Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
Williams
Williams’ current interest rate risk exposure, inclusive of subsidiaries, is related primarily to its debt portfolio. The debt portfolio is primarily comprised of fixed rate debt, which mitigates the impact of fluctuations in interest rates. Any borrowings under the credit facility and any issuances under Williams’ commercial paper program could be at a variable interest rate and could expose it to the risk of increasing interest rates. The maturity of Williams’ long-term debt portfolio is partially influenced by the expected lives of its operating assets. Williams may utilize interest rate derivative instruments to hedge interest rate risk associated with future debt issuances (see Note 13 – Debt and Banking Arrangements).
The tables below provide information by maturity date about the interest rate risk-sensitive instruments as of December 31, 2024 and 2023. The tables exclude unamortized debt issuance costs and net unamortized debt premium (discount) as disclosed in Note 13 – Debt and Banking Arrangements. See Note 16 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for the methods used in determining the fair value of Williams’ long-term debt.
2025 2026 2027 2028 2029 Thereafter
Total Fair Value December 31, 2024
(Millions)
Long-term debt, including current portion:
Fixed rate $ 1,720 $ 2,345 $ 1,994 $ 1,445 $ 1,600 $ 17,618 $ 26,722 $ 25,830
Weighted-average interest rate 5.1 % 5.1 % 5.0 % 5.1 % 5.1 % 5.2 %
Commercial paper (1)
$ 455 $ — $ — $ — $ — $ — $ 455 $ 455
2024 2025 2026 2027 2028 Thereafter
Total Fair Value December 31, 2023
(Millions)
Long-term debt, including current portion:
Fixed rate
$ 2,338 $ 2,263 $ 2,345 $ 1,993 $ 1,445 $ 15,583 $ 25,967 $ 25,553
Weighted-average interest rate 4.9 % 5.0 % 5.1 % 5.0 % 5.1 % 5.1 %
Commercial paper (1)
$ 725 $ — $ — $ — $ — $ — $ 725 $ 725
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(1) The weighted-average interest rate for commercial paper as of December 31, 2024 and 2023 was 4.6 percent and 5.6 percent, respectively.
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Transco
At December 31, 2024 and 2023, Transco’s debt portfolio included only fixed rate debt, which mitigates the impact of fluctuations in interest rates. Any borrowings under the credit facility would be at a variable interest rate and would expose it to the risk of increasing interest rates. The following tables provide Transco’s information by maturity date about the interest rate risk-sensitive instruments, as of December 31, 2024 and 2023. The tables exclude unamortized debt issuance costs and net unamortized debt premium (discount) as disclosed in Note 13 – Debt and Banking Arrangements. See Note 16 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for the methods used in determining the fair value of Transco’s long-term debt.
2025 2026 2027 2028 2029 Thereafter
Total Fair Value December 31, 2024
(Millions)
Long-term debt, excluding other financing obligation:
Fixed rate $ — $ 1,208 $ — $ 400 $ — $ 2,575 $ 4,183 $ 3,858
Weighted-average interest rate 5.2 % 4.8 % 4.2 % 4.2 % 4.2 % 4.5 %
Other financing obligations, including current portion:
Fixed rate $ 35 $ 37 $ 41 $ 45 $ 50 $ 878 $ 1,086 $ 1,418
Weighted-average interest rate 9.2 % 9.2 % 9.2 % 9.2 % 9.2 % 9.3 %
2024 2025 2026 2027 2028 Thereafter
Total Fair Value December 31, 2023
(Millions)
Long-term debt, excluding other financing obligation:
Fixed rate
$ — $ — $ 1,208 $ — $ 400 $ 2,575 $ 4,183 $ 3,948
Weighted-average interest rate 5.2 % 5.2 % 4.4 % 4.2 % 4.2 % 4.4 %
Other financing obligations, including current portion:
Fixed rate
$ 32 $ 35 $ 37 $ 41 $ 45 $ 926 $ 1,116 $ 1,490
Weighted-average interest rate 9.2 % 9.2 % 9.2 % 9.2 % 9.2 % 9.3 %
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NWP
At December 31, 2024 and 2023, NWP’s debt portfolio included only fixed rate debt, which mitigates the impact of fluctuations in interest rates. Any borrowings under the credit facility would be at a variable interest rate and would expose it to the risk of increasing interest rates. The following tables provide NWP’s information by maturity date about the interest rate risk-sensitive instruments, as of December 31, 2024 and 2023. The tables exclude unamortized debt issuance costs and net unamortized debt premium (discount) as disclosed in Note 13 – Debt and Banking Arrangements. See Note 16 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for the methods used in determining the fair value of NWP’s long-term debt.
2025 2026 2027 2028 2029 Thereafter
Total Fair Value December 31, 2024
(Millions)
Long-term debt, including current portion:
Fixed rate $ 85 $ — $ 500 $ — $ — $ — $ 585 $ 573
Weighted-average interest rate 4.2 % 4.0 % — % — % — % — %
2024 2025 2026 2027 2028 Thereafter
Total Fair Value December 31, 2023
(Millions)
Long-term debt:
Fixed rate
$ — $ 85 $ — $ 500 $ — $ — $ 585 $ 581
Weighted-average interest rate 4.5 % 4.2 % 4.0 % — % — % — %
Commodity Price Risk
Williams is exposed to commodity price risk through its natural gas and NGL marketing activities, including contracts to purchase, sell, transport, and store product. Williams routinely manages this risk with a variety of exchange-traded and OTC energy contracts such as forward contracts, futures contracts, and basis swaps, as well as physical transactions. Although many of the contracts used to manage commodity exposure are derivative instruments, these economic hedges are not designated or do not qualify for hedge accounting treatment.
Williams is also exposed to commodity prices through the upstream business and certain gathering and processing contracts. Williams uses derivative instruments to lock in forward sales prices on a portion of expected future production and to lock in NGL margin on a portion of commodity-exposed gathering and processing volumes. These economic hedges are not designated for hedge accounting treatment.
The fair value measurements and maturities of Williams’ commodity derivative assets (liabilities) at December 31, 2024 and 2023, were as follows:
Total
Fair
Value Maturity
Fair Value Measurements Level (1)
2025
2026 - 2027
2028 - 2029+
(Millions)
Level 1 (2) $ (105) $ (41) $ (56) $ (8)
Level 2 (287) (97) (112) (78)
Level 3 48 11 8 29
Fair value of contracts outstanding at December 31, 2024
$ (344) $ (127) $ (160) $ (57)
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Total
Fair
Value Maturity
Fair Value Measurements Level (1)
2024
2025 - 2026
2027 - 2028+
(Millions)
Level 1 (3) $ 138 $ 110 $ 33 $ (5)
Level 2 (166) 14 (71) (109)
Level 3 53 2 16 35
Fair value of contracts outstanding at December 31, 2023
$ 25 $ 126 $ (22) $ (79)
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(1) See Note 16 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk for discussion of valuation techniques by level within the fair value hierarchy. See Note 17 – Commodity Derivatives for the amount of change in fair value recognized in Williams’ Consolidated Statement of Income.
(2) Commodity derivative assets and liabilities exclude $288 million of net cash collateral in Level 1.
(3) Commodity derivative assets and liabilities exclude $2 million of net cash collateral in Level 1.
Value at Risk (VaR)
VaR is the maximum predicted loss in portfolio value over a specified time period that is not expected to be exceeded within a given degree of probability. Williams’ VaR may not be comparable to that of other companies due to differences in the factors used to calculate VaR. Williams’ VaR is determined using parametric models with 95 percent confidence intervals and one-day holding periods, which means that 95 percent of the time, the risk of loss in a day from a portfolio of positions is expected to be less than or equal to the amount of VaR calculated. Williams’ open exposure is managed in accordance with established policies that limit market risk and require daily reporting of predicted financial loss to management. Because Williams generally manages physical gas assets and economically protects its positions by hedging in the futures markets, its open exposure is generally mitigated. Williams employs daily risk testing, using both VaR and stress testing, to evaluate the risk of its positions.
Williams actively monitors open commodity marketing positions and the resulting VaR and maintain a relatively small risk exposure as total buy volume is close to sell volume, with minimal open natural gas price risk.
The VaR associated with Williams’ integrated natural gas trading operations was $4 million at December 31, 2024 and $9 million at December 31, 2023. Williams had the following VaRs for the period shown:
Year Ended
December 31, 2024 Year Ended
December 31, 2023
(Millions)
Average $ 3 $ 6
High $ 15 $ 13
Low $ 1 $ 4
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Williams’ non-trading portfolio primarily consists of commodity derivatives that hedge Williams’ upstream business and certain gathering and processing contracts. The VaR associated with these commodity derivatives was $8 million at December 31, 2024 and $3 million at December 31, 2023. Williams had the following VaRs for the period shown:
Year Ended
December 31, 2024 Year Ended
December 31, 2023
(Millions)
Average $ 5 $ 4
High $ 8 $ 8
Low $ 3 $ 2
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