, to restore land and remove surface equipment at gas processing, fractionation, and compression facilities, to cap certain gathering pipelines at the wellhead connection and remove any related surface equipment, to plug storage caverns and remove any related surface equipment, and to plug producing wells and remove any related surface equipment.

The following table presents the significant changes to our ARO, of which $ 1.827 billion and $ 1.590 billion are included in Regulatory liabilities, deferred income, and other with the remaining current portion in Accrued and other current liabilities at December 31, 2022 and 2021, respectively.

The following table presents the significant changes to our AROs, of which $ 1.978 billion and $ 1.827 billion are included in Regulatory liabilities, deferred income, and other with the remaining current portion in Accrued and other current liabilities at December 31, 2023 and 2022, respectively.

Year Ended December 31,

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Balance at end of year $ 2,084 $ 1,914

(1) Includes $ 307 million of ARO in 2021 related to acquired upstream properties.

(1) Several factors are considered in the annual review process, including inflation rates, current estimates for removal cost, market risk premiums, discount rates, and the estimated remaining useful life of the assets.

The 2022 revisions reflect changes in removal cost estimates and increases in inflation rates, partially offset by increases in discount rates.

The 2021 revisions reflect changes in removal cost estimates, increases in the estimated remaining useful life of certain assets, and increases in inflation rates.

The funds Transco collects through a portion of its rates to fund its ARO are deposited into an external trust account dedicated to funding its ARO (ARO Trust).

The 2023 and 2022 revisions reflect changes in removal cost estimates and increases in inflation rates, partially offset by increases in discount rates.

The funds Transco collects through a portion of its rates to fund its AROs are deposited into an external trust account dedicated to funding its AROs (ARO Trust).

(See Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk.) Under its current rate settlement, Transco’s annual funding obligation is approximately $ 16 million, with installments to be deposited monthly.

Note 10 – Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill, included in Intangible assets – net of accumulated amortization in our Consolidated Balance Sheet, by reportable segment for the periods indicated are as follows:

Transmission & Gulf of Mexico West

December 31, 2021 $ — $ — $ —

December 31, 2022 — — —

MountainWest Acquisition (Note 3)

Cureton Acquisition (Note 3)

RMM Acquisition (Note 3)

December 31, 2023 $ 400 $ 63 $ 463

Goodwill is not subject to amortization, but is evaluated at least annually for impairment or more frequently if impairment indicators are present.

We did not identify or recognize any impairments to goodwill in connection with our evaluation of goodwill for impairment during the year ended December 31, 2023.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Note 10 – Intangible Assets

The gross carrying amount and accumulated amortization of intangible assets, included in Intangible assets – net of accumulated amortization in the Consolidated Balance Sheet, at December 31 are as follows:

Other Intangible Assets

The gross carrying amount and accumulated amortization of other intangible assets, included in Intangible assets – net of accumulated amortization in our Consolidated Balance Sheet, at December 31 are as follows:

Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

1 unchanged sentence

Transportation and storage capacity contracts 267 ( 223 ) 267 ( 172 )

6 ( 2 ) 6 ( 2 )

Other intangible assets

2 unchanged sentences

Customer relationships primarily relate to gas gathering, processing, and fractionation contractual customer relationships recognized in acquisitions.

Contractual customer relationships are being amortized on a straight-line basis over a period of 30 years for most acquisitions, which represents a portion of the term over which the contractual customer relationships are expected to contribute to our cash flows.

Contractual customer relationships are being amortized on a straight-line basis over periods of up to 30 years, which represents a portion of the term over which the contractual customer relationships are expected to contribute to our cash flows.

We expense costs incurred to renew or extend the terms of our gas gathering, processing, and fractionation contracts with customers.

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The amortization expense related to customer relationships was $ 360 million, $ 353 million, and $ 332 million in 2023, 2022, and 2021, respectively.

The estimated amortization expense for each of the next five succeeding fiscal years is approximately $ 357 million.

The estimated amortization expense for each of the next five succeeding fiscal years is $ 368 million, $ 368 million, $ 364 million, $ 360 million, and $ 360 million.

Transportation and storage capacity contracts

Certain transportation and storage capacity contracts were recognized as intangible assets as part of the Sequent Acquisition.

(See Note 3 – Acquisitions.) The amortization expense related to transportation and storage capacity contracts was $ 158 million in 2022 and $ 14 million in 2021.

(See Note 3 – Acquisitions and Divestitures.) The amortization expense related to transportation and storage capacity contracts was $ 51 million, $ 158 million, and $ 14 million in 2023, 2022, and 2021, respectively.

The estimated amortization expense for each of the next five succeeding fiscal years is $ 21 million, $ 10 million, $ 7 million, $ 4 million, and $ 2 million.

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Employee costs 197 218

Regulatory liabilities (Note 1)

Contract liabilities 159 141

Alaska refinery contamination litigation (Note 17) 134 21

Asset retirement obligations (Note 9) 106 87

Regulatory liabilities (Note 1) 77 201

Operating lease liabilities (Note 13) 24 25

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Other financing obligation — Dalton 250 252

MountainWest:

3.53 % Notes due 2028 (Note 3)

3.91 % Notes due 2038 (Note 3)

4.875 % Notes due 2041 (Note 3)

Northwest Pipeline:

11 unchanged sentences

2.6 % Notes due 2031

7.5 % Debentures due 2031

11 unchanged sentences

3.5 % Notes due 2051

Various — 7.7 % to 8.72 % Notes due 2022 to 2027

5.3 % Notes due 2052

7.7 % Notes due 2027

RMM deferred consideration obligation (Note 3) 665 —

Unamortized debt issuance costs ( 140 ) ( 135 )

3 unchanged sentences

Long-term debt $ 23,376 $ 21,927

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Certain of our debt agreements contain covenants that restrict or limit, among other things, our ability to create liens supporting indebtedness, sell assets, and incur additional debt.

Default of these agreements could also restrict our ability to make certain distributions or repurchase equity.

The following table presents aggregate minimum maturities of long-term debt and other financing obligations, excluding net unamortized debt premium (discount) and debt issuance costs, for each of the next five years:

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

The following table presents aggregate minimum maturities of long-term debt, other financing obligations, and the RMM deferred consideration obligation, excluding net unamortized debt premium (discount) and debt issuance costs, for each of the next five years:

December 31, 2023

Issuances and retirements

On October 17, 2022, we early retired $ 850 million of 3.7 percent senior unsecured notes due January 15, 2023.

On August 8, 2022, we issued $ 1.0 billion of 4.65 percent senior unsecured notes due August 15, 2032, and $ 750 million of 5.30 percent senior unsecured notes due August 15, 2052.

On May 16, 2022, we early retired $ 750 million of 3.35 percent senior unsecured notes due August 15, 2022.

On January 18, 2022, we early retired $ 1.25 billion of 3.6 percent senior unsecured notes due March 15, 2022.

On October 8, 2021, we completed a public offering of $ 600 million of 2.6 percent senior unsecured notes due 2031.

The new 2031 notes are an additional issuance of the $ 900 million of 2.6 percent senior unsecured notes due 2031 issued on March 2, 2021, and will trade interchangeably with such notes.

Also, on October 8, 2021, we completed a public offering of $ 650 million of 3.5 percent senior unsecured notes due 2051.

We retired $ 371 million of 7.875 percent senior unsecured notes that matured on September 1, 2021.

On August 16, 2021, we early retired $ 500 million of 4.0 percent senior unsecured notes due November 15, 2021.

On August 17, 2020, we early retired $ 600 million of 4.125 percent senior unsecured notes due November 15, 2020.

On May 14, 2020, we completed a public offering of $ 1 billion of 3.5 percent senior unsecured notes due 2030.

On May 8, 2020, Transco issued $ 700 million of 3.25 percent senior unsecured notes due 2030 and $ 500 million of 3.95 percent senior unsecured notes due 2050 to investors in a private debt placement.

In the fourth quarter of 2020, Transco filed a registration statement and completed an exchange of these notes for substantially identical new notes that are registered under the Securities Act of 1933, as amended.

We retired $ 1.5 billion of 5.25 percent senior unsecured notes that matured on March 15, 2020.

We retired $ 14 million of 8.75 percent senior unsecured notes that matured on January 15, 2020.

Other financing obligations

During the construction of the Atlantic Sunrise, Leidy South, and Dalton projects, Transco received funding from co-owners for their proportionate share of construction costs.

Amounts received were recorded within

Our senior unsecured public debt issuances for the past three years and subsequent to the balance sheet date are as follows:

Maturity Date

January 5, 2024

March 15, 2029 $ 1,100 4.900 %

January 5, 2024

March 15, 2034 1,000 5.150 %

August 10, 2023 (1)

March 2, 2026 350 5.400 %

August 10, 2023

August 15, 2028 900 5.300 %

March 2, 2023

March 2, 2026 750 5.400 %

March 2, 2023

March 15, 2033 750 5.650 %

August 8, 2022

August 15, 2032 1,000 4.650 %

August 8, 2022

August 15, 2052 750 5.300 %

October 8, 2021 (2)

March 15, 2031 600 2.600 %

October 8, 2021

October 15, 2051 650 3.500 %

March 2, 2021

March 15, 2031 900 2.600 %

(1) Additional issuance of the 5.40 percent senior notes due 2026 issued on March 2, 2023, and trade interchangeably with such notes.

(2) Additional issuance of the 2.6 percent senior notes due 2031 issued on March 2, 2021, and trade interchangeably with such notes.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

noncurrent liabilities and the costs associated with construction were capitalized in the Consolidated Balance Sheet.

Our senior unsecured public debt retirements for the past three years are as follows:

Date of Retirement

Maturity Date

November 15, 2023

November 15, 2023 $ 600 4.500 %

October 17, 2022

January 15, 2023 850 3.700 %

August 15, 2022 750 3.350 %

January 18, 2022

March 15, 2022 1,250 3.600 %

September 1, 2021

September 1, 2021 371 7.875 %

August 16, 2021 November 15, 2021 500 4.000 %

Other financing obligations

During the construction of the Atlantic Sunrise, Leidy South, and Dalton projects, Transco received funding from co-owners for their proportionate share of construction costs.

Amounts received were recorded within noncurrent liabilities and the costs associated with construction were capitalized in the Consolidated Balance Sheet.

Upon placing these projects into service Transco began utilizing the co-owners’ undivided interest in the assets, including the associated pipeline capacity, and reclassified the funding previously received from its co-owners from noncurrent liabilities to debt.

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The Credit Agreement was effective on October 8, 2021.

The maturity date of the credit facility is October 8, 2026.

However, the co-borrowers may request up to two extensions of the maturity date each for an additional one-year period to allow a maturity date as late as October 8, 2028, under certain circumstances.

In the second quarter of 2023, the maturity date of our Credit Agreement was extended one year and now expires October 8, 2027.

The amended Credit Agreement allows the co-borrowers to request up to two extensions of the maturity date each for an additional one-year period to allow a maturity date as late as October 8, 2029, under certain circumstances.

Additionally, the amended Credit Agreement replaces the London Interbank Offered Rate with the Term Secured Overnight Financing Rate as the benchmark interest rate index.

The Credit Agreement allows for swing line loans up to an aggregate of $ 200 million, subject to available capacity under the credit facility, and letters of credit commitments of $ 500 million.

Transco and Northwest Pipeline are each able to borrow up to $ 500 million under this credit facility to the extent not otherwise utilized by the other co-borrowers.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

The Credit Agreement contains the following terms and conditions:

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• Other than swing line loans, each time funds are borrowed, the applicable borrower may choose from two methods of calculating interest:

a fluctuating base rate equal to an alternative base rate as defined in the Credit Agreement plus an applicable margin or a periodic fixed rate equal to the London Interbank Offered Rate (LIBOR) plus an applicable margin.

a fluctuating base rate equal to an alternative base rate as defined in the Credit Agreement plus an applicable margin or a periodic fixed rate equal to the Term Secured Overnight Financing Rate plus an applicable margin.

We are required to pay a commitment fee based on the unused portion of the credit facility.

The applicable margin is determined by reference to a pricing schedule based on the applicable borrower’s senior unsecured long-term debt ratings and the commitment fee is determined by reference to a pricing schedule based on Williams’ senior unsecured long-term debt ratings.

The Credit Agreement also includes customary provisions to provide for replacement of LIBOR with an alternative benchmark rate when LIBOR ceases to be available.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Significant financial covenants under the Credit Agreement require the ratio of debt to EBITDA (earnings before interest, taxes, depreciation, and amortization), each as defined in the Credit Agreement, to be no greater than 5.0 to 1.0, except that for any fiscal quarter in which the funding of the purchase price for an acquisition (whether effectuated as one or a series of related transactions) with an aggregate purchase price of $ 25 million or more has been effected, and the following two fiscal quarters (in each case subject to certain limitations), the ratio of debt to EBITDA is to be no greater than 5.5 to 1.

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Commercial Paper Program

In 2018, we entered into a $ 4 billion commercial paper program that has been reduced to $ 3.5 billion in connection with the October 2021 Credit Agreement.

We have a $ 3.5 billion commercial paper program.

The maturities of the commercial paper notes vary but may not exceed 397 days from the date of issuance.

2 unchanged sentences

At December 31, 2023, $ 725 million of commercial paper was outstanding at a weighted-average interest rate of 5.6 percent.

We had no commercial paper outstanding at December 31, 2021.

We had $ 350 million of commercial paper outstanding at December 31, 2022 at a weighted-average interest rate of 4.8 percent.

Cash Payments for Interest (Net of Amounts Capitalized)

29 unchanged sentences

2007 Incentive Plan (the Plan) provides common-stock-based awards to both employees and nonmanagement directors.

To date, 50 million new shares have been authorized for making awards under the Plan, including 10 million shares added on April 28, 2020.

The Plan permits the granting of various types of awards including, but not limited to, restricted stock units and stock options.

At December 31, 2022, 25 million

To date, 50 million new shares have been authorized for making awards under the Plan.

The Plan permits the granting of various types of awards including, but not limited to, restricted

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

shares of our common stock were reserved for issuance pursuant to existing and future stock awards, of which 15 million shares were available for future grants.

Additionally, up to 5.2 million new shares of our common stock have been authorized to date to be available for sale under our Employee Stock Purchase Plan (ESPP), including 1.6 million shares added on April 28, 2020.

stock units and stock options.

At December 31, 2023, 21 million shares of our common stock were reserved for issuance pursuant to existing and future stock awards, of which 12 million shares were available for future grants.

Additionally, up to 5.2 million new shares of our common stock have been authorized to date to be available for sale under our Employee Stock Purchase Plan (ESPP).

Employees purchased 250 thousand shares at a weighted-average price of $ 27.56 per share during 2023.

8 unchanged sentences

At December 31, 2023 and 2022, we had restricted stock units outstanding, including performance-based shares, of 6.6 million shares and 6.9 million shares, respectively, with a weighted-average fair value of $ 28.34 and $ 23.63 , respectively.

During 2023, we granted 3.8 million shares of restricted stock units with a weighted-average fair value of $ 27.43 .

Restricted stock units generally vest after three years .

5 unchanged sentences

The weighted-average remaining contractual life for stock options that were both outstanding and exercisable at December 31, 2023, was 1.8 years.

Cash received for the exercise of stock options in 2022 was $ 49 million, and the related income tax benefit recognized in 2022 was $ 2 million.

Cash received for the exercise of stock options in 2023 and 2022 was $ 2 million and $ 49 million, respectively, and the related income tax benefit recognized in both 2023 and 2022 was $ 2 million.

The Williams Companies, Inc.

12 unchanged sentences

Commodity derivative liabilities (1) ( 285 ) ( 285 ) ( 3 ) ( 278 ) ( 4 )

Other financial assets (liabilities) - net ( 5 ) ( 5 ) — ( 5 ) —

Interest rate derivatives

Additional disclosures:

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Guarantees ( 38 ) ( 25 ) — ( 9 ) ( 16 )

(1) Net commodity derivative assets and liabilities exclude $ 202 million of net cash collateral in Level 1.

(2) Net commodity derivative assets and liabilities exclude $ 296 million of net cash collateral in Level 1.

(1) Commodity derivative assets and liabilities exclude $ 2 million of net cash collateral in Level 1.

(2) Commodity derivative assets and liabilities exclude $ 202 million of net cash collateral in Level 1.

Fair Value Methods

2 unchanged sentences

ARO Trust investments :

Transco deposits a portion of its collected rates, pursuant to its rate case settlement, into an external trust that is specifically designated to fund future ARO’s.

Transco deposits a portion of its collected rates, pursuant to its rate case settlement, into an external trust that is specifically designated to fund future AROs.

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 and is reported in Regulatory assets, deferred charges, and other in our Consolidated Balance Sheet.

12 unchanged sentences

Commodity derivative liabilities are reported in Derivative liabilities and Regulatory liabilities, deferred income, and other in our Consolidated Balance Sheet.

Changes in the fair value of our derivative assets and liabilities are recorded in Net gain (loss) on commodity derivatives and Net processing commodity expenses in our Consolidated Statement of Income.

See Note 16 – Derivatives for additional information on our derivatives.

Changes in the fair value of our derivative assets and liabilities are recorded in Net gain (loss) from commodity derivatives and Net processing commodity expenses in our Consolidated Statement of Income.

See Note 16 – Commodity Derivatives for additional information on our derivatives.

The following table presents a reconciliation of changes in fair value of our net commodity derivatives classified as Level 3 in the fair value hierarchy.

3 unchanged sentences

Purchases, issuances, and settlements 20 ( 5 )

Acquired derivatives (Note 3)

Transfers into Level 3 — ( 24 )

3 unchanged sentences

The valuation of this contract reflects the extrapolation of forward natural gas prices for periods beyond observable price curves, which is considered a significant unobservable input.

Interest rate derivatives:

At December 31, 2023, we held forward starting interest rate swap agreements with notional amounts totaling $ 1.15 billion.

During January 2024 we terminated certain of these agreements totaling $ 750 million of notional value coinciding with the issuance of long-term debt (see Note 12 – Debt and Banking Arrangements).

The fair value of these derivatives is determined using discounted cash flows considering forward interest rates and the terms of the agreements, corroborated by counterparty valuations, and is classified as a Level 2 measurement.

We designated these derivatives as cash flow hedges to reduce interest rate exposure on future debt issuances.

Gains and losses on these derivative instruments are reflected as a component of AOCI and will be amortized to earnings as a component of Interest expense in our Consolidated Statement of Income.

These forward starting interest rate swaps are reported in Derivative assets and Derivative liabilities in our Consolidated Balance Sheet.

Additional fair value disclosures

2 unchanged sentences

The quoted prices are based on observable transactions in less active markets for our debt or similar instruments.

The fair values of the financing obligations associated with our Dalton, Leidy South, and Atlantic Sunrise projects, which are included within long-term debt, were determined using an income approach (see Note 12 – Debt and Banking Arrangements).

Guarantees primarily consist 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.

The fair values of the financing obligations associated with our Dalton, Leidy South, and Atlantic Sunrise projects, as well as the deferred

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

consideration obligation associated with the RMM Acquisition (see Note 3 – Acquisitions and Divestitures), all included within long-term debt, were determined using an income approach (see Note 12 – Debt and Banking Arrangements).

Guarantees primarily consist of a guarantee we have provided in the event of nonpayment by our previously owned communications subsidiary, Williams Communications Group, Inc., (WilTel), on a lease performance obligation that extends through 2042.

Guarantees also include an indemnification related to a disposed operation.

To estimate the fair value of the WilTel 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 WilTel’s current owner and the term of the underlying obligation.

The estimated default rate is determined by obtaining the average cumulative issuer-weighted default rate based on the credit rating of WilTel’s current owner and the term of the underlying obligation.

The default rate is published by Moody’s Investors Service.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

value of the WilTel guarantee is reported in Accrued and other current liabilities in our Consolidated Balance Sheet.

The maximum potential undiscounted exposure is approximately $ 24 million at December 31, 2022.

The carrying value of the WilTel guarantee is reported in Accrued and other current liabilities in our Consolidated Balance Sheet.

The maximum potential undiscounted liquidity exposure is approximately $ 23 million at December 31, 2023.

Our exposure declines systematically through the remaining term of WilTel’s obligation.

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We have never been called upon to perform under these indemnifications and have no current expectation of a future claim.

Nonrecurring fair value measurements

During the first quarter of 2020, we observed a significant decline in the publicly traded price of our common stock on the New York Stock Exchange, which declined 40 percent during the quarter, including a 26 percent decline in the month of March.

These changes were generally attributed to macroeconomic and geopolitical conditions, including significant declines in crude oil prices driven by both surplus supply and a decrease in demand caused by the coronavirus pandemic.

As a result of these conditions, we performed an interim assessment of the goodwill associated with our Northeast G&P reporting unit as of March 31, 2020.

The assessment considered the total fair value of the businesses within the Northeast G&P reporting unit, which was determined using income and market approaches.

We utilized internally developed industry weighted-average discount rates and estimates of valuation multiples of comparable publicly traded gathering and processing companies.

In assessing the fair value as of the March 31, 2020, measurement date, we were required to consider recent publicly available indications of value, which included lower observed publicly traded EBITDA market multiples as compared with recent history and significantly higher industry weighted-average discount rates.

The fair value of the reporting unit was further reconciled to our estimated total enterprise value as of March 31, 2020, which considered observable valuation multiples of comparable publicly traded companies applied to each distinct business including the Northeast G&P reporting unit.

This assessment indicated that the estimated fair value of the Northeast G&P reporting unit was below its carrying value, including goodwill.

As a result of this Level 3 measurement, we recognized a full impairment charge of $ 187 million as of March 31, 2020, in Impairment of goodwill in our Consolidated Statement of Income.

Our partner’s $ 65 million share of this impairment is reflected within Net income (loss) attributable to noncontrolling interests in our Consolidated Statement of Income.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

The following table presents impairments of assets and equity-method investments associated with certain nonrecurring fair value measurements within Level 3 of the fair value hierarchy, except as specifically noted.

Year Ended December 31,

Segment Date of Measurement Fair Value 2022 2021 2020

Impairment of certain assets:

Certain capitalized project costs (1) Transmission & Gulf of Mexico June 30, 2021 $ 1 $ 2

Certain capitalized project costs (1) Transmission & Gulf of Mexico December 31, 2020 42 $ 170

Certain gathering assets (2) Northeast G&P December 31, 2020 5 12

Impairment of certain assets $ — $ 2 $ 182

Impairment of equity-method investments:

RMM (3) West December 31, 2020 $ 421 $ 108

RMM (4) West March 31, 2020 557 243

Brazos Permian II (4) West March 31, 2020 — 193

BRMH (5) Northeast G&P March 31, 2020 191 229

Appalachia Midstream Investments (5) Northeast G&P March 31, 2020 2,700 127

Aux Sable (5) Northeast G&P March 31, 2020 7 39

Laurel Mountain (5) Northeast G&P March 31, 2020 236 10

Discovery (5) Transmission & Gulf of Mexico March 31, 2020 367 97

Impairment of equity-method investments $ — $ — $ 1,046

______________

(1) Relates to capitalized project development costs for the Northeast Supply Enhancement project.

Approvals required for the project from the New York State Department of Environmental Conservation and the New Jersey Department of Environmental Protection have been denied and we have not refiled at this time.

Beginning in May 2020, we discontinued capitalization of costs related to this project.

Considering that the customer precedent agreements and FERC certificate for the project remain in effect, we had previously concluded that the probability of completing the project was sufficient to not require impairment.

However, developments in the political and regulatory environments caused us to slightly lower that assessed probability such that the capitalized project costs required impairment.

The estimated fair value of the materials within the capitalized project costs at December 31, 2020 considered other internal uses and salvage values for the Property, plant, and equipment – net .

The remaining capitalized costs were determined to have no fair value.

The estimated fair value of certain capitalized project costs at June 30, 2021, was determined by a market approach, which incorporated an indication of interest by a third-party.

(2) Relates to a gathering system in the Marcellus Shale region, that was sold in 2021.

The estimated fair value of the Property, plant, and equipment – net and Intangible assets – net of accumulated amortization was determined using a market approach, which incorporated an indication of interest by a third party.

These inputs resulted in a fair value measurement within Level 2 of the fair value hierarchy.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

(3) During the fourth quarter of 2020, RMM renegotiated service contracts with a significant customer in connection with the customer’s Chapter 11 bankruptcy proceedings.

The renegotiated contracts result in lower service rates and lower projected future cash flows.

As a result, we evaluated this investment for other-than-temporary impairment.

The fair value was measured using an income approach.

We utilized a discount rate of 18 percent in our analysis .

(4) Following the previously described declining market conditions during the first quarter of 2020, we evaluated these investments for other-than-temporary impairment.

The fair value was measured using an income approach.

Both investees operate in primarily oil-driven basins where significant expected reductions in producer activities led to reduced estimates of expected future cash flows.

Our fair value estimates also reflected discount rates of approximately 17 percent for these investments.

We also considered any debt held at the investee level, and its impact to fair value.

The industry weighted-average discount rates utilized were significantly influenced by the market declines previously discussed.

(5) Following the previously described declining market conditions during the first quarter of 2020, we evaluated these investments for other-than-temporary impairment.

The impairments within our Northeast G&P segment are primarily associated with operations in wet-gas areas where producer drilling activities are influenced by NGL prices which historically trend with crude oil prices.

The fair values of our investments in BRMH and Aux Sable Liquid Products LP (Aux Sable) were estimated using a market approach, reflecting valuation multiples ranging from 5.0 x to 6.2 x EBITDA (weighted-average 6.0 x).

The fair values of the other investments, including gathering systems that are part of Appalachia Midstream Investments, were estimated using an income approach, with discount rates ranging from 9.7 percent to 13.5 percent (weighted-average 12.6 percent).

We also considered any debt held at the investee level, and its impact to fair value.

The assumed valuation multiples and industry weighted-average discount rates utilized were both significantly influenced by the market declines previously discussed.

Concentration of Credit Risk

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We use established credit policies to determine and monitor the creditworthiness of gas marketing and trading counterparties, including requirements to post collateral or other credit security, as well as the quality of pledged collateral.

Collateral or credit security is most often in the form of cash or letters of credit from an investment-grade

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

financial institution, but may also include U.S.

Collateral or credit security is most often in the form of cash or letters of credit from an investment-grade financial institution, but may also include U.S.

government securities.

1 unchanged sentence

When more than one derivative transaction with the same counterparty is outstanding and a legally enforceable netting agreement exists with that counterparty, the “net” mark-to-market exposure represents a reasonable measure of our credit risk with that counterparty.

Note 16 – Derivatives

Commodity-Related Derivatives

Note 16 – Commodity Derivatives

We are exposed to commodity price risk.

3 unchanged sentences

See Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for additional fair value information.

In our Consolidated Statement of Cash Flows, any cash impacts of settled commodity-related derivatives are recorded as operating activities.

We enter into commodity-related derivatives to economically hedge exposures to natural gas, NGLs, and crude oil and retain exposure to price changes that can, in a volatile energy market, be material and can adversely affect our results of operations.

At December 31, 2022, the notional volume of the net long (short) positions for our commodity-related derivative contracts were as follows:

In our Consolidated Statement of Cash Flows, any cash impacts of settled commodity derivatives are recorded as operating activities.

We enter into commodity derivatives to economically hedge exposures to natural gas, NGLs, and crude oil and retain exposure to price changes that can, in a volatile energy market, be material and can adversely affect our results of operations.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

At December 31, 2023, the notional volume of the net long (short) positions for our commodity derivative contracts were as follows:

Commodity Unit of Measure Net Long (Short) Position

5 unchanged sentences

Central Hub Risk - WTI Crude Oil Barrels ( 155,000 )

Derivative Financial Statement Presentation

The fair value of commodity-related derivatives, which are not designated as hedging instruments for accounting purposes, was reflected as follows:

Commodity Derivatives Financial Statement Presentation

The fair value of commodity derivatives, which are not designated as hedging instruments for accounting purposes, was reflected as follows:

2023 December 31,

Derivative Category Assets (Liabilities) Assets (Liabilities)

Commodity Derivatives Categories

Assets (Liabilities) Assets (Liabilities)

Current $ 623 $ ( 496 ) $ 1,099 $ ( 1,278 )

Noncurrent 243 ( 345 ) 269 ( 734 )

Total derivatives $ 1,368 $ ( 2,012 ) $ 785 $ ( 1,189 )

Total commodity derivatives

$ 866 $ ( 841 ) $ 1,368 $ ( 2,012 )

Counterparty and collateral netting offset ( 552 ) 554 ( 1,034 ) 1,236

Amounts recognized in our Consolidated Balance Sheet $ 314 $ ( 287 ) $ 334 $ ( 776 )

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

The pre-tax effects of commodity-related derivative instruments in Net gain (loss) on commodity derivatives reflected within Total revenues and Net processing commodity expenses in our Consolidated Statement of Income were as follows:

The pre-tax effects of commodity derivative instruments in our Consolidated Statement of Income were as follows:

Year Ended December 31,

2023 2022 2021

Realized commodity-related derivatives designated as hedging instruments $ — $ ( 55 ) $ ( 2 )

Realized commodity-related derivatives not designated as hedging instruments ( 91 ) 16 ( 3 )

Unrealized commodity-related derivatives not designated as hedging instruments ( 296 ) ( 109 ) —

Net gain (loss) on commodity derivatives $ ( 387 ) $ ( 148 ) $ ( 5 )

Realized commodity-related derivatives not designated as hedging instruments in Net processing commodity expenses

Unrealized commodity-related derivatives not designated as hedging instruments in Net processing commodity expenses

Net gain (loss) from commodity derivatives within Total revenues :

Realized commodity derivatives designated as hedging instruments $ — $ — $ ( 55 )

Realized commodity derivatives not designated as hedging instruments 253 ( 91 ) 16

Unrealized commodity derivatives not designated as hedging instruments 703 ( 296 ) ( 109 )

$ 956 $ ( 387 ) $ ( 148 )

Net gain (loss) from commodity derivatives within Net processing commodity expenses :

Realized commodity derivatives not designated as hedging instruments $ ( 4 ) $ 16 $ 2

Unrealized commodity derivatives not designated as hedging instruments ( 43 ) 47 —

$ ( 47 ) $ 63 $ 2

Total net gain (loss) from commodity derivatives

$ 909 $ ( 324 ) $ ( 146 )

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

Contingent Features

Generally, collateral may be provided by a parent guaranty, letter of credit, or cash.

Generally, collateral may be provided in the form of a parent guaranty, letter of credit, or cash.

If collateral is required, fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral are offset against fair value amounts recognized for derivatives executed with the same counterparty.

6 unchanged sentences

At December 31, 2023, and 2022, net cash collateral held on deposit in broker margin accounts was $ 2 million and $ 202 million, respectively.

Note 17 – Contingent Liabilities and Commitments

Note 17 – Contingencies and Commitments

Alaska Refinery Contamination Litigation

8 unchanged sentences

Certain claims by FHRA against us were resolved by the Alaska Supreme Court in our favor.

FHRA’s claims against us for contractual indemnification and statutory claims for damages related to off-site sulfolane were remanded to the Alaska Superior

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

FHRA’s claims against us for contractual indemnification and statutory claims for damages related to off-site sulfolane were remanded to the Alaska Superior Court.

The State of Alaska filed its action in March 2014, seeking damages.

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A bench trial on all claims except North Pole’s claims began in October 2019.

In January 2020, the Alaska Superior Court issued its Memorandum of Decision finding in favor of the State of Alaska and FHRA, with the total incurred and potential future damages estimated to be $ 86 million.

The court found that FHRA is not entitled to contractual indemnification from us because FHRA contributed to the sulfolane contamination.

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We also filed post-judgment motions including a Motion for New Trial and a Motion to Alter or Amend the Judgment.

These post-trial motions were resolved with the court’s denial of the last motion on June 11, 2020.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

post-trial motions were resolved with the court’s denial of the last motion on June 11, 2020.

Our Statement of Points on Appeal was filed on July 13, 2020.

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Oral argument was held on December 15, 2021.

We have recorded an accrued liability in the amount of our estimate of the probable loss.

It is reasonably possible that we may not be successful on appeal and could ultimately pay up to the amount of judgment.

On May 26, 2023, the Alaska Supreme Court issued its Opinion substantially affirming the Superior Court’s decision.

On July 18, 2023, the Superior Court granted our stay of execution of the monetary judgment portions of the judgment while we seek review before the United States Supreme Court.

On September 25, 2023, we filed a Petition for a Writ of Certiorari with the United States Supreme Court, which was subsequently denied in January 2024.

The North Pole claims were also settled in January 2024.

During 2023, we recorded pre-tax charges of $ 125 million to Income (loss) from discontinued operations in our Consolidated Statement of Income related to these matters.

Payments were made in January 2024 and the claims against us are now resolved.

Royalty Matters

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We have also been named as a defendant in certain of these cases filed in Pennsylvania based on allegations that we improperly participated with Chesapeake in causing the alleged royalty underpayments.

We believe that the claims asserted are subject to indemnity obligations owed to us by Chesapeake.

Chesapeake has reached a settlement to resolve substantially all Pennsylvania royalty cases pending, which settlement applies to both Chesapeake and us.

The settlement does not require any contribution from us.

On August 23, 2021, the court approved the settlement, but two objectors filed an appeal with the United States Court of Appeals for the Fifth Circuit.

We believe that the claims asserted are subject to indemnity obligations owed to us by Chesapeake, which obligations survived Chesapeake’s bankruptcy proceedings.

Prior to its bankruptcy, Chesapeake reached a settlement to resolve substantially all Pennsylvania royalty cases pending.

During the pendency of the bankruptcy, that settlement was renegotiated.

The settlement applies to both Chesapeake and us and does not require any contribution from us.

On August 23, 2021, after referral to the United States District Court for the Southern District of Texas by the bankruptcy court, the court approved the settlement.

Two objectors filed an appeal with the United States Court of Appeals for the Fifth Circuit.

On June 8, 2023, the Court of Appeals vacated the settlement approval and remanded to the United States District Court for the Southern District of Texas with instructions to dismiss the settlement proceedings for lack of jurisdiction.

On August 31, 2023, the bankruptcy court entered an order finding the settlement agreements to be null and void.

Certain plaintiffs have filed a notice of dismissal of their claims against Chesapeake that arose prior to February 8, 2021 in the United States District Court for the Middle District of Pennsylvania lawsuits.

The notice states that plaintiffs are not releasing their claims against the other defendants, including us, or claims against Chesapeake that arose after February 9, 2021.

We continue to believe the claims against us are subject to indemnity obligations owed to us by Chesapeake.

Litigation Against Energy Transfer and Related Parties

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On May 3, 2016, Energy Transfer and LE GP, LLC filed an answer and counterclaims.

On May 13, 2016, we filed a separate complaint in Delaware Chancery Court against Energy Transfer, LE GP, LLC and the other Energy Transfer affiliates that are parties to the ETE Merger Agreement, alleging material breaches of the ETE Merger Agreement for failing to cooperate and use necessary efforts to obtain a tax opinion required under the ETE Merger Agreement (Tax Opinion) and for otherwise failing to use necessary efforts to consummate the merger under the ETE Merger Agreement wherein we would be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger).

The suit sought, among other things, a declaratory judgment and injunction preventing Energy Transfer from terminating or otherwise avoiding its obligations under the ETE Merger Agreement due to any failure to obtain the Tax Opinion.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

breaches of the ETE Merger Agreement for failing to cooperate and use necessary efforts to obtain a tax opinion required under the ETE Merger Agreement (Tax Opinion) and for otherwise failing to use necessary efforts to consummate the merger under the ETE Merger Agreement wherein we would be merged with and into the newly formed Energy Transfer Corp LP (ETC) (ETC Merger).

The Court of Chancery coordinated the Special Offering and Tax Opinion suits.

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On September 21, 2022, the court entered a final order and judgment awarding us the termination fee, attorney’s fees, expenses, and interest in the amount of $ 602 million plus additional interest starting September 17, 2022.

Energy Transfer has appealed to the Delaware Supreme Court.

Energy Transfer appealed to the Delaware Supreme Court.

The Delaware Supreme Court held oral argument en banc on July 12, 2023.

On October 10, 2023, the Delaware Supreme Court issued an opinion affirming the Court of Chancery’s ruling.

On October 25, 2023, Energy Transfer filed a motion for reargument with the Delaware Supreme Court.

On November 28, 2023, we received a $ 627 million payment from Energy Transfer for the final order and judgment.

On the same day, we paid attorney fees which had been incurred on a contingent fee basis.

This resulted in a net gain of $ 534 million reported as Net gain from Energy Transfer litigation judgment in our Consolidated Statement of Income and included as a component of Modified EBITDA within our Other segment for the year ended December 31, 2023.

Environmental Matters

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The EPA and various state regulatory agencies routinely propose and promulgate new rules and issue updated guidance to existing rules.

These rulemakings include, but are not limited to, rules for reciprocating internal combustion engine and combustion turbine maximum achievable control technology, reviews and updates to the National Ambient Air Quality Standards, and rules for new and existing source performance standards for volatile

These rulemakings include, but are not limited to, rules for reciprocating internal

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

organic compound and methane.

combustion engine and combustion turbine maximum achievable control technology, reviews and updates to the National Ambient Air Quality Standards, and rules for new and existing source performance standards for volatile organic compound and methane.

We continuously monitor these regulatory changes and how they may impact our operations.

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• Net income (loss) before:

◦ Income (loss) from discontinued operations;

◦ Provision (benefit) for income taxes;

◦ Interest incurred, net of interest capitalized;

◦ Interest expense;

◦ Equity earnings (losses);

◦ Impairment of equity-method investments;

◦ Other investing income (loss) – net;

◦ Impairment of goodwill;

◦ Depreciation and amortization expenses;

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Notes to Consolidated Financial Statements – (Continued)

Significant noncash items which are components of Modified EBITDA may include unrealized net gain (loss) from commodity derivatives within Total revenues, unrealized net gain (loss) from commodity derivatives within Net processing commodity expenses for our Gas & NGL Marketing segment, charges associated with lower of cost or net realizable value adjustments to our Gas & NGL Marketing segment inventory within Product sales and Product costs in our Consolidated Statement of Income, and impairments of certain assets within Other (income) expense – net within Operating income (loss) .

The following table reflects the reconciliation of Modified EBITDA to Net income (loss) as reported in our Consolidated Statement of Income:

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Gas & NGL Marketing Services

Other 434 178 ( 15 )

950 ( 40 ) 22

Total reportable segments

7,172 5,641 5,316

Modified EBITDA of other business activities

8,013 6,075 5,494

Accretion expense associated with asset retirement obligations for nonregulated operations ( 59 ) ( 51 ) ( 45 )

Depreciation and amortization expenses ( 2,071 ) ( 2,009 ) ( 1,842 )

Impairment of goodwill — — ( 187 )

Equity earnings (losses) 589 637 608

Impairment of equity-method investments — — ( 1,046 )

Other investing income (loss) – net 108 16 7

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(Provision) benefit for income taxes ( 1,005 ) ( 425 ) ( 511 )

Income (loss) from discontinued operations ( 97 ) — —

Net income (loss) $ 3,303 $ 2,117 $ 1,562

(1) Modified EBITDA for 2022, 2021, and 2020, includes charges of $ 161 million, $ 15 million, and $ 17 million respectively, associated with lower of cost or net realizable value adjustments to our inventory.

These charges are reflected in Product Sales or Product costs in our Consolidated Statement of Income (see Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies ) .

Net unrealized commodity-related derivatives gains of $ 47 million in 2022 and $ 0 in 2021 and 2020 are reflected in Net processing commodity expenses.

The Williams Companies, Inc.

Notes to Consolidated Financial Statements – (Continued)

The following table reflects the reconciliation of Segment revenues to Total revenues as reported in the Consolidated Statement of Income and Other financial information :

The following table reflects the reconciliation of Segment revenues to Total revenues as reported in our Consolidated Statement of Income and Other financial information :

Transmission & Gulf of Mexico Northeast G&P West Gas & NGL Marketing Services (1) Other Eliminations Total

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Total product sales 252 132 441 2,060 442 ( 548 ) 2,779

Net gain (loss) on commodity derivatives

Net gain (loss) from commodity derivatives

Realized 2 — 89 115 47 — 253

Unrealized — — — 702 1 — 703

Total net gain (loss) on commodity derivatives (2) — — ( 4 ) ( 304 ) ( 79 ) — ( 387 )

Total net gain (loss) from commodity derivatives (2)

2 — 89 817 48 — 956

Total revenues $ 4,150 $ 2,033 $ 2,135 $ 2,878 $ 506 $ ( 795 ) $ 10,907

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Total product sales 404 134 841 3,534 706 ( 1,063 ) 4,556

Net gain (loss) on commodity derivatives

Net gain (loss) from commodity derivatives

Realized — — ( 4 ) 17 ( 104 ) — ( 91 )

Unrealized — — — ( 321 ) 25 — ( 296 )

Total net gain (loss) on commodity derivatives (2) — — ( 44 ) ( 84 ) ( 20 ) — ( 148 )

Total net gain (loss) from commodity derivatives (2)

— — ( 4 ) ( 304 ) ( 79 ) — ( 387 )

Total revenues $ 4,047 $ 1,802 $ 2,561 $ 3,233 $ 651 $ ( 1,329 ) $ 10,965

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Total product sales 349 99 643 4,292 333 ( 1,180 ) 4,536

Net gain (loss) on commodity derivatives

Net gain (loss) from commodity derivatives

Realized — — ( 44 ) 25 ( 20 ) — ( 39 )

Unrealized — — — ( 109 ) — — ( 109 )

Total net gain (loss) on commodity derivatives (2) — — ( 2 ) ( 3 ) — — ( 5 )

Total net gain (loss) from commodity derivatives (2)

— — ( 44 ) ( 84 ) ( 20 ) — ( 148 )

Total revenues $ 3,786 $ 1,634 $ 2,026 $ 4,211 $ 345 $ ( 1,375 ) $ 10,627

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______________

(1) See Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies.

(2) We record transactions that qualify as derivatives at fair value with changes in fair value recognized in earnings in the period of change and characterized as unrealized gains or losses.

Gains and losses on derivatives held for energy trading purposes are presented on a net basis in revenue.

(1) As we are acting as agent for natural gas marketing customers or engage in energy trading activities, the resulting revenues are presented net of the related costs of those activities.

(2) We record transactions that qualify as commodity derivatives at fair value with changes in fair value recognized in earnings in the period of change and characterized as unrealized gains or losses.

Gains and losses from commodity derivatives held for energy trading purposes are presented on a net basis in revenue.

Segment assets include Investments , Property, plant, and equipment – net, and Intangible assets – net of accumulated amortization .

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On January 30, 2024, our board of directors approved a regular quarterly dividend to common stockholders of $ 0.475 per share payable on March 25, 2024.

MountainWest Acquisition

On February 14, 2023, we closed on the acquisition of 100 percent of MountainWest Pipelines Holding Company (MountainWest) which includes FERC-regulated interstate natural gas pipeline systems and natural gas storage capacity (MountainWest Acquisition), for $ 1.08 billion of cash funded with available sources of short-term liquidity and assumption of $ 430 million outstanding principal amount of long-term debt, subject to working capital and post-closing adjustments.

The MountainWest Acquisition expands our existing transmission and storage infrastructure footprint into major markets in Utah, Wyoming, and Colorado.

Due to the timing, the initial purchase price accounting for the transaction was not yet complete at the time of filing.

Gulf Coast Storage Acquisition

See Note 3 – Acquisitions and Divestitures for discussion.

Long-term Debt Issuance

In January 2024, we issued $ 1.1 billion of 4.9 percent senior unsecured notes due March 15, 2029, and $ 1 billion of 5.15 percent senior unsecured notes due March 15, 2034 (see Note 12 – Debt and Banking Arrangements).

We used a portion of the proceeds in January 2024 to pay down $ 725 million of commercial paper outstanding at December 31, 2023.

The Williams Companies, Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data