The Williams Companies
Annual Report 2022

Plain-text annual report

Williams Annual Report 2022 Williams Vision, Mission and Core Values Vision As the world demands reliable, low-cost, low-carbon energy, Williams will be there with the best transport, storage and delivery solutions. We make clean energy happen by being the best-in-class operator of the critical infrastructure that supports a clean energy future. Mission Williams is committed to being the leader in providing infrastructure that safely delivers natural gas products to reliably fuel the clean energy economy. At Williams, We Are Front Cover: Kaleb S., Operations Technician II, Lafayette, La. Forward-Looking Statements: Any statements included in this 2022 Annual Report that are not historical facts, including, without limitation, statements regarding future market trends and results of operations are forward-looking statements within the meaning of applicable securities law. Such statements are subject to numerous risks and uncertainties beyond our control and our actual results may differ materially from our forward-looking statements. Additional information concerning factors that may influence our results can be found in the Form 10-K under the heading “Part I, Item 1A. Risk Factors.” Table of Contents 1 Stockholder Letter 3 Directors and Officers 5 Form 10-K ALALAAA N SN SN S. AA. ARMRMSSTTROTR NGG PRPRERESIDIDDENTENENTE ANAND CD CD CHIEHIEEFF EXECCUTUTIVE E OFFOFFICEICEERRR Dear Fellow Shareholders: Strong demand for natural gas drove another outstanding year at Williams as we delivered on our strategy to provide clean and reliable energy services to a diverse and growing customer base. In 2022, our teams moved record volumes of natural gas for electricity generation, heating and industrial use, as consumers took advantage of the economic and environmental benefits of this efficient and abundant energy resource. Our track record of delivering predictable, growing earnings in all market cycles underscores the value of Williams as a resilient, long-term investment with a growing dividend. We’ve built a durable business positioned for the future, and we’re leveraging our existing infrastructure to serve rising domestic and global energy security needs, while lowering emissions and creating sustainable value for shareholders. CONNECTING THE BEST SUPPLIES TO GROWING MARKETS In addition to remarkable business performance in 2022, we also made three strategic acquisitions that bolster our ability to deliver growth through a variety of macroeconomic conditions. We significantly expanded our network by adding NorTex Midstream and Trace Midstream’s Haynesville assets, a key link in our Gulf Coast LNG export strategy. Additionally, this past February we closed on the MountainWest Pipeline System, which serves the fast growing mountain states of Utah, Colorado and western Wyoming with fully contracted demand-based gas transmission and storage services. Williams now handles approximately one third of U.S.-produced natural gas with more than 33,000 miles of infrastructure, drawing on production from 14 basins and delivering to the largest demand centers on the Gulf Coast and across the South, Eastern Seaboard, Northeast, Western Mountain States as well as to the Pacific Northwest. We are expanding our natural gas storage portfolio to capture price fluctuations and to support varying loads of LNG exports and backup needs for electrification and renewables. These investments, along with a slate of high-return projects along our existing infrastructure, give us a clear path to significant growth beyond 2030. INVESTING IN PEOPLE AND TECHNOLOGY Our people, asset footprint and ability to successfully adapt as a business over the last 100 years has established a strong culture at Williams of embracing change for the opportunities it offers. I’m excited to see how our employees and leadership 2022 Annual Report The Williams Companies, Inc. 1 Debbie J., (left) Contract Analyst III, and Courtney M., Safety & Health Specialist III, Employee and Contractor Safety, pack meals for nonprofit Filling the Void in Tulsa, Okla. More than 1,000 employees volunteered more than 6,000 hours in projects across Williams’ footprint during Williams’ inaugural Volunteer Week in April 2022. Events like Volunteer Week reflect Williams’ commitment to the communities where its employees live and work. renewables and support the buildout of electrification. Williams is the largest, most natural gas-centric midstream company. We have the expertise and the strategy to help solve what I see as one of the most complex challenges of our time: producing affordable and reliable energy, while displacing carbon heavy fuels both in the United States and overseas — all while growing our nation’s competitiveness. On behalf of all of Williams, I want to thank you, the shareholder, for your continued trust and investment in Williams. Alan S. Armstrong President and Chief Executive Officer March 16, 2023 are more motivated than ever to tackle challenges around energy security, affordability and climate concerns. In addition to executing a multi-year asset modernization program across our footprint, we are investing in New Energy Ventures, an expanding team focused on commercializing innovative technologies, markets and business models including NextGen Gas, clean hydrogen, carbon capture, solar and renewable natural gas. New Energy Ventures collaborates across our core business to evaluate and implement clean energy solutions. COMMITTED TO COMMUNITY AND THE ENVIRONMENT As one of the largest infrastructure companies spanning the United States, we are committed to continually improving our understanding of the priorities of the people our business touches, while building long-term relationships with landowners and other stakeholders. Williams employees volunteered more than 20,000 hours in 2022 to improve their communities, and we also gave more than $13.8 million to approximately 2,100 organizations across 50 states. Our employees are also impassioned about the work they do to support sustainable business operations and transparency. Last year, Williams once again earned recognition across several key ESG rankings — including CDP Climate Change Questionnaire, S&P Global ESG Score and the Dow Jones Sustainability Index (DJSI). Williams was named for the third consecutive year to the DJSI North America index and for the second consecutive year to the DJSI World index. SOLVING COMPLEX ENERGY CHALLENGES Natural gas is the most effective tool available to decarbonize society’s energy demands, driven by economics and not government subsidies or intervention. Shifting from coal to natural gas to generate electricity in the U.S. has significantly reduced emissions since 2005 — the equivalent of removing nearly every gasoline- powered car off the road today. In fact, it reduced more emissions from our power generation sector than all the renewable investments combined. On a global scale, coal-to-gas switching is even more powerful. Converting the top 5 percent of the world’s highest carbon emitting power plants would reduce emissions from power generation by 30 percent. As concerns around climate and energy security converge, natural gas and the infrastructure that moves it are necessary to meet growing demand for clean energy, backstop intermittent 2 The Williams Companies, Inc. 2022 Annual Report BOARD COMMITTEES Audit Committee Michael A. Creel Stacey H. Doré Peter A. Ragauss Rose M. Robeson (Chair) Jesse J. Tyson Compensation & Management Development Committee Stephen W. Bergstrom Carri A. Lockhart Richard E. Muncrief Scott D. Sheffield Murray D. Smith William H. Spence (Chair) Governance & Sustainability Committee Stephen W. Bergstrom Stacey H. Doré (Chair) Peter A. Ragauss William H. Spence Jesse J. Tyson Environmental, Health & Safety Committee Michael A. Creel (Chair) Carri A. Lockhart Richard E. Muncrief Rose M. Robeson Scott D. Sheffield Murray D. Smith D I R E C T O R S A N D O F F I C E R S DIRECTORS ALAN S. ARMSTRONG Tulsa, Oklahoma President and Chief Executive Officer, Williams. Director since 2011. STEPHEN W. BERGSTROM The Woodlands, Texas Retired Board Chair, President and Chief Executive Officer American Midstream Partners, GP, LLC. Chairman; Director since 2016. MICHAEL A. CREEL The Woodlands, Texas Retired Director and Chief Executive Officer, Enterprise Products Partners L.P. Director since 2016. STACEY H. DORÉ Dallas, Texas Executive Vice President of Public Affairs and Chief Strategy and Sustainability Officer, Vistra Corp. Director since 2021. CARRI A. LOCKHART1 Dallas, Texas Former Executive Vice President, Technology, Digital & Innovation, Equinor. Director since 2023. RICHARD E. MUNCRIEF Edmond, Oklahoma Director, President and Chief Executive Officer, Devon Energy Corporation Director since 2022. PETER A. RAGAUSS Houston, Texas Retired Senior Vice President and Chief Financial Officer, Baker Hughes Company. Director since 2016. ROSE M. ROBESON Centennial, Colorado Retired Group Vice President and Chief Financial Officer, DCP Midstream LLC. Director since 2020. SCOTT D. SHEFFIELD Irving, Texas Director and Chief Executive Officer, Pioneer Natural Resources Company. Director since 2016. MURRAY D. SMITH Calgary, Alberta, Canada President, Murray D. Smith and Associates and Former Minister of Energy for Alberta, Canada. Director since 2012. WILLIAM H. SPENCE Bethlehem, Pennsylvania Retired Board Chair, President, and Chief Executive Officer, PPL Corporation. Director since 2016. JESSE J. TYSON The Woodlands, Texas. Retired President and Chief Executive Officer, ExxonMobil Inter-Americas. Director since 2022. HONORARY DIRECTOR JOSEPH H. WILLIAMS Charleston, South Carolina Chairman and Chief Executive Officer for Williams from 1979 -94. Elected to the board in 1969. SENIOR OFFICERS ALAN S. ARMSTRONG President and Chief Executive Officer MICHEAL G. DUNN Executive Vice President and Chief Operating Officer CHAD J. ZAMARIN Executive Vice President of Corporate Strategic Development DEBBIE L. COWAN Senior Vice President and Chief Human Resources Officer SCOTT A. HALLAM Senior Vice President – Transmission and Gulf of Mexico LARRY C. LARSEN Senior Vice President – Gathering & Processing JOHN D. PORTER Senior Vice President and Chief Financial Officer CHAD A. TEPLY Senior Vice President – Project Execution T. LANE WILSON Senior Vice President and General Counsel 1 Carri A. Lockhart joined the Williams Board of Directors on February 10, 2023 2022 Annual Report The Williams Companies, Inc. 3 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ☐ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4174 The Williams Companies, Inc. (Exact Name of Registrant as Specified in Its Charter) Delaware (State or Other Jurisdiction of Incorporation or Organization) One Williams Center Tulsa Oklahoma (Address of Principal Executive Offices) 73-0569878 (IRS Employer Identification No.) 74172 (Zip Code) 800-945-5426 (800-WILLIAMS) (Registrant’s Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Common Stock, $1.00 par value Trading Symbol(s) WMB Securities registered pursuant to Section 12(g) of the Act: None Name of Each Exchange on Which Registered New York Stock Exchange Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☑ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☑ Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☑ The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant’s most recently completed second quarter was approximately $36,889,420,649. The number of shares outstanding of the registrant’s common stock outstanding at February 17, 2023 was 1,218,562,959. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant’s Definitive Proxy Statement for the Registrant’s Annual Meeting of Stockholders to be held on April 25, 2023, are incorporated into Part III, as specifically set forth in Part III. THE WILLIAMS COMPANIES, INC. FORM 10-K TABLE OF CONTENTS PART I Item 1. Business............................................................................................................................................... General ................................................................................................................................................ Service Assets, Customers, and Contracts .......................................................................................... Business Segments .............................................................................................................................. Transmission & Gulf of Mexico...................................................................................................... Northeast G&P ................................................................................................................................ West ................................................................................................................................................. Gas & NGL Marketing Services ..................................................................................................... Other ................................................................................................................................................ Regulatory Matters .............................................................................................................................. Environmental Matters ........................................................................................................................ Competition ......................................................................................................................................... Human Capital Resources ................................................................................................................... Website Access to Reports and Other Information ............................................................................. Item 1A. Risk Factors ......................................................................................................................................... Item 1B. Unresolved Staff Comments ............................................................................................................... Item 2. Properties............................................................................................................................................. Item 3. Item 4. Legal Proceedings ............................................................................................................................... Mine Safety Disclosures...................................................................................................................... Information About Our Executive Officers......................................................................................... Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.............................................................................................................................. PART II Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ............. Item 7A. Quantitative and Qualitative Disclosures About Market Risk ............................................................ Item 8. Financial Statements and Supplementary Data ................................................................................... Reports of Independent Registered Public Accounting Firms ........................................................ Consolidated Statement of Income.................................................................................................. Consolidated Statement of Comprehensive Income (Loss) ............................................................ Consolidated Balance Sheet ............................................................................................................ Consolidated Statement of Changes in Equity ................................................................................ Consolidated Statement of Cash Flows ........................................................................................... 1 Page 5 5 6 9 9 13 15 17 18 18 22 22 23 25 26 40 40 41 41 42 44 46 69 72 72 75 76 77 78 79 PART II (continued) Notes to Consolidated Financial Statements ....................................................................................... Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies ..................................................................................................................... Note 2 – Variable Interest Entities .................................................................................................. Note 3 – Acquisitions ...................................................................................................................... Note 4 – Related Party Transactions ............................................................................................... Note 5 – Revenue Recognition........................................................................................................ Note 6 – Provision (Benefit) for Income Taxes .............................................................................. Note 7 – Employee Benefit Plans.................................................................................................... Note 8 – Investing Activities ........................................................................................................... Note 9 – Property, Plant, and Equipment ........................................................................................ Note 10 – Intangible Assets............................................................................................................. Note 11 – Accrued and Other Current Liabilities............................................................................ Note 12 – Debt and Banking Arrangements.................................................................................... Note 13 – Leases.............................................................................................................................. Note 14 – Equity-Based Compensation........................................................................................... Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk.................... Note 16 – Derivatives ...................................................................................................................... Note 17 – Contingent Liabilities and Commitments....................................................................... Note 18 – Segment Disclosures....................................................................................................... Note 19 – Subsequent Events .......................................................................................................... Schedule II – Valuation and Qualifying Accounts.............................................................................. tem 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............. Item 9A. Controls and Procedures...................................................................................................................... Item 9B. Other Information................................................................................................................................ Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections ................................................ PART III Item 10. Directors, Executive Officers and Corporate Governance.................................................................. Item 11. Executive Compensation..................................................................................................................... Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ............................................................................................................................................. Certain Relationships and Related Transactions, and Director Independence.................................... Principal Accountant Fees and Services ............................................................................................. PART IV Exhibits and Financial Statement Schedules....................................................................................... Form 10-K Summary........................................................................................................................... 2 Item 12. Item 13. Item 14. Item 15. Item 16. 80 80 92 94 98 99 102 104 109 111 113 114 115 119 119 121 126 127 131 135 136 137 137 140 140 140 140 140 141 141 142 150 The following is a listing of certain abbreviations, acronyms, and other industry terminology that may be us ff ed DEFINITIONS throughout this Annual Report. Measurements: Barrel or Bbl: One barrel of petroleum products that equals 42 U.S. gallons MbblsMM /dss : One thousand barrels per day Bcf : One billion cubic feet of natural gas Bcf/d: One billion cubic feet of natur MMMM cf/dMM : One million cubic feet per day ff al gas per day UU British Thermal U TT nit (Btu) : A unit of energy needed to raise the temperature of one pound of water by one degree Fahrenheit MMMM btu:MM One million British thermal units : One thousand dekatherms per day th): A unit of energy equal to one million British thermal units Dekatherms (D(( Mdth/dMM MMMM dthMM : One million dekatherms or approximately one trillion British thermal units MMMM dth/dMM : One million dekatherms per day Consolidated Entities: Entities in which we either own 100 percent ownership interest or for which we do not own 100 percent ownership interest but which we control and therefore consolidate, including the following: Cardinal: Cardinal Gas Services, L.L.C. Gulfstar One: Gulfsff tar One LLC Northeast JV: Ohio Valley Midstream LLC Northwest Pipeline: Northwest Pipeline LLC TrTT ansco: Transcontinental Gas Pipe Line Company, LLC Nonconsolidated Entities: Entities in which we do not own a 100 percent ownership interest and which, as of December 31, 2022, we account for as equity-method investments, including principally the following: Aux Sable: Aux Sable Liquid Products LP Blue Racer: Blue Racer Midstream LLC Brazos Permian II: Brazos Permian II, LLC Discovery:r Discovery Prr roducer Services LLC Gulfstream: Gulfstream Natural Gas System, L.L.C. ff Laurel Mountain: Laurel Mountain Midstream, LLC OPPLOO : Overland Pass Pipeline Company LLC RMMMM :MM Rocky Mountain Midstream Holdings LLC r TarTT ga T rTT ain 7: Targa Train 7 LLC y Government and Regulatory: g EPA: Environmental Protection Agency Exchange Act, the: Securities and Exchange Act of 1934, as amended 3 FERC: Federal Energy Regulatory Commission II IRS: Internal Revenue Service SEC: Securities and Exchange Commission Securities Act, the: Securities Act of 1933, as amended Other: EBITII DTT A:DD Earnings before interest, taxes, depreciation, and amortization Fractionation: The process by which a mixed stream of natural gas liquids is separated into constituent products, such as ethane, propane, and butane GAAPGG : U.S. generally accepted accounting principles LNG: Liquefied natural gas; natural gas which has been liquefied at cryogenic temperatures MVC: Minimum volume commitments NGLs: Natural gas liquids; natural gas liquids result from natural gas processing and crude oil refining and are ff used as petrochemical feedstocks, heating f ff uels, and gasoline additives , among other applications NGL margins r : NGL revenues less Btu replacement cost, plant fuel, transportation, and fractionation Appalachia MidsMM tream Investments: II Our equity-method investments with an approximate average 66 percent interest in multiple gas gathering systems in the Marcellus Shale region. Sequent Acquisition: The July 1, 2021, acquisition of 100 percent of Sequent Energy Management, L.P. and Sequent Energy Canada, Corp. TrTT ace Acquisition: The April 29, 2022, acquisition of 100 percent of Gemini Arklatex, LLC. NorTex Asset Purchase: TT gas storage facilities and pipelines, from NorTex Midstr ff eam Holdings, LLC. The August 31, 2022, purchase of a group of assets in north Texas, primarily natural MM MountainWes t Acquisition: The February 14, 2023, acquisition of 100 percent of MountainWes r t Pipelines Holding Company (MountainWest). tatements in this Annual Report that are not historical information, including statements concerning plans and The s TT e forward-looking objectives of management for future operations, economic performance or related assumptions, ar statements. Forward-looking statements may be identified by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “assumes,” “guidance,” “ outlook,” “in-service date,” or other similar expressions and other words and terms of similar “ meaning. Although we believe that our expectations regarding future events are based on reasonable assumptions, we can give no assurance that such expectations or assumptions will be achieved. Additional information regarding m forward-looking statements and important factors that could cause actual results to differ materially from those in the forward-looking statements are described under Part I, Item 1A in this Annual Report. m rr 4 PART I Item 1. Business In this report, Williams (which includes The Williams Companies, Inc. and, unless the context otherwise indicates, all of our subsidiaries) is at times referred to in the first person as “we,” “us,” or “our.” We also sometimes refer to Williams as the “Company.” GENERAL We are an energy company committed to being the leader in providing infrastructure that safely delivers natural gas products to reliably fuel the clean energy economy. We have operations in 14 supply areas that provide natural gas gathering, processing, and transmission services, NGLs fractionation, transportation, and storage services, and marketing services to more than 700 customers. We own an interest in and operate over 33,000 miles of pipelines in 25 states, 29 natural gas processing facilities, 7 NGL fractionation facilities, approximately 24 million barrels of NGL storage capacity, and 290.4 Bcf of natural gas storage capacity, and deliver natural gas that is used every day ff for clean-power generation, heating, and industrial use. ff Infrastructure serving natural gas demand Natural Gas Gathering Natural Gas Processing Natural Gas Transmission & Storage ü Gather natural gas from producers’ wells and move volumes to processing ü Process volumes to separate natural gas from natural gas liquids (NGLs) ü Move post-processed natural gas to growing demand centers ü Transmission & Gulf of Mexico, Northeast G&P, and West segments ü Transmission & Gulf of Mexico, Northeast G&P, and West segments ü Transco is the nation’s largest natural gas transmission pipeline ü Gas gathering capacity is 25.2 Bcf/d ü Processing capacity is 7.4 Bcf/d ü Transmission & Gulf of Mexico segment ü Total transmission capacity is 31.7 MMdth/d NGL Services Gas And NGL Marketing Services ü NGLs transported to fractionators to split out individual products: ethane, propane, butanes, and natural gasoline ü Purity products moved to end-users via pipeline, truck or rail ü Transmission & Gulf of Mexico, Northeast G&P, and West segments ü Market gas & NGLs to wide range of end-users primarily through transportation and storage agreements ü Complementary to core pipeline transportation and storage business ü Gas and NGL Marketing Services segment ü Gas marketing footprint of over 7 Bcf/d ü NGL marketing sales volume of 250 MMBbls ü 290.4 Bcf of natural gas storage capacity ü ~24 MMBbls of NGL storage capacity Figures represent 100% capacity for operated assets, including those in which Williams has a share of ownership as of December 31, 2022, and includes acquired MountainWest systems which closed February 14, 2023. r ff We were founded in 1908, or iginally incorporated under the laws of the state of Nevada in 1949 and reincorpor ated under the laws of the state of Delaware in 1987. Our common stock trades on the New York Stock Exchange under the symbol “WMB.” Our operations are located in the United States. Williams’ headquarters are located in Tulsa, Oklahoma, with other major offices in Houston, Texas and Pittsburgh, Pennsylvania. Our telephone number is 800-945-5426 (800-WILLIAMS). 5 Service Assets, Customers, and Contracts Key variables for our businesses will continue to be: • • • • • • Obstacles to our expansion efforts, including delays or denials of necessary permits and opposition to hydrocarbon- based energy development; r Producer drilling activities impacting natural gas supplies supporting our gathering and processing volumes; Retaining and attracting customers by continuing to provide reliable services; Revenue growth associated with additional infrastructure either completed or currently under construction; Prices impacting our commodity-based activities; Disciplined growth in our service areas. InII tersrr tate Natural Gas Pipeline Assets Our interstate natural gas pipelines, which are presented in our Transmission & Gulf of Mexico segment as described under the heading “Business Segments,” are subject to regulation by the FERC and as such, our rates and charges for the transportation of natural gas in interstate commerce ar e subject to regulation. The rates are established primarily through the FERC’s ratemaking process, but we also may negotiate rates with our customers pursuant to the terms of our tariffs and FERC policy. ff Our interstate natural gas pipelines transport and store natural gas for a broad mix of customers, including local natural gas distribution companies, public utilities, municipalities, direct industrial users, electric power generators, and natural gas marketers and producers. Most of our interstate natural gas transmission businesses are fully contracted under long-term firm reservation contracts with high credit quality customers. These contracts have various expiration dates and account for the major portion of our regulated businesses. Additionally, we offer storage services and interruptible transportation services under shorter-term agreements. Transco’s and Northwest 6 Pipeline’s three largest customers in 2022 accounted for approximately 23 percent and 51 percent, respectively, of their total operating revenues. GG Gather ing, Processing, and Treating Assets Our gathering, processing, and treating operations are presented within our Transmission & Gulf of Mexico, Northeast G&P, and West reporting segments as described under the heading “Business Segments.” Our gathering systems receive natural gas from producers’ crude oil and natural gas wells and gather these volumes to gas processing, treating, or redelivery facilities. Typically, natural gas, in its raw form, is not acceptable ansportation in major interstate natural gas pipelines or for commercial use as a fuel. Our treating facilities for tr ff remove water vapor, carbon dioxide, and other contaminants, and collect condensate. We are gener ally paid a fee based on the volume of natural gas gathered and/or treated, generally measured in the Btu heating value. r In addition, natural gas contains various amounts of NGLs, which generally have a higher value when separated from the natural gas stream. Our processing plants extract the NGLs, which include ethane, primarily used in the petrochemical industry; propane, used for heating, fuel, and also in the petrochemical industry; and, normal butane, isobutane, and natural gasoline, primarily used by the refining industry. Our gas processing services generate revenues primarily from the following types of contracts: • • ff Fee-based: We are paid a fee based on the volume of natural gas processed, generally measured in the Btu heating value. A portion of our fee-based processing revenue includes a share of the margins on the NGLs produced. For the year ended December 31, 2022, approximately 90 percent of our NGL production volumes were under fee-based contracts. Noncash commodity-based: We also process gas under two types of commodity-based contracts, keep- whole and percent-of-ff liquids, where we receive consideration for our services in the form of NGLs. For a keep-whole arrangement we replace the Btu content of the retained NGLs with natural gas purchases, also known as shrink replacement gas. For a percent-of-liquids arrangement, we deliver an agreed-upon percentage of the extracted NGLs and retain the remainder. Retained NGLs are referred to as our equity NGL production. Per-unit NGL margins are calculated based on sales of our own equity volumes at the processing plants. For the year ended December 31, 2022, approximately 10 percent of our NGL production volumes were under noncash commodity-based contracts. Generally, our gathering and processing agreements are long-term agreements, with terms ranging from month- to-month to the life of the producing lease. Certain contracts include cost of service mechanisms that are designed to support a return on invested capital and allow our gathering rates to be adjusted, subject to specified caps in certain cases, to account for variability in volume, capital expenditures, commodity price fluctuations, compression, and other expenses. We also have certain gas gathering and processing agreements with MVC, whereby the customer is obligated to pay a contractually determined fee based on any shortfall between the actual gathered and processed volumes and the MVC for a stated period. Demand for gas gathering and processing services is dependent on producers’ drilling activities, which is impacted by the strength of the economy, commodity prices, and the resulting demand for natural gas by manufacturing and industrial companies and consumers. Our gathering, processing, and treating businesses do not have direct exposure to crude oil prices. Our on-shore natural gas gathering and processing businesses are substantially focused on gas-directed drilling basins rather than crude oil, with a broad diversity of basins and customers served. Declines in crude oil drilling would be expected to result in less associated natural gas production, ff which could drive more demand for natural gas produced from gas-directed basins we serve. ff During 2022, our facilities gathered and processed gas and crude oil for approximately 240 customers. Our top ten customers accounted for approximately 70 percent of our gathering and processing fee revenues and NGL margins from our noncash commodity-based agreements. We believe counterparty credit concerns in our gathering and processing businesses are significantly mitigated by the physical nature of our services, where w e gather at the wellhead and are therefore critical to a producer’s ability to move product to market. ff r 7 GG Gas an d NGNN L Marketin GG g Our NGL and natural gas marketing services are presented primarily within our Gas & NGL Marketing Services segment. We market natural gas and NGL products to a wide range of users in the energy and petrochemical industries. In 2022, our three largest natural gas marketing customers accounted for approximately 12 percent of our gross natural gas marketing sales, and our three largest NGL marketing customers accounted for approximately 42 percent of our NGL marketing sales. Our gas marketing business markets natural gas from the production at our upstream properties and provides asset management and the wholesale marketing, trading, storage, and transportation of natural gas for a diverse set of natural gas and electric utilities, municipalities, power generators, and producers, and moves gas to markets through transportation and storage agreements on strategically positioned assets. Our pipeline agreements connect with multiple pipelines that provide our customers with access to diverse sources of supply and various natural gas test growing markets. The southeastern market served by our Gas & NGL Marketing Services segment is the fasff natural gas demand region in the United States and expands our natural gas marketing activities, as well as optimizes our pipeline and storage capabilities. 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 futur e, resulting in positive net product sales. Commodity-based exchange-traded futures contracts and over-the- ff 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. 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. Monthly demand charges incurred for the contracted storage and transportation capacity and payments associated with asset management agreements are substantially indirectly reimbursed by our customers. As we are acting as an agent, our natural gas marketing revenues are presented net of the related costs of those activities. In addition, all of our natural gas marketing derivative activities qualify as held for trading purposes, which requires net presentation in the Consolidated Statement of Income. Prior to the integration in 2022 of our historical gas marketing business with the acquired Sequent gas marketing business, natural gas marketing revenues and costs for our historical business were reported on a gross basis. Following the integration in 2022, the entire natural gas ading purposes, and the related revenues are therefore presented net of marketing portfolio is considered held for tr the related costs of those activities in 2022. ff Our NGL marketing business transports and markets our equity NGLs from the production at our processing plants, NGLs from the production at our upstream properties, and also NGLs on behalf of third-party NGL producers, including some of our fee-based processing customers, as well as the NGL volumes owned by RMM and Discovery. The NGL marketing bus iness bears the risk of price changes in these NGL volumes while they are being transported to final sales delivery points. In order to meet sales contract obligations, we may purchase products in the spot market for resale. rr We are exposed to commodity price risk. 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 hedge exposures to natural gas and NGLs and retain exposure to price changes that can, in a volatile energy market, be material and can adversely affff ect our results of operations. ff We experience significant earnings volatility from the fair value accounting required for the derivatives used to ff 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. ff 8 Crude Oil Transpor s tation and Production Handling Assets r rr Our crude oil trans portation operations, which are primarily presented in our Transmission & Gulf of Mexico segment as described under the heading “Business Segments,” earn revenues primarily from a combination of fixed- oduction volumes, and contributions in aid of monthly fees, contractual fixed or variable fees applied to pr construction (CIAC) arr sociated with production handling and export revenues are recognized on a units-of-ff production basis utilizing either contractually determined maximum daily quantities or expected remaining production. CIAC arrangements are recognized based on a units of production basis, utilizing expected remaining production. Our crude oil transportation business is supported mostly by major oil producers with long-cycle perspectives. angements. Generally, fixed-monthly fees as ff ff BUSINESS SEGMENTS Consistent with the manner in which our chief operating decision maker evaluates performance and allocates resources, our operations are conducted, managed, and presented in Part I of this Annual Report within the following reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services. All remaining business activities, including our upstream operations and corporate activities, are included in Other. Our reportable segments are comprised of the following business activities: • • Transmission & Gulf of Mexico is comprised of our interstate natural gas pipelines, Transco, Northwest Pipeline, and MountainWest, and their related natural gas storage facilities, as well as natural gas gathering and processing and crude oil production handling and transpor tation assets in the Gulf Coast region, including a 51 percent interest in Gulfstar One, a 50 percent equity-method investment in Gulfstream, and a 60 percent equity-method investment in Discovery. Transmission & Gulf of Mexico also includes natural gas storage facilities and pipelines providing services in nor th Texas. rr ff Northeast G&P is comprised of our midstream gathering, processing, and fractionation businesses in the Marcellus Shale region primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio, as well as a 65 percent interest in our Northeast JV which operates in West Virginia, Ohio, and Pennsylvania, a 66 percent interest in Cardinal which operates in Ohio, a 69 percent equity-method investment in Laurel Mountain, a 50 percent equity-method investment in Blue Racer, and Appalachia Midstream Investments. • 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, and the Mid-Continent region which includes the Anadarko and Permian basins. This segment also includes our NGL storage ff facilities, an undivided 50 percent interest in an NGL fractionator near Conway, Kansas, a 50 percent equity-method investment in OPPL, a 50 percent equity-method investment in RMM, a 20 percent equity- method investment in Targa Train 7, and a 15 percent equity-method investment in Brazos Permian II. • Gas & NGL Marketing Services includes our NGL and natural gas marketing and trading operations. This segment includes risk management and transactions related to the storage and transportation of natural gas and NGLs on strategically positioned assets. Detailed discussion of each of our reportable segments follows. For a discussion of our ongoing expansion projects, see Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Transmission & Gulf of Mexico This segment includes the Transco interstate natural gas pipeline that extends from the Gulf of Mexico to the eastern seaboard, the Northwest Pipeline interstate natural gas pipeline, the MountainWest interstate natural gas pipeline, as well as natural gas gathering, processing and treating, crude oil production handling, and NGL frff actionation assets within the onshore, offshore shelf, and deepwater areas in and around the Gulf Coast states of 9 Texas, Louisiana, Mississippi, and Alabama. This segment also includes various petrochemical and feedstock pipelines in the Gulf Coast region and natural gas pipelines and storage facilities located in north Texas. Transco Transco is an interstate natural gas transmission company that owns and operates a 9,700-mile natural gas pipeline system, which is regulated by the FERC, extending from Texas, Louisiana, Mississippi, and the Gulf of Mexico through Alabama, Georgia, South Carolina, North Carolina, Virginia, Maryland, Delaware, Pennsylvania, and New Jersey to the New York City metropolitan area. The system serves customers in Texas and 12 southeast and Atlantic seaboard states, including major metropolitan areas in Georgia, North Carolina, Washington, D.C., Maryland, N ew York, New Jersey, and Pennsylvania. rr At December 31, 2022, Transco’s system had a design capacity totaling approximately 18.6 MMdth/d. Transco’s system includes 59 compressor stations, four underground storage fields, and one LNG storage facility. Compression facilities at sea level-rated capacity total approximately 2.4 million horsepower. Transco has natural gas storage capacity in four underground storage fields located on or near its pipeline system or market areas and operates two of these storage fields. Transco also has storage capacity in an LNG storage facility that it ow ns and operates. The total usable gas storage capacity available to Transco and its customers in ff such underground storage fields and LNG storage facility and through storage service contracts is approximately 188 Bcf of natural gas. At December 31, 2022, Transco’s customers had stored in its facilities approximately 127 Bcf of natural gas. Storage capacity permits our customers to inject gas into storage during the summer and off-peak rr periods for deliver ff y during peak winter demand periods. ff NorNN thwest Pipeline Northwest Pipeline is an interstate natural gas transmission company that owns and operates a 3,900-mile natural gas pipeline system, which is regulated by the FERC, extending from the San Juan basin in northwestern New Mexico and southwestern Colorado through Colorado, Utah, Wyoming, Idaho, Oregon, and Washington to a point on the Canadian border near Sumas, Washington. Northwest Pipeline provides services for markets in Washington, Oregon, Idaho, Wyoming, Nevada, Utah, Colorado, New Mexico, California, and Arizona, either directly or indirectly through interconnections with other pipelines. ff At December 31, 2022, Northwest Pipeline’s system had a design capacity totaling approximately 3.8 MMdth/d. Northwest Pipeline’s system includes 42 transmission compressor stations having a combined sea level- rated capacity of approximately 476,000 horsepower. Northwest Pipeline owns a one-third undivided interest in the Jackson Prairie underground storage facility in Washington. Northwest Pipeline also owns and operates a LNG storage facility in Washington. These storage facilities have an aggregate working natural gas storage capacity of 10.4 Bcf, which is substantially utilized for third-party natural gas. These natural gas storage facilities enable Northwest Pipeline to balance daily receipts and deliveries and provide storage services to customers. NorNN th Texas Assets (N(( orTex) NN On August 31, 2022, we purchased a group of assets in north Texas from NorTex Midstream Holdings, LLC. The NorTex assets include approximately 80 miles of natural gas transmission pipelines and 36 Bcf of natural gas storage in the Dallas-Fort Worth market. In addition to providing gas supply to power generation in north Texas, these assets also provide storage services for Permian gas directed toward growing Gulf Coast LNG demand. MouMM ntainWest Acquisition r rr On Februar y 14, 2023, we closed on the acquisition of 100 per cent of MountainWest Pipelines Holding Company. MountainWest is an interstate natural gas pipeline company that owns and operates an approximately 2,000-mile natural gas pipeline system and provides transportation and underground natural gas storage services in Utah, Wyoming, and Colorado. At February 14, 2023, the MountainWest system had a design capacity totaling 8.0 MMdth/d. The system is located in the Rocky Mountains near six producing areas, including the Greater Green 10 River, Uinta, and Piceance basins. MountainWest also owns and operates 56 Bcf of natural gas storage capacity, including the Clay basin underground storage reservoir in Utah. GG Gas Tr ansportation, Processing, and Treating Assets The following tables summarize the significant operated assets of this segment: ff Offshor ff e Natural Gas Pipelines ll Pipeline Miles Inlet Capacity (Bcf/ff d) Ownership Interest Supply Basins Location Consolidated: Canyon Chief, iff ncluding Blind Faith and Gulfstar extensions......................... Deepwater Gulf of Mexico Norphlet ........................... Deepwater Gulf of Mexico Other Eastern Gulf ........... e shelf and other ff Offshor Seahawk ........................... Deepwater Gulf of Mexico Perdido Norte ................... Deepwater Gulf of Mexico Other Western Gulf.......... e shelf and other ff Offshor Non-consolidated: (1) Discovery ......................... Central Gulf of Mexico Consolidated: Markham .......................... Mobile Bay....................... NorTex ............................. Non-consolidated: (1) Location Markham, TX Coden, AL Jack Co., TX Discovery ......................... Larose, LA 156 58 46 115 105 65 594 0.5 0.3 0.2 0.4 0.3 0.3 0.6 100% 100% 100% 100% 100% 100% Eastern Gulf of Mexico Eastern Gulf of Mexico Eastern Gulf of Mexico Western Gulf of Mexico Western Gulf of Mexico Western Gulf of Mexico 60% Central Gulf of Mexico ll Natural Gas Processing Facilities NGL Production Capacity (Mbbls/d) Inlet Capacity (Bcf/ff d) Ownership Interest Supply Basins 0.5 0.7 0.1 0.6 45 35 13 32 100% 100% 100% Western Gulf of Mexico Eastern Gulf of Mexico Barnett Shale 60% Central Gulf of Mexico _____________ (1) Includes 100 percent of the statistics associated with operated equity-method investments. Crude Oil Transpor s tation and Production Handling Assets In addition to our natural gas assets, we own and operate four deepwater crude oil pipelines and own production platforms serving the deepwater in the Gulf of Mexico. Our offshore f ff loating production platforms provide ff centralized services to deepwater producers such as compression, separation, production handling, water removal, and pipeline landings. 11 The following tables summarize the significant crude oil transportation pipelines and production handling ff platforms of this segment: ff Consolidated: Mountaineer, including Blind Faith and Gulfsff tar extensions .................................... BANAA JO ........................................................ Alpine .......................................................... Perdido Norte............................................... Pipeline Miles Capacity (Mbbls/d) ipelines PP Crude Oil Pii Ownership Interest Supply Basins 155 57 96 74 150 90 85 150 100% 100% 100% 100% Eastern Gulf of Mexico Western Gulf of Mexico Western Gulf of Mexico Western Gulf of Mexico Production Handling Platforms HH Gas Inlet Capacity (MMcf/ff d) Crude/NGL Handling Capacity (Mbbls/d) Ownership Interest Supply Basins Consolidated: Devils Tower ................................................. Gulfsff tar I FPS (1) .......................................... Non-consolidated: (2) Discoveryr ....................................................... 110 172 75 60 80 10 100% 51% Eastern Gulf of Mexico Eastern Gulf of Mexico 60% Central Gulf of Mexico __________ (1) Statistics reflect 100 percent of the assets from our 51 percent interest in Gulfstar O (2) Includes 100 percent of the statistics associated with operated equity-method investments. ne. ff OO Transmission & Gulf of Mexico O MM perating Statistics 2022 2021 (Annual Average Amounts) 2020 Consolidated: Interstate natural gas pipeline throughput (MMdth/d) (2) ............................ Gathering volumes (Bcf/d) ........................................................................... Plant inlet natural gas volumes (Bcf/d) ........................................................ NGL production (Mbbls/d) ........................................................................... NGL equity sales (Mbbls/d).......................................................................... Crude oil transportation (Mbbls/d) ............................................................... Non-consolidated: (1) Interstate natural gas pipeline throughput (MMdth/d) (2) ............................ Gathering volumes (Bcf/d)............................................................................ Plant inlet natural gas volumes (Bcf/d)......................................................... NGL production (Mbbls/d) ........................................................................... NGL equity sales (Mbbls/d).......................................................................... 16.9 0.29 0.47 28 6 119 1.3 0.40 0.40 28 8 _____________ (1) Includes 100 percent of the volumes associated with operated equity-method investments. (2) Tbtu converted to MMdth at one trillion British thermal units = one million dekatherms. 16.2 0.28 0.45 29 6 134 1.2 0.35 0.35 27 8 15.1 0.25 0.48 29 5 121 1.2 0.30 0.30 21 6 12 Certain Equity-M- ethMM od InII vestments Gulfstream Gulfsff tream is a 745-mile interstate natural gas pipeline system extending from the Mobile Bay area in Alabama to markets in Florida, which has a capacity to transport 1.4 Bcf/d. We own a 50 percent equity-method investment in Gulfsff tream. We share operating responsibilities for Gulfstream with the other 50 percent owner. Discoveryr yogenic natur s assets include a 600 We own a 60 percent interest in and operate the facilities of Discovery. Discovery’ MMcf/d cr al gas processing plant near Larose, Louisiana, a 32 Mbbls/d NGL fractionator plant near rr ff Paradis, Louisiana, and a 594-mile offshore natural gas gathering and transportation system in the Gulf of Mexico. s mainline has a gathering inlet capacity of 600 MMcf/d. Discovery’s assets also include a crude oil Discovery’rr production handling platform with capacity of 10 Mbbls/d and gas handling and separation capacity of 75 MMcf/d. rr Northeast G&P This segment includes our natural gas gathering, compression, processing, and NGL fractionation businesses in ff the Marcellus and Utica Shale regions in Pennsylvania, West Virginia, New York, and Ohio. The following tables summarize the significant operated assets of this segment and non-operated Blue Racer: ff Natural Gas Gathering Assetstt Location Pipeline Miles Inlet Capacity (Bcf/ff d) Ownership Interest Supply Basins Consolidated: Ohio Valley Midstream (1)............. Utica East Ohio Midstream (1) (2) . Susquehanna Supply Hub ............... Cardinal (1) ..................................... Flint................................................. Ohio, West Virginia, & Pennsylvania Ohio Pennsylvania & New York Ohio Ohio ff Non-consolidated: (3) Bradford Supply Hub Marcellus South .............................. Pennsylvania & West Virginia Laurel Mountain.............................. Blue Racer....................................... Pennsylvania Ohio & West Virginia ...................... Pennsylvania 216 53 479 395 100 750 290 1,145 741 0.8 0.6 4.3 0.7 0.5 4.0 1.3 0.9 1.5 65% 65% 100% 66% 100% 66% 68% 69% 50% Appalachian Appalachian Appalachian Appalachian Appalachian Appalachian Appalachian Appalachian Appalachian Location Consolidated: (1) Fort Beeler ................................ Oak Grove................................. Kensington................................ Leesville.................................... Marshall Co., WV Marshall Co., WV Columbiana Co., OH Carroll Co., OH Non-consolidated: (3) (4) Berne......................................... Natrium..................................... Monroe Co., OH Marshall Co., WV Natural Gas Processing Facilities ll Inlet Capacity (Bcf/ff d) NGL Production Capacity (Mbbls/d) Ownership Interest Supply Basins 0.5 0.6 0.6 0.2 0.4 0.8 62 75 68 18 60 120 65% 65% 65% 65% 50% 50% Appalachian Appalachian Appalachian Appalachian Appalachian Appalachian _____________ (1) Statistics reflect 100 percent of the assets from our 65 percent ownership in our Northeast JV and 66 percent ownership of Cardinal gathering system. 13 (2) Utica East Ohio Midstream inlet capacity consists of 1.3 Bcf/d of a high-pressure gathering pipeline that delivers Cardinal gathering volumes to Utica East Ohio Midstream processing facilities. The listed inlet capacity of 0.6 Bcf/d is incremental capacity to the Cardinal gathering capacity of 0.7 Bcf/d. ff (3) Includes 100 percent of the statistics associated with operated equity-method investments and non-operated Blue Racer. (4) Natural gas processing facilities owned by non-operated Blue Racer. Other NGNN L Operations GG ff ff We own and operate a 43 Mbbls/d NGL fractionation facility at Moundsville, West V irginia, de-ethanization and condensate facilities at our Oak Grove processing plant, a condensate stabilization facility near our M oundsville frff actionator, an ethane pipeline, and an NGL pipeline. Our Oak Grove de-ethanizer is capable of handling up to approximately 80 Mbbls/d of mixed NGLs to extract up to approximately 40 Mbbls/d of ethane. Our condensate stabilizers are capable of handling approximately 17 Mbbls/d of field condensate. We also own and operate 44 Mbbls/d of condensate stabilization capacity, a 135 Mbbls/d NGL fractionation facility, approximately 970,000 barrels of NGL storage capacity, and other ancillary assets, including loading and terminal facilities in Ohio. NGLs are extracted from the natural gas stream in our Oak Grove and Fort Beeler cryogenic processing plants. Ethane produced at our de-ethanizer is transported to markets via our 50-mile ethane pipeline from Oak Grove to Houston, Pennsylvania. The remaining mixed NGL stream from the de-ethanizer is then transported via our 50-mile NGL pipeline and frff actionated at either our Moundsville or Harrison County, Ohio, fractionation facility. The resulting products are then transported on truck, rail, or pipeline. Ohio Valley Midstream provides residue natural gas take away options for our customers with interconnections to three interstate transmission pipelines. NorNN theast G&P Operating Statistics Consolidated: ff .............................................................................. Gathering volumes (Bcf/d) Plant inlet natural gas volumes (Bcf/d) ........................................................... NGL production (Mbbls/d) ............................................................................. NGL equity sales (Mbbls/d) ............................................................................ ff Non-consolidated: (1) ff .............................................................................. Gathering volumes (Bcf/d) ........................................................... Plant inlet natural gas volumes (Bcf/d) NGL production (Mbbls/d) ............................................................................. NGL equity sales (Mbbls/d) ............................................................................ ff 2022 2021 (Annual Average Amounts) 2020 4.19 1.65 120 1 6.61 0.71 51 3 4.24 1.57 115 1 6.79 0.82 56 6 4.31 1.32 103 2 6.16 0.95 65 6 __________ (1) Includes 100 percent of the volumes associated with operated equity-method investments, including the Laurel Mountain Midstream partnership; and the Bradford Supply Hub and the Marcellus South Supply Hub within Appalachia Midstream Investments. Periods after November 18, 2020, have been updated to include non- operated Blue Racer volumes. Further, the amounts for Blue Racer presented for 2020 are averages for the 44 days over which we included Blue Racer, not averages over the entire year. ff Certain Equity-M- ethMM od InII vestments Appalachia MidsMM tream Investments Through our Appalachia Midstream Investments, we operate 100 percent of and own an approximate average 66 percent interest in the Bradford Supply Hub gathering system and own an approximate average 68 percent interest in the Marcellus South gathering system, together which consist of approximately 1,040 miles of gathering 14 pipeline in the Marcellus Shale region with the capacity to gather 5,330 MMcf/d of natural gas. The majority of our volumes in the region are gathered from northern Pennsylvania, southwestern Pennsylvania, and the northwestern panhandle of West Virginia in core areas of the Marcellus Shale. We operate the assets under long-term, 100 percent fixed- ing agreements that include significant acreage dedications and, in the Bradford Supply Hub, a cost ff of service mechanism. Additionally, some Marcellus South agreements have MVCs. ff fee gather Laurel Mountain We own a 69 percent interest in a joint venture, Laurel Mountain, that includes a 1,145-mile gathering system that we operate in western Pennsylvania with the capacity to gather 0.9 Bcf/d of natural gas. Laurel Mountain has a long-term, dedicated, volumetric-based fee agreement, with exposure to natural gas prices, to gather the anchor customer’s production in the western Pennsylvania area of the Marcellus Shale. Additionally, certain Laurel Mountain agreements have MVCs. ff Blue Racer We own a 50 percent interest in Blue Racer which is operated by Blue Racer Midstream Holdings, LLC (BRMH). BRMH (previously named Caiman Energy II, LLC), a former equity-method investment, is a consolidated entity follow ing our acquisition of a controlling interest in November 2020 and the remaining interest in September ff 2021. BRMH’s primary asset is a 50 percent interest in Blue Racer, accounted for as an equity-method investment. Blue Racer is a joint venture to own, operate, develop, and acquire midstream assets in the Utica Shale and certain adjacent areas in the Marcellus Shale. Blue Racer’s assets include 741 miles of gathering pipelines, and the Natrium complex in Marshall County, West Virginia, with a cryogenic processing capacity of 800 MMcf/d and fractionation capacity of approximately 134 Mbbls/d. Blue Racer also owns the Berne complex in Monroe County, Ohio, with a cryogenic processing capacity of 400 MMcf/d, and NGL and condensate pipelines connecting Natrium to Berne. rr Blue Racer provides gathering, processing, and marketing services primarily under percent-of-liquids and fixed-f eeff agreements. ff West Gas GGG athGG ering, Processing, and Treating Assets The following tables summarize the significant operated assets of this segment: ff Consolidated: Wamsutter........................ Southwest Wyoming........ Piceance ........................... Barnett Shale.................... Eagle Ford Shale.............. Location Wyoming Wyoming Colorado Texas Texas Haynesville Shale (1)....... Louisiana & Texas Permian............................ Texas Mid-Continent ................. Oklahoma & Texas 1,752 Natural Gas Gathering Assetstt Pipeline Miles Inlet Capacity (Bcf/d) Ownership Interest Supply Basins/Shale Formations 2,265 1,614 352 839 1,251 929 112 0.7 0.5 1.8 0.5 0.5 4.7 0.1 0.2 100% 100% 100% 100% 100% 100% 100% 100% Wamsutter Southwest Wyoming Piceance Barnett Shale Eagle Ford Shale Haynesville Shale, Bossier Shale Permian Miss-Lime, Granite Wash, Colony Wash Non-consolidated: (2) Rocky Mountain Midstream........................ Colorado 208 0.6 50% Denver-Julesburg 15 Location Consolidated: Echo Springs..................... Opal .................................. Willow Creek.................... Parachute .......................... Echo Springs, WY Opal, WY Rio Blanco Co., CO Garfiff eld Co., CO Non-consolidated: (2) Fort Lupton....................... Keenesburg I..................... Weld Co., CO Weld Co., CO ll Natural Gas Processing Facilities NGL Production Capacity (Mbbls/d) Inlet Capacity (Bcf/d) Ownership Interest 0.6 1.1 0.5 1.0 0.3 0.2 48 47 30 5 50 40 100% 100% 100% 100% 50% 50% Supply Basins Wamsutter Southwest Wyoming Piceance Piceance Denver-Julesburg Denver-Julesburg _______________ (1) Includes statistics for assets acquired in the Trace Acquisition. (2) Includes 100 percent of the statistics associated with operated equity-method investments. Other NGNN L Operations GG We own interests in and/or operate NGL fractionation and storage assets in central Kansas near Conway. These assets include a 50 percent interest in an NGL fractionation facility with capacity of slightly more than 100 Mbbls/d and we own approximately 23 million barrels of NGL storage capacity. We also own a 189-mile NGL pipeline from our fractionator near Conw ay, Kansas, to an interconnection with a third-party NGL pipeline system in Oklahoma. ff WesWW t Operating Statis OO tics Consolidated: ff 1) ........................................................................ Gathering volumes (Bcf/d) ( Plant inlet natural gas volumes (Bcf/d) ........................................................... NGL production (Mbbls/d) ............................................................................. NGL equity sales (Mbbls/d) ............................................................................ ff Non-Consolidated: (2) .............................................................................. Gathering volumes (Bcf/d) Plant inlet natural gas volumes (Bcf/d) ........................................................... NGL production (Mbbls/d) ............................................................................. ff ff 2022 2021 (Annual Average Amounts) 2020 5.19 1.15 43 14 0.29 0.28 33 3.25 1.23 41 16 0.29 0.28 29 3.33 1.25 49 22 0.25 0.25 23 ________________ (1) Includes volumes for gathering assets acquired in the Trace Acquisition after the purchase on April 29, 2022. Further, the amounts for the acquired assets presented for 2022 are averaged over the period owned, not over the entire year. (2) Includes 100 percent of the volumes associated with operated equity-method investments. 16 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. The purpose of this acquisition was to expand our footprint into the east Texas area of the Haynesville Shale region, increasing in-basin scale. Certain Equity-M- ethMM od InII vestments Overland Pass Pipeline We operate and own a 50 percent interest in OPPL. OPPL is capable of transporting 255 Mbbls/d of NGLs and includes approximately 1,035 miles of NGL pipeline extending from Opal, Wyoming, to the Mid-Continent NGL market center near Conway, Kansas, along with extensions into the Piceance and Denver-Julesberg basins in Colorado and the Bakken Shale in the Williston basin in North Dakota. Our equity NGL volumes from our Wyoming plants and our Willow Creek facility in Colorado are dedicated for transport on OPPL under a long-term transportation agreement. NGL volumes from our RMM equity-method investment are also transported on OPPL. ff Rocky Mountain Midstream MM We operate and own a 50 percent interest in RMM. RMM includes a natural gas gathering pipeline, an approximate 100-mile crude oil transportation pipeline, and natural gas processing assets in Colorado’s Denver- Julesburg basin. It also includes crude oil storage and compression assets. Brazos Permian II We own a 15 percent interest in Brazos Permian II, a privately held Permian basin midstream company. r TarTT ga T rTT ain 7 We own a 20 percent interest in Targa Train 7, a Mt. Belvieu, Texas, fractionation train. Gas & NGL Marketing Services Our natural gas marketing business provides asset management and the wholesale marketing, trading, storage, and transportation of natural gas for a diverse set of natural gas and electric utilities, municipalities, power generators, and producers and markets natural gas from the production at our upstream properties. The Sequent Acquisition in July 2021 significantly increased the scope of our natural gas marketing operations. Our NGL marketing business transports and markets our equity NGLs from the production at our processing plants, NGLs from the production at our upstream properties, and also NGLs on behalf of third-party NGL producers, including based processing customers. See the Gas and NGL Marketing section of Service Assets, some of our fee- Customers, and Contracts in Item 1. Business for additional information related to this business segment. ff Gas & NGL MarMM keting Ser rr vices Operating Statistics SS 2022 2021 (Annual Average Amounts) 2020 Sales Volumes: Natural Gas (Bcf/d) (1) (2).............................................................................. NGLs (Mbbls/d) (2)......................................................................................... 7.20 250 7.70 227 0.62 220 ________________ (1) Includes 100% of the volumes associated with the Sequent Acquisition after the purchase on July 1, 2021. Further, the amounts for the acquired assets presented for 2021 are averaged over the period owned, not over the entire year. (2) 2021 amounts have been updated to reflect revised natural gas and NGL volumes. 2020 amounts have been updated to reflect revised NGL volumes. 17 Other Other includes our upstream operations and minor business activities that are not reportable segments, as well as corporate operations. rr UpsUU tream Ventures rr r We acquired certain crude oil and natural gas properties in the Wamsutter basin in Febr uary 2021. These properties were conveyed to a venture in the third quarter of 2021 along with certain oil and gas properties conveyed by a third-party operator in the region. Under the terms of the agreement, the third party owns a 25 percent and we own a 75 percent undivided interest in each well’s working interest. We will retain ownership in the undeveloped acreage until certain acreage earning hurdles are met, at which time the third party will receive an additional 25 percent of any new wells and 50 percent of the remaining undeveloped acreage resulting in the third party owning 50 percent and us owning 50 percent. The combined properties consist of over 1.2 million net acres and an interest in over 3,500 wells. Certain natural gas properties in Louisiana were transferred to us in November 2020 as part of a bankruptcy resolution with one of our customers. In the third quarter of 2021, we sold 50 percent of the existing wells and wellbore rights in the South Mansfield area of the Haynesville Shale region to a third party operator, in a strategic effort to develop the acreage, ther eby enhancing the value of our midstream natural gas infrastructure. Under the ff agreement, the third party operates the upstream position and develops the undeveloped acreage. When a certain drilling hurdle is met, the third party’s interest in new wells increases to 75 percent. The third party met this drilling hurdle in early 2023. We retain ownership in the undeveloped acreage until a separate acreage earning hurdle is met, at which time remaining undeveloped acreage will be conveyed to the third party resulting in the third party owning 75 percent and us owning 25 percent. OperO ating Statistics Net Product Sales Volumes: 2022 2021 (Annual Average Amounts) Natural Gas (Bcf/d)................................................................................................ NGLs (Mbbls/d)..................................................................................................... Crude Oil (Mbbls/d) .............................................................................................. 0.22 7 2 0.13 6 2 NN New En r ergy Ventu res Our Other segment also includes investments in new energy ventures related to hydrogen, solar, renewable natural gas, and NextGen Gas. NextGen Gas is natural gas that has been independently certified as low emissions gas across all segments of the value chain. FERC REGULATORY MATTERS Our gas pipeline interstate transmission and storage activities are subject to FERC regulation under the Natural Gas Act of 1938 (NGA) and under the Natural Gas Policy Act of 1978, and, as such, our rates and charges for the transportation of natural gas in interstate commerce, accounting, and the extension, enlargement, or abandonment of our jurisdictional facilities, among other things, are subject to regulation. Each of our gas pipeline companies holds certificates of public convenience and necessity issued by the FERC authorizing ownership and oper ation of all pipelines, facilities, and pr hich certificates are required under the NGA. FERC Standards of Conduct govern how our interstate pipelines communicate and conduct transmission transactions with an affiliate that engages in marketing functions. Among other things, the Standards of Conduct require that interstate gas pipelines treat all transmission customers, affiliated and non-affiliated, on a not unduly discriminatory basis. operties for wff ff ff 18 FERC regulation requires all terms and conditions of service, including the rates charged, to be filed with and approved by the FERC before any changes can go into effect. Our interstate gas pipeline companies establish rates through the FERC’s ratemaking process. In addition, our interstate gas pipelines may enter into negotiated rate agreements where cost-based recourse rates are made available. Key determinants in the FERC ratemaking process include: • • • Costs of providing service, including depreciation expense; Allowed rate of return, including the equity component of the capital structure and related income taxes; Contract and volume throughput assumptions. The allowed rate of return is determined in each rate case. Rate design and the allocation of costs between the reservation and commodity rates also impact profitability. As a result of these proceedings, certain revenues previously collected may be subject to refund. We also own interests in and operate natural gas liquids pipelines that are regulated by various federal and s tate governmental agencies. Services provided on our interstate natural gas liquids pipelines are subject to regulation under the Interstate Commerce Act by the FERC, which has authority over the terms and conditions of service; rates, including depreciation and amortization policies; and initiation of service. Our intrastate natural gas liquids pipelines providing common carrier service are subject to regulation by various state regulatory agencies. ff Updated Certificate Policy Statement and Interim Greenhouse Gas (GHG) Policy Statement rr On February 18, 2022, the FERC issued two policy s tatements providing guidance for its pending and future consideration of interstate natural gas pipeline projects. The first policy statement is an Updated Certificate Policy Statement, which provides an analytical framework for how the FERC will consider whether a project is in the public convenience and necessity and explains that the FERC will consider all impacts of a proposed project, including economic and environmental impacts, together. The second policy statement is an Interim GHG Policy Statement, which sets forth how the FERC will assess the impacts of natural gas infrastructure projects on climate change in its reviews under the National Environmental Policy Act and the NGA. The FERC sought comment on all aspects of the policy statements, including the approach to assessing the significance of the proposed project’s contribution to climate change. On March 24, 2022, the FERC issued an order converting the Updated Certificate Policy Statement and the Interim GHG Policy Statement into draft policy statements and announcing that it will not apply either policy statement to pending applications or applications filed before the FERC issues any final guidance on the policy statements. The FERC has not yet issued final guidance on the policy statements. ff ff ff Pipeline SafSS etyff Our gas pipelines are subject to the Natural Gas Pipeline Safety Act of 1968, as amended, the Pipeline Safety Improvement Act of 2002, the Pipeline Safety, Regulatory Certainty, and Jobs Creation Act of 2011, and the Protecting Our Infrastructure of Pipelines and Enhancing Safety Act of 2016 and 2020, which regulate safety requirements in the design, construction, operation, and maintenance of interstate natural gas transmission facilities. The United States Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) administers feder al pipeline safety laws. ff Federal pipeline safety laws authorize PHMSA to establish minimum safety standards for pipeline facilities and persons engaged in the transportation of gas or hazardous liquids by pipeline. These safety standards apply to the design, construction, testing, operation, and maintenance of gas and hazardous liquids pipeline facilities affecting interstate or foreign commerce. PHMSA has also established reporting requirements for operators of gas and hazardous liquid pipeline facilities, as well as provisions for establishing the qualification of pipeline personnel and requirements for managing the integrity of gas transmission and distribution lines and certain hazardous liquid pipelines. To ensure compliance with these provisions, PHMSA performs pipeline safety inspections and has the authority to initiate enforcement actions. ff 19 ff In October 2019, PHMSA published the first of three rules that would be a part of the Mega Rule. The Mega Rule was more than 10 years in the making and since October 2019, PHMSA has also published Rules 2 and 3 as a part of the Mega Rule implementation. At the end of 2021, PHMSA published Rule 3 of the Mega Rule with an implementation date in May 2022. Rule 3 was also called The Gas Gathering Rule and expanded Federal Pipeline , including approximately 5,400 miles Safety oversight to more than 400,000 miles of pipeline across all operators and 4,500 miles of our regulated and unregulated pipelines, respectively. The rule established Federal pipeline safety oversight on previously unregulated gas gathering pipelines. The rule limits the use of “incidental gathering pipelines” to 10 miles in length or less. The rule also creates a new category of regulated gas gathering pipelines that are located in rural locations and will be subject to certain reporting and safety standards. New regulations in Rule 3 include requirements for public awareness, emergency response, damage prevention, incident notification, and annual reporting. As a result of the rule, we revised numerous procedures and are now reporting based on the expanded scope as required by regulation. In August 2022, PHMSA published Rule 2, which is the last in the three part Mega Rule set of regulations. Certain portions of Rule 2 go into effect in May 2023 with the remaining portions taking effect in February 2024. Rule 2 contains new corrosion control requirements, new requirements for repair criteria outside of high consequence areas (HCAs), inspections to be performed after extreme weather events or natural disasters, management of change, and other integrity management related rule changes. We are evaluating procedures that will need to be updated to maintain compliance and are also analyzing anticipated cost impacts. ff r ement of Valve Installation and Minimum Rupture Detection Standards, went into PHMSA’s new rule, Requir e standards are applicable to existing upture monitoring and emergency respons r ff effect in October 2022. The r pipelines, but the installation of rupture mitigation valves (RMVs) is not retroactive and only applies to new pipelines and significant pipeline replacements. This new rule establishes criteria for how operators must monitor and respond to potential ruptures on their system. It also outlines requirements for the installation of RMVs or Alternative Equivalent Technology to allow for quicker isolation after an incident has occurred. In response to the new regulation, Williams has updated all applicable procedures and is developing implementation plans as a result of the rulemaking. Pipeline Integrity Regulations ff We have an enterprise-wide Gas Integrity Management Plan that meets the PHMSA final rule that was issued pursuant to the requirements of the Pipeline Safety Improvement Act of 2002. The rules require gas pipeline operators to develop an integrity management program for pipelines that could aff ff ect HCAs in the event of pipeline failure. The integrity management program includes a baseline assessment plan along with periodic reassessments to be completed within required time frames. In meeting the integrity regulations, we have identified HCAs and developed baseline assessment plans. Ongoing periodic reassessments and initial assessments of any new HCAs have been completed. Also, in response to the portion of the Mega Rule implemented in 2021, we have identified Moderate Consequence Areas, and Class 3 and 4 pipeline locations required by the rule and integrated those segments into our integrity program, and have begun scheduling required assessments and reassessments as needed to meet the regulatory timelines. We estimate that the cost to be incurred in 2023 associated with this program to be approximately $126 million. Management considers costs associated with compliance with the rule to be prudent costs incurred in the ordinary course of business and, therefore, recoverable through Northwest Pipeline’s and Transco’s rates. We have an enterprise-wide Liquid Integrity Management Plan that we believe meets the PHMSA final rule that was issued pursuant to the requirements of the Pipeline Safety Improvement Act of 2002. The rule requires liquid pipeline operators to develop an integrity management program for liquid transmission pipelines that could affect HCAs in the event of pipeline failure. The integrity management program includes a baseline assessment plan along with periodic reassessments expected to be completed within required time frames. In meeting the integrity regulations, we utilized government defined HCAs and developed baseline assessment plans. We completed assessments within the required time frames. We estimate that the cost to be incurred in 2023 associated with this program will be approximately $10 million. Ongoing periodic reassessments and initial assessments of any new HCAs are expected to be completed within the time frames required by the rule. Management considers the costs associated with compliance with the rule to be prudent costs incurred in the ordinary course of business. ff r 20 Cybersrr ecurity Matters rr ff The Transportation Security Administration (TSA) issued Security Directive Pipeline-2021-01B (Security Directive 1B) on May 29, 2022, which requires that owners/operators of critical pipelines (1) report cybersecurity s; (2) appoint a cybersecurity incidents to the Cybersecurity and Infrastructure Agency (CISA) within 24 hour coordinator to coordinate with TSA and CISA; and (3) conduct a self-assessment of cybersecurity practices, identifyff any gaps, and develop a plan and timeline for remediation. On July 27, 2022, the TSA issued Security Directive Pipeline-2021-02C (Security Directive 2C), which requires owners/operators of critical pipelines to (1) establish and implement a TSA-approved Cybersecurity Implementation Plan that describes the specific cybersecurity measures employed and the schedule for achieving the cybersecurity outcomes described in Security Directive 2C; (2) develop and maintain a Cybersecurity Incident Response Plan to reduce the risk of operational disruption or other significant impacts frff om a cybersecurity incident; and (3) establish a Cybersecurity Assessment Program and submit an annual plan describing how the effectiveness of cybersecurity measures will be assessed. We have established and received TSA approval for our Cybersecurity Implementation Plan and are compliant with the remaining requirements established in Security Directives 1B and 2C. New regulations or security directives issued by TSA may impose additional requirements applicable to our cybersecurity program, which could cause us to incur increased capital and operating costs and operational delays. ff ff See Part I, Item 1A. “Risk Factors” — “A breach of our information technology infras tructure, including a breach caused by a cybersecurity attack on us or third parties with whom we are interconnected, may interfere with the safe operation of our assets, result in the disclosure of personal or proprietary information, and harm our reputation.” “ SS State G athGG ering Regulations Our onshore midstream gathering operations are subject to laws and regulations in the various states in which we operate. For example, the Texas Railroad Commission has the authority to regulate the terms of service for our intrastate natural gas gathering business in Texas. Although the applicable state regulations vary widely, they generally require that pipeline rates and practices be reasonable and nondiscriminatory, and may include provisions covering marketing, pricing, pollution, environment, and human health and safety. Some states, such as New York and Ohio, have specific regulations pertaining to the design, construction, and operations of gathering lines within such state. InII trastate Liquids Pipelines in the Gulf Coast Our intrastate liquids pipelines in the Gulf Coast are regulated by the Louisiana Department of Natural Resources, the Texas Railroad Commission, and various other state and federal agencies. These pipelines are also subject to the liquid pipeline safety and integrity regulations discussed above since both Louisiana and Texas have adopted the integrity management regulations defined in PHMSA. OCSLA Our offshore gas and liquids pipelines located on the outer continental shelf are subject to the Outer Continental that outer continental shelf pipelines “must provide open and Shelf Lands Act, which provides in part nondiscriminatory access to both owner and non-owner shippers.” r See Part I, Item 1A. “Risk Factors” — “The oper ation of our businesses might be adversely affected by oceedings, changes in government regulations or in their interpretation or implementation, or the regulatory pr introduction of new laws or regulations applicable to our businesses or our customers,” and “The natur al gas sales, transportation, and storage operations of our gas pipelines are subject to regulation by the FERC, which could have an adversrr e impact on their ability to establish tr ansportation and storage rates that would allow them to recover the full cost of operating their respective pipelines and storage assets, including a reasonable rate of return.” m TT TT 21 ENVIRONMENTAL MATTERS Our operations are subject to federal environmental laws and regulations as well as the state, local, and tribal laws and regulations adopted by the jurisdictions in which we operate. We could incur liability to governments or . or cleanup costs ff third parties for any unlawf ff Materials could be released into the environment in several ways including, but not limited to: ff ul discharge of pollutants into the air, soil, or water, as well as liability f • • • • Leakage frff om gathering systems, underground gas storage caverns, pipelines, processing or treating ff facilities, transportation facilities, and storage tanks; Damage to facilities resulting from accidents dur ff ing normal operations; Damages to onshore and offff sff hore equipment and facilities resulting from storm events or natural disasters; Blowouts, cratering, and explosions. In addition, we may be liable for environmental damage caused by former owners or operators of our properties. We believe compliance with current environmental laws and regulations will not have a material adverse effect on our capital expenditures, earnings, or current competitive position. However, environmental laws and regulations could affff ect our bus including incurring capital and maintenance expenditures, fines and penalties, and creating the need to seek relief from the FERC for rate increases to recover the costs of certain capital expenditures and operation and maintenance expenses. iness in various ways from time to time, ff For additional information regarding the potential impact of federal, state, tribal, or local regulatory measures on our business and specific environmental issues, please refer to Part 1, Item 1A. “Risk Factors” — “Our operations are subject to environmental laws and regulations, including laws and regulations relating to climate change and greenhouse gas emissions, which may expose us to significant costs, liabilities, and expenditures that could exceed our expectations,” and Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Environmental” and “Environmental Matters” in Part II, Item 8. Financial Statements and Supplementary Data — Note 17 – Contingent Liabilities and Commitments of Notes to Consolidated Financial Statements. Gathering and Processing COMPETITION ff Competition for natural gas gathering, proces sing, treating, transportation, and storage, as well as NGLs transportation, fractionation, and storage continues to increase as production from shales and other resource areas continues to grow. Our midstream services compete with similar facilities that are in the same proximity as our assets. ff We face competition from companies of varying size and financial capabilities, including major and independent natural gas midstream providers, private equity firms, and major integrated oil and natural gas companies that gather, transport, process, frff actionate, store, and market natural gas and NGLs, as well as some larger exploration and production companies that are choosing to develop midstream services to handle their own natural gas. Our gathering and processing agreements are generally long-term agreements that may include acreage dedication. Competition for natural gas volumes is primarily based on reputation, commercial terms (products retained or fees charged), arr ay of services provided, efficiency and reliability of services, location of gathering , available capacity, downstream interconnects, and latent capacity. We believe our significant presence in facilities ff traditional prolific s upply basins, our solid positions in growing shale plays, our expertise and reputation as a reliable operator, and our ability to offer integrated packages of services position us well against our competition. ff ff 22 Regulated Interstate Natural Gas Transportation and Storage ff The market for s upplying natural gas is highly competitive and new pipelines, storage facilities, and other related services are expanding to service the growing demand for natural gas. Additionally, pipeline capacity in many growing natural gas supply basins is constrained causing competition to increase among pipeline companies as they strive to connect those basins to major natural gas demand centers. In our business, we predominately compete with major intrastate and interstate natural gas pipelines. In the last few years, local dis tribution companies have also started entering into the long-haul transportation business through ff joint venture pipelines. The principle elements of competition in the interstate natural gas pipeline business are based on capacity available, rates, reliability, quality of customer service, diversity of supply, and proximity to customers and market hubs. ff ff We face competition in a number of our key markets and we compete with other inters tate and intrastate pipelines for deliveries to customers who can take deliveries at multiple points. Natural gas delivered on our system competes with alternative energy sources used to generate electricity such as hydroelectric power, coal, fuel oil, and nuclear. Future demand for natural gas within the power sector could be increased by regulations limiting or discouraging coal use or could be adversely affected by laws mandating or encouraging renewable power sources. ff Significant entrance bar riers to build new pipelines exist, including federal and growing state regulations and public opposition against new pipeline builds, and these factors will continue to impact potential competition for the forff eseeable futur e. However, we believe our past success in working with regulators and the public, the position of our existing infrastructure, established strategic long-term contracts, and the fact that our pipelines have numerous receipt and delivery points along our systems provide us a competitive advantage, especially along the eastern seaboard and northwestern United States. ff Energy Management and Marketing Services Our Gas & NGL Marketing Services segment competes with national and regional full-service ener ff gy providers, producers, and pipelines marketing affiliates or other marketing companies that aggr egate commodities ff with transportation and storage capacity. For additional information regarding competition for our services or otherwise affecting our business, please refer to Part 1, Item 1A. “Risk Factors” - “The financial condition of our natural gas transportation and midstream businesses is dependent on the continued availability of natural gas supplies in the supply basins that we access and demand for those supplies in the markets we serve,” “Our industry is highly competitive and increased competitive pressure could adversely affect our business and operating results,” and “We may not be able to replace, extend, or add additional customer contracts or contracted volumes on favorable terms, or at all, which could affect our financial condition, the amount of cash available to pay dividends, and our ability to grow.” TT ff HUMAN CAPITAL RESOURCES We are committed to maintaining a work environment that enables us to attract, develop, and retain a highly skilled and diverse group of talented employees who help promote long-term value creation. Employees r As of February 1, 2023, we had 5,043 full-time employees located throughout the United States . Of this total, approximately 22 percent are women and 17 percent are ethnically diverse. During 2022, our voluntary turnover rate was 7.7 percent. We encourage you to review our 2021 Sustainability Report available on our website for more information about our human capital programs and initiatives. Nothing on our website shall be deemed incorporated by reference into this Annual Report on Form 10-K. r 23 ff Workforce S afetyff We continue to advance our safety-first culture by developing and empowering our employees to operate our assets in a safe, reliable, and customer-focused way. We strive to continuously improve safety and work towards zero safety incidents. When a safety hazard is recognized, every employee is empowered to stop work activities, make changes to enhance safety, and share the lessons learned with the organization on how we made it right. ff ff For 2021, safety and environmental-focused goals and related metrics comprised 10 per cent of our annual incentive program for employees, and included our Loss of Primary Containment Events Reduction and High Potential Near Miss to Incident Ratio. For 2022, these goals included our Loss of Primary Containment Events Reduction, a new Behavioral Near Miss to Incident Ratio goal aimed to focus attention on behaviors that are the leading causes of incidents, as well as a new Methane Emissions Reduction goal focusing on our efforts to reduce greenhouse gas emissions. These three metrics comprise 15 percent of our annual incentive program for employees, and reinforce the importance of incident prevention and our commitment to environmental and safety-focused improvements. ff For 2022, our Behavioral Near Miss to Incident Ratio and Methane Emissions Reduction goals outperformed the established targets, and while Loss of Primary Containment Events were reduced, they fell short of the overall reduction target. ff Workforce Healt ff h, Engagement, and Development Our employees are our most valued resource, are instrumental in our mission to safely deliver products that f ff uel r the clean energy economy, and are the driving force behind our reputation as a safe, reliable company that does the right thing, every time. Cultivating a healthy work environment increases productivity and promotes long-term value creation. ff We provide a comprehensive total rewards program that includes base salary, an all-employee annual incentive program, retirement benefits, and health benefits, including wellness and employee assistance programs. We provide employees with company-paid life insurance, disability coverage, and paid parental leave for both birth and non- birth parents, as well as adoption assistance. Our annual incentive program is a key component of our commitment to a perforff mance culture focused on recognizing and rewarding high performance. In order to attract and retain top talent, we create and are committed to maintaining a safe, inclusive workplace where employees feel valued, heard, respected, and supported in their personal and professional development. Our Employee Development Council is a cross-functional, cross-enterprise advisory board that works to understand the needs of the business by providing input on, and advocating for, employee development initiatives. Additionally, we support strong employee engagement by encouraging open dialogue regarding professional development and succession planning. ff We offer robust corporate and technical training programs to s upport the professional development of our employees and add long-term value to our business. Our Learning and Training Council defines and maintains an agile governance structure that ensures training plans are effective and aligned to business needs and employee development. Performance is measured considering both the achieved results associated with attaining annual goals and observable skills and behaviors based on our defined competencies that contribute to workplace effectiveness and career success. Including the defined competencies in our annual performance program illustr ates our emphasis on, and commitment to, achieving results in the right way. ff Additionally, we are committed to strengthening the communities where we operate through philanthropic giving and volunteerism. We support Science, Technology, Engineering, and Math education initiatives, environmental conservation and first responder efforts, and the work of United Way agencies across the United States. 24 The Compensation and Management Development Committee of our Board of Directors oversees the establishment and administration of our compensation programs, including incentive compensation and equity-based plans, as well as the oversight of human capital management, including diversity and inclusion, and development. Diversity & Inclusion We are committed to creating an inclusive culture, where differences are embraced and employees feel valued, welcomed, appreciated, and compelled to reach their full potential. We believe that inclusion fosters innovation, collaboration, and drives business growth and long-term success. To create a culture of inclusion, we embrace, appreciate, and fully leverage the diversity within our teams, including gender, race and ethnicity, life experiences, thoughts, perspectives, and anything that makes us different from one another. We believe that incor r porating our ff many diffff erff ences into a team of people who are working toward the same goal gives us a competitive advantage. ff To create space for employees to shar ff e personal experiences and perspectives, and to appreciate and celebrate what makes people diffff erent, we of ff fff er Employee Resource Groups (ERGs). These groups are employee-led and based on similar interests and experiences, represent diverse communities and their allies, and are open to everyone. ERG members participate in community events, volunteer, lend professional and personal support to one another, and promote inclusion across the company. They also provide input to the leadership team. We are committed to helping all employees develop and succeed. We strive for diverse representation at all levels of the organization through our talent management practices and employee development programs, including required baseline diversity and inclusion training for all leaders across the company. Diversity metrics are reported monthly to our management team to enhance transparency and opportunities for improvement. Our Diversity and Inclusion Council, which includes members of the executive officer team, organizational and operational leaders, and individual employees, promotes policies, practices, and procedures that support the growth of a high-performing workforce where all individuals can achieve their full potential. The council serves as the governing body over enterprise diversity and inclusion initiatives, including a quarterly candid conversation meeting for all employees, 10 active ERGs, and annual awards that recognize an outstanding leader and an individual ff contributor who champion inclusion. As of December 31, 2022, our Board of Directors includes 12 members, 11 of whom are independent members, and one-quarter of which are women. As part of the director selection and nominating process, the Governance and Sustainability Committee annually assesses the Board’s diversity in areas such as geography, gender, race and ethnicity, and age. We strive to maintain a board of directors with diverse occupational and personal backgrounds. WEBSITE ACCESS TO REPORTS AND OTHER INFORMATION We file our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, and other documents electronically with the SEC under the Exchange Act. Our Internet website is www.williams.com. We make available, free of charge, through the Investors tab of our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furff nished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. Our Corporate Governance Guidelines, Sustainability Report, Code of Ethics for Senior Officers, Board committee charters, and the Williams Code of Business Conduct are also available on our Internet website. We will also provide, free of charge, a copy of any of our corpor ate documents listed above upon written request to our Corporate Secretary, One Williams Center, Suite 4700, Tulsa, Oklahoma 74172. r 25 Item 1A. Risk Factors FORWARD-LOOKING STATEMENTS AND CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The reports, filings, and other public announcements of Williams may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forff ward-looking statements relate to anticipated financial performance, management’s plans and objectives forff futur e operations, business prospects, outcomes of regulatory proceedings, market conditions, and other matters. We ff make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this report that address activities, events, or developments that we expect, believe, or anticipate will exist or may occur in the future, are forward-looking statements. Forward-looking statements can be identified by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “assumes,” “guidance,” “outlook,” “in-service date,” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding: • • • • • • • • • • • Levels of dividends to Williams stockholders; Future credit ratings of Williams and its affiliates; ff Amounts and nature of future capital expenditures; Expansion and growth of our business and operations; Expected in-service dates for capital projects; ff Financial condition and liquidity; Business strategy; Cash flow from operations or results of operations; Seasonality of certain business components; Natural gas, natural gas liquids, and crude oil prices, supply, and demand; Demand for our services ff . Forward-looking statements are based on numerous assumptions, uncertainties, and risks that could cause future events or results to be materially different from those stated or implied in this report. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to diffff er from results contemplated by the forward-looking statements include, among others, the following: ff • • • • Availability of supplies, market demand, and volatility of prices; Development and rate of adoption of alternative energy sources; The impact of existing and future laws and regulations, the regulatory environment, environmental matters, and litigation, as well as our ability to obtain necessary permits and approvals, and achieve favorable rate proceeding outcomes; Our exposure to the credit risk of our customers and counterparties; 26 • Our ability to acquire new businesses and assets and successfully integrate those operations and assets into existing businesses as well as successfully expand our facilities and consummate asset sales on acceptable terms; • Whether we are able to successfully identify, evaluate, and timely execute our capital projects and investment opportunities; • • The strength and financial resources of our competitors and the effects of competition; ff The amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate; • Whether we will be able to effectively execute our financing plan; • • • • • • • • • • • • • Increasing scrutiny and changing expectations from stakeholders with respect to our environmental, social, r and governance practices; The physical and financial risks associated with climate change; The impacts of operational and developmental hazards and unforeseen interruptions; The risks resulting from outbreaks or other public health crises, including COVID-19; Risks associated with weather and natural phenomena, including climate conditions and physical damage to our facilities; ff Acts of terrorism, cybersecurity incidents, and related disruptions; ff Our costs and funding obligations for def ff ined benefit pension plans and other pos tretirement benefit plans; Changes in maintenance and construction costs, as well as our ability to obtain sufficient construction- related inputs, including skilled labor; ff ff Inflation, inter global credit markets and the impact of these events on customers and suppliers); est rates, and general economic conditions (including future disruptions and volatility in the r Risks related to financing, including restrictions stemming from debt agreements, future changes in credit ratings as determined by nationally recognized credit rating agencies, and the availability and cost of capital; The ability of the members of the Organization of Petroleum Exporting Countries (OPEC) and other oil exporting nations to agree to and maintain oil price and production controls and the impact on domestic production; Changes in the current geopolitical situation, including the Russian invasion of Ukraine; Changes in U.S. governmental administration and policies; • Whether we are able to pay current and expected levels of dividends; • Additional risks described in our filings with the SEC. Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to, and do not intend to, update the above list or announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments. ff In addition to causing our actual results to differ, the factors listed above and referred to below may cause our intentions to change from those s tatements of intention set forth in this report. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise. ff ff Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forff ward-looking statements. These factors are described in the following section. ff 27 RISK FACTORS You should carefully consider the following risk factors in addition to the other information in this report. Each of these factors could adversely affect our business, prospects, financial condition, results of operations, cash flows, and, in some cases our reputation. The occurrence of any of such risks could also adversely affect the value of an investment in our securities. Risks Related to Our Business ff tream businesses is dependent on the The financial con continued availability of natural gas supplies in the supply basins that we access and demand for those supplies in the markets we serve. dition of our natural gas transportation and mids s Our ability to maintain and expand our natural gas transportation and midstream businesses depends on the level of drilling and production predominantly by third parties in our supply basins. Production from existing wells and natural gas supply basins with access to our pipeline and gathering systems will naturally decline over time. The amount of natural gas reserves underlying these existing wells may also be less than anticipated, and the rate at which production from these reserves declines may be greater than anticipated. We do not obtain independent evaluations of natural gas reserves connected to our systems and processing facilities. Accordingly, we do not have independent estimates of total reserves dedicated to our systems or the anticipated life of such reserves. In addition, low prices for natural gas, regulatory limitations, including permitting and environmental regulations, or the lack of available capital have, and may continue to, adversely affect the development and production of existing or additional natural gas reserves and the installation of gathering, storage, and pipeline transportation facilities. The import and export of natural gas supplies may also be affected by such conditions. Low natural gas prices in one or more of our existing supply basins, whether caused by a lack of infrastructure or otherwise, could als o result in depressed natural gas production in such basins and limit the supply of natural gas made available to us. The competition for natural gas supplies to serve other markets could also reduce the amount of natural gas supply for our customers. A failure to obtain access to sufficient natural gas supplies will adversely impact our ability to maximize the capacities of our gathering, transportation, and processing facilities. ff ff ff Demand for our s ervices is dependent on the demand for gas in the markets we serve. Alternative fuel sources such as electricity, coal, fuel oils, or nuclear energy, as well as technological advances and renewable sources of energy, could reduce demand for natural gas in our markets and have an adverse effect on our business. Governmentally imposed constraints, such as prohibitions on natural gas hookups in newly constructed buildings, could also artificially limit new demand for natural gas. A failure to obtain access to sufficient natural gas supplies or a reduction in demand for our services in the iness, markets we serve could result in impairments of our assets and have a material adverse effect on our bus ff financial condition, r esults of operations, and cash flows. ff Prices for natural gas, NGLs, oil, and other commodities, are volatile and this volatility has and could continue to adversrr ely affff ect ou r finff ancial condition, results of operations, cash flows, access to capital, and ability to maintain or grow our businesses. ff Our revenues, operating results, future rate of growth, and the value of certain components of our businesses depend primarily upon the prices of natural gas, NGLs, oil, or other commodities, and the differences between prices of these commodities and could be materially adversely affected by an extended period of low commodity prices, or ff a decline in commodity prices. Price volatility has and could continue to impact both the amount we receive for our products and services and the volume of products and services we sell. Prices affect the amount of cash flow available for capital expenditures and our ability to borrow money or raise additional capital. Price volatility has had and could continue to have an adverse effect on our business, results of operations, financial condition, and cash flowff s. ff The markets for natural gas, NGLs, oil, and other commodities are likely to continue to be volatile. Wide ff fluctuations in prices might result from one or more factors beyond our control, including: • Imbalances in supply and demand whether rising from worldwide or domestic supplies of and demand for natural gas, NGLs, oil, and related commodities; 28 • • • • • • • • • Geopolitical turmoil in the Middle East, Eastern Europe, and other producing regions; The activities of OPEC and other countries, whether acting independently of or informally aligned with OPEC, which have significant oil, natural gas or other commodity production capabilities, including Russia; The level of consumer demand; The price and availability of other types of fuels or feedstocks; ff The availability of pipeline capacity; Supply disruptions, including plant outages and transpor rr tation disruptions; The price and quantity of foreign imports and domestic exports of natural gas and oil; Domestic and foreign governmental regulations and taxes; The credit of participants in the markets where products are bought and sold. We arWW e exposed to the credit risk of our customers and counterparties, and our credit risk management will not be able to completely eliminate such risk. r r We are subject to the risk of loss resulting from nonpayment and/or nonperformance by our customers and counterpar ties in the ordinary course of our business. Generally, our customers are rated investment grade, are otherwise considered creditworthy, are required to make prepayments or provide security to satisfy credit concerns, or are dependent upon us, in some cases without a readily available alternative, to provide necessary services. However, our credit procedures and policies cannot completely eliminate customer and counterparty credit risk. Our customers and counterparties include industrial customers, local distribution companies, natural gas producers, and marketers whose creditworthiness may be suddenly and disparately impacted by, among other factors, commodity price volatility, deteriorating energy market conditions, and public and regulatory opposition to energy producing activities. In a low commodity price environment, certain of our customers have been or could be negatively impacted, causing them significant economic stress resulting, in some cases, in a customer bankruptcy filing or an effort to renegotiate our contracts. To the extent one or more of our key customers commences bankruptcy ff proceedings, our contracts with such customers may be subject to rejection under applicable provisions of the United States Bankruptcy Code or, if we s o agree, may be renegotiated. Further, during any such bankruptcy proceeding, prior to assumption, rejection, or renegotiation of such contracts, the bankruptcy court may temporarily authorize the payment of value for our services less than contractually required, which could have a material adverse effect on our to adequately assess the business, creditworthiness of existing or futur e customers and counterparties or otherwise do not take sufficient mitigating actions, including obtaining sufficient collateral, deterioration in their creditworthiness and any resulting increase in nonpayment and/or nonperforff mance by them could cause us to write down or write off accounts receivable. Such hich they occur, and, if write-downs or write-offff s could negatively affect our operating results for the period in w significant, could have a mater ial adverse effect on our business, financial condition, results of operations, and cash flowff results of operations, cash flows , and financial condition. If we fail ff s. ff ff ff r ff We fWW ace opposition to operation and expansion of our pipelines and facilities from various individuals and ff groupsu . We have experienced, and we anticipate that we will continue to face, opposition to the operation and expansion of our pipelines and facilities from governmental officials, environmental groups, landowners, tribal groups, local groups, and other advocates. In some instances, we encounter opposition that disfavors hydrocarbon-based energy supplies regardless of practical implementation or financial considerations. Opposition to our operation and expansion can take many forff ms, including the delay or denial of required governmental permits, organized protests, attempts to block or sabotage our operations, intervention in regulatory or administrative proceedings involving our assets, or lawsuits or other actions designed to prevent, disrupt, or delay the operation or expansion of our assets and business. In addition, acts of sabotage or eco-terrorism could cause significant damage or injury to people, property, or the environment or lead to extended interruptions of our operations. Any such event that delays or prevents the expansion of our business, that interrupts the revenues generated by our operations, or which causes us to make 29 ff significant expenditures not covered by insurance, could adversely affect our financial condition and res operations. ults of WW We may not be able to grow or effectively manage our growth. As part of our growth strategy, we consider acquisition opportunities and engage in significant capital projects. We have both a project lifecycle process and an investment evaluation process. These are processes we use to identify, evaluate, and execute on acquisition opportunities and capital projects. We may not always have sufficient and accurate information to identify and value potential opportunities and risks or our investment evaluation process may be incomplete or flawed. Regarding potential acquisitions, suitable acquisition candidates or assets may not be available on terms and conditions we find acceptable or, where multiple parties are trying to acquire an acquisition candidate or assets, we may not be chosen as the acquirer. If we are able to acquire a targeted business, we may not be able to successfully integrate the acquired businesses and realize anticipated benefits in a timely manner. ff ff ff ff Our growth may also be dependent upon the construction of new natural gas gathering, transportation, compression, processing, or treating pipelines and facilities, NGL transportation, or fractionation or storage facilities as well as the expansion of existing facilities. Additional risks associated with construction may include the inability to obtain rights-of-way, skilled labor, equipment, materials, permits, and other required inputs in a timely manner such that projects are completed, on time or at all, and the risk that construction cost overruns, including due to inflation, could cause total project costs to exceed budgeted costs. Additional risks associated with growing our business include, among others, that: ff ff • Changing circumstances and deviations in variables could negatively impact our investment analysis, including our projections of revenues, earnings, and cash flow relating to potential investment targets, resulting in outcomes that are materially different than anticipated; • We could be required to contribute additional capital to support acquired businesses or assets, and we may assume liabilities that were not disclosed to us, that exceed our estimates and for which contractual protections are either unavailable or prove inadequate; • • Acquisitions could disrupt our ongoing business, distract management, divert financial and operational resources from existing operations, and make it difficult to maintain our current business standards, controls, and procedures; Acquisitions and capital projects may require substantial new capital, including the issuance of debt or equity, and we may not be able to access credit or capital markets or obtain acceptable terms. If realized, any of these risks could have an adverse impact on our financial condition, results of operations, including the possible impairment of our assets, or cash flows. Our industry is highly competitive and increased competitive pressure could adversely affect our business and operating results. We have numerous competitors in all aspects of our businesses, and additional competitors may enter our markets. Any current or future competitor that delivers natural gas, NGLs, or other commodities into the areas that we operate could offer transportation services that are more desirable to shippers than those we provide because of location, facilities, or other factors. In addition, current or potential competitors may make strategic price, acquisitions or have greater financial resources than we do, which could affect our ability to make strategic investments or acquisitions. Our competitors may be able to respond more quickly to new laws or regulations or emerging technologies or to devote greater resources to the construction, expansion, or refurbishment of their facilities than we can. Failure to successfully compete against current and future competitors could have a material . adverse effect on our business, results of operations, financial condition, and cash flows ff We do not own 100 percent of the equity interests of certain subsidiaries, including the NonNN consolidated Entities, which may limit our ability to operate and control including the Nonconsolidated Entities, are conducted through arrangements that may limit our ability to operate and control these operations. these subsidiaries. Certain operations, u The operations of our current non-wholly-owned subsidiaries, including the Nonconsolidated Entities, are conducted in accordance with their organizational documents. We anticipate that we will enter into more such 30 arrangements, including through new joint venture structures or new Nonconsolidated Entities. We may have limited operational flexibility in such current and future arrangements, and we may not be able to control the timing or amount of cash distributions received. In certain cases: • We cannot control the amount of cash reserves determined to be necessary to operate the business, which reduces cash available for distributions; • We cannot control the amount of capital expenditures that we are required to fund and we are dependent on third parties to fund their required share of capital expenditures; • We may be subject to restrictions or limitations on our ability to sell or transfer our interests in the jointly owned assets; • We may be forff ced to offer rights of participation to other joint venture participants in the area of mutual interest; • We have limited ability to influence or control certain day to day activities affecting the operations; • We may have additional obligations, such as required capital contributions, that are important to the success of the operations. ff In addition, conflicts of interest may ar ise between us, on the one hand, and other interest owners, on the other hand. If such conflicts of interest arise, we may not have the ability to control the outcome with respect to the matter in question. Disputes between us and other interest owners may also result in delays, litigation, or operational impasses. The risks described above or the failure to continue such arrangements could adversely affect our ability to conduct the operations that are the subject of such arrangements which could, in turn, negatively affect our business, growth strategy, financial condition, and results of operations. d, or add additional customer contracts or contracted volumes on favorable , or at all, which could affect our financial condition, the amount of cash available to pay dividends, and We may not be able to replace, exten WW termsrr s our ability to grow. ff We rely on a limited number of customers and producers for a significant portion of our revenues and supply of natural gas and NGLs. Although many of our customers and suppliers are subject to long-term contracts, if we are unable to replace or extend such contracts, add additional customers, or otherwise increase the contracted volumes of natural gas provided to us by current producers, in each case on favorable terms, if at all, our financial condition, growth plans, and the amount of cash available to pay dividends could be adversely affected. Our ability to replace, extend, or add additional customer or supplier contracts, or increase contracted volumes of natural gas from current producers, on favorable terms, or at all, is subject to a number of factors, some of which are beyond our control, including: • • • • • The level of existing and new competition in our businesses or from alternative sources, such as electricity, renewable resources, coal, fuel oils, or nuclear energy; Natural gas and NGL prices, demand, availability, and margins in our markets. Higher prices for energy commodities related to our businesses could result in a decline in the demand for those commodities and, therefore, in customer contracts or throughput on our pipeline systems. Also, lower energy commodity prices could negatively impact our ability to maintain or achieve favorable contractual terms, including pricing, and could also result in a decline in the production of energy commodities resulting in reduced customer contracts, supply contracts, and throughput on our pipeline systems; General economic, financial markets, and industry conditions; The effects of regulation on us, our cus ff tomers, and our contracting practices; Our ability to understand our customers’ expectations, efficiently and reliably deliver high quality services, and effectively manage customer relationships. The results of these efforts will impact our reputation and positioning in the market. 31 Certain of our gas pipeline services are subject to long-term, fixed-price contracts that are not subject to adjustment, even if our cost to perfr orff m s uch services exceeds the revenues received from such contracts. rr Our gas pipelines provide some services pursuant to long-term, fixed-price contracts. It is poss ible that costs to perform services under such contracts will exceed the revenues our pipelines collect for their services. Although other services are priced at cost-based rates that are subject to adjustment in rate cases, under FERC policy, a regulated service provider and a customer may mutually agree to sign a contract for service at a “negotiated rate” that may be above or below the FERC regulated cost-based rate for that service. These “negotiated rate” contracts ff are not generally subject to adjustment for increased costs that could be produced by inflation or other f actors relating to the specific facilities being used to perform the s ervices. ff ff ff Some of our businesses are exposed to supplier concentration risks arising from dependence on a single or a SS limited number of suppliers. Some of our businesses may be dependent on a small number of suppliers for delivery of critical goods or services. If a supplier on which one of our businesses depends were to fail to timely supply required goods and services, such business may not be able to replace such goods and services in a timely manner or otherwise on favorable terms or at all. If our busines s is unable to adequately diversify or otherwise mitigate such supplier ff concentration risks and such risks were realized, such businesses could be subject to reduced revenues and increased expenses, which could have a material adverse effect on our financial condition, results of operation, and cash flows. ff Failure of our service providers or disruptions to our outsourcing relationships might negatively impact our ability to conduct our business. Certain of our accounting and information technology services are currently provided by third-party vendors, and sometimes from service centers outside of the United States. Services provided pursuant to these arrangements could be disrupted. Similarly, the expiration of agreements associated with such arrangements or the transition of services between providers could lead to loss of institutional knowledge or service disruptions. Our reliance on others as service providers could have a material adverse effect on our business, financial condition, results of . operations, and cash flows ff rr An impairmen investments, could reduce our earnings. t of our assets, inclu rr s ding property, plant, and equipment, intangible assets, and/or equity-method GAAP requires us to test certain assets for impairment on either an annual basis or when events or circumstances occur which indicate that the carrying value of such assets might be impaired. The outcome of such testing could result in impairments of our assets including our property, plant, and equipment, intangible assets, and/ or equity-method investments. Additionally, any asset monetizations could result in impairments if any assets are sold or otherwise exchanged for amounts less than their carrying value. If we determine that an impairment has occurred, we would be required to take an immediate noncash charge to earnings. InII creasing scrutiny an governance practices may impose additional costs on us or expose us to new or additional risks. d changing expectations from stakeholders with respect to our environmental, social and n ff Companies across all industries are facing increasing scrutiny from stakeholders related to their environmental, social and governance (“ESG”) practices. Investor advocacy groups, institutional investors, investment funds and ingly focused on ESG practices and in recent years have placed increasing other influential investors are also increas importance on the implications and social cost of their investments. Regardless of the industry, investors’ increased focus and activism related to ESG (as pr oponents or opponents) and similar matters may hinder access to capital, as ff investors may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Companies that do not adapt to or comply with investor or other stakeholder expectations and standards, which are evolving, or that are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage, and the business, financial condition, and/or stock price of such a company could be materially and adversely affected. ff We face pressures from our stockholders, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint, and promote sustainability. Our stockholders may require us to implement ESG procedures or standards in order to continue engaging with us, to remain invested in us or before they may make further investments in us. Additionally, we may face reputational challenges in the event our 32 ESG procedures or standards do not meet the standards set by certain constituencies. We adopted certain practices as highlighted in our 2021 Sustainability Report, including with respect to air emissions, biodiversity and land use, climate change, and environmental stewardship. It is possible, however, that our stockholders might not be satisfied with our sustainability efforts or the speed of their adoption. If we do not meet our stockholders’ expectations, our business, ability to access capital, and/or our stock price could be harmed. ff Additionally, adverse effff ects upon the oil and gas industry related to the worldw ide social and political environments, including uncertainty or instability resulting from climate change, changes in political leadership and environmental policies, changes in geopolitical-social views toward fossil fuels and renewable energy, concern about the environmental impact of climate change, and investors’ expectations regarding ESG matters, may also adversely affff ect demand for our services try could have a significant financial and operational adverse impact on our business. . Any long-term material adverse effect on the oil and gas indus ff ff ff The occurrence of any of the foregoing could have a material adverse effect on the price of our stock and our ff business and financial condition. WW We may be s ubject to physical and financial risks associated with climate change. ff The threat of global climate change may create physical and financial risks to our business. Energy needs vary with weather conditions. To the extent weather conditions may be affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increased energy use due to weather changes may require us to invest in more pipelines and other infrastructure to serve increased demand. A decrease in energy use due to weather changes may affect our financial condition through decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions. Weather conditions outside of our operating territory could also have an impact on our revenues. To the extent the frequency of extreme weather events increases, this could increase our cost of providing service. We may not be able to pass on the higher costs to our customers or recover all costs related to mitigating these physical risks. Additionally, many climate models indicate that global warming is likely to result in rising sea levels and increased frff equency and severity of weather events, which may lead to higher insurance costs, or a decrease in sets in areas subject to severe weather. These climate-related changes could damage available coverage, for our as our physical assets, especially operations located in low-lying areas near coasts and river banks, and facilities situated in hurricane-prone and rain-susceptible regions. ff ff To the extent financial markets view climate change and greenhouse gas (“GHG”) emissions as a financial r isk, this could negatively impact our cost of and access to capital. Climate change and GHG regulation could also reduce demand for our s ervices. Our business could also be affected by the potential for lawsuits against GHG emitters, ff based on links drawn between GHG emissions and climate change. Our operations are subject to operational hazards and unforn eseen interruptions. There are operational risks associated with the gathering, transporting, storage, processing, and treating of natural gas, the fractionation, transportation, and storage of NGLs, and crude oil transportation and production handling, including: • • • • • • • • Aging infrastructure and mechanical problems; Damages to pipelines and pipeline blockages or other pipeline interruptions; Uncontrolled releases of natural gas (including sour gas), NGLs, crude oil, or other products; Collapse or failur ff e of storage caverns; Operator error; Damage caused by third-party activity, such as operation of construction equipment; Pollution and other environmental risks; Fires, explosions, craterings, and blowouts; 33 • • Security risks, including cybersecurity; Operating in a marine environment. Any of these risks could result in loss of human life, personal injuries, significant damage to property, environmental pollution, impairment of our operations, loss of services to our customers, reputational damage, and substantial losses to us. The location of certain segments of our facilities in or near populated areas, including residential areas, commercial business centers, and industrial sites, could increase the level of damages resulting from these risks. An event such as those described above could have a material adverse effect on our financial condition and results of operations, particularly if the event is not fully covered by insurance. Our assets and operations, as well as our customers’ assets and operations, can be adversely affected by weather and other natural phenomena. ff ff Our assets and operations, especially those located offshore, and our customers’ assets and operations can be adversely affff ected by hurricanes, f , earthquakes, landslides, tornadoes, fires, and other natural phenomena and ff weather conditions, including extreme or unseasonable temperatures, making it more difficult for us to realize the historic rates of return associated with our assets and operations. A significant disruption in our or our customers’ operations or the occurrence of a significant liability for which we are not fully insured could have a material adverse effff ect on our business, financial condition, results of operations, and cash flows. loods ff ff Our business could be negatively impacted by acts of terrorism and related disruptions. Given the volatile nature of the commodities we transport, process, store, and sell, our assets and the assets of our customers and others in our industry may be targets of terrorist activities. Uncertainty surrounding the Russian invasion of Ukraine, or other sustained military campaigns, may affect our operations in unpredictable ways, including the possibility that infrastructure facilities could be direct targets of, or indirect casualties of, an act of terrorism. A terrorist attack could create significant price volatility, disrupt our business, limit our access to capital markets, or cause significant harm to our operations, such as full or partial disr r uption to our ability to produce, process, transport, or distribute natural gas, NGLs, or other commodities. Acts of terrorism, as well as events occurring in response to or in connection with acts of terrorism, could cause environmental repercussions that could result in a significant decrease in revenues or significant reconstruction or remediation cos ts, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows. ff r ff A breach of our information technology infrastructure, including a breach caused by a cybersecurity attack on us or third parties with whom we are interconnected, may interfere with the safe operation of our assets, result in the rr disclosure of personal or proprietary infn orff mation, and har m our reputation rr . ff r ff We rely on our information technology infrastructure to process, transmit, and store electronic information, including information we use to safely operate our assets. Our Board of Director s has oversight responsibility with regard to assessment of the major risks inherent in our business, including cybersecurity risks, and reviews ts to address and mitigate such risks, including the establishment and implementation of policies management’s effff orff to address cybersecurity threats. We have invested, and expect to continue to invest, significant time, manpower, and capital in our information technology infrastructure. However, the age, operating systems, or condition of our current information technology infrastructure and software assets and our ability to maintain and upgr ade such assets could affect our ability to resist cybersecurity threats. While we believe that we maintain appropriate information security policies, practices, and protocols, we regularly face cybersecurity and other security threats to our inforff mation technology infrastructure, which could include threats to our operational industrial control systems and safety systems that operate our pipelines, plants, and assets. We face unlawful attempts to gain access to our inforff mation technology infrastructure, including coordinated attacks from hackers, whether state-sponsored groups, “hacktivists”, or private individuals. We face the threat of thef e of sensitive data and information, ff including customer and employee information. We also face attempts to gain access to information related to our assets through attempts to obtain unauthorized access by targeting acts of deception against individuals with legitimate access to physical locations or information. We also are subject to cybersecurity risks arising from the fact that our business operations are interconnected with third parties, including third-party pipelines, other facilities and our contractors and vendors. In addition, the breach of certain business systems could affect our ability to correctly record, process, and report financial information. Breaches in our information technology infrastructure or physical t and misus ff ff 34 , or other disruptions including those arising from theft, vandalis m, fraud, or unethical conduct, which may ff facilities increase as a result of the Russian invasion of Ukraine, could result in damage to or destruction of our assets, unnecessary wrr aste, safety incidents, damage to the environment, reputational damage, potential liability, the loss of contracts, the imposition of significant costs associated with remediation and litigation, heightened regulatory e effect on our operations, financial condition, results scrutiny, increased insurance costs, and have a material advers of operations, and cash flows. rr ff ird-party pipelines and other facilities interconnected to our pipelines and facilities become unavailable to If thII transport natural gas and NGLs or to treat natural gas, our revenues could be adversely affected. ff ff We depend upon third-party pipelines and other facilities that provide delivery options to and from our pipelines and facilities for the benefit of our customers. Because we do not own these third-party pipelines or other facilities, their continuing operation is not within our control. If these pipelines or facilities were to become temporarily or permanently unavailable for any reason, or if throughput were reduced because of testing, line repair, damage to pipelines or facilities, reduced operating pr essures, lack of capacity, increased credit requirements or rates charged by such pipelines or facilities or other causes, we and our customers would have reduced capacity to transport, store, or deliver natural gas or NGL products to end use markets or to receive deliveries of mixed NGLs, thereby reducing our revenues. Any temporary or permanent interruption at any key pipeline interconnection or in operations on third- party pipelines or facilities that would cause a material reduction in volumes transported on our pipelines or our gathering systems or processed, fractionated, treated, or stored at our facilities could have a material adverse effect on our business, financial condition, res ults of operations, and cash flows. ff ff Our operating results for certain components of our business might fluctuate on a seasonal basis. Revenues from certain components of our business can have seasonal characteristics. In many parts of the country, demand for natural gas and other fuels peaks during the winter. As a result, our overall operating results in the future might fluctuate substantially on a seasonal basis. Demand for natural gas and other fuels could vary ystems and significantly from our expectations depending on the nature and location of our facilities and pipeline s the terms of our natural gas transportation arrangements relative to demand created by unusual weather patterns. ff We do n WW operations. ot own all of the land on which our pipelines and facilities are located, which could disrupt our We do not own all of the land on which our pipelines and facilities have been constructed. As such, we are subject to the possibility of increased costs to retain necessary land use. In those instances in which we do not own the land on which our facilities are located, we obtain the rights to construct and operate our facilities and gathering systems on land owned by third parties and governmental agencies for a specific period of time. In addition, some of our facilities cross Native A merican lands pursuant to rights-of-way of limited terms. We may not have the right of eminent domain over land owned by Native American tribes. Our loss of any of these rights, through our inability to renew right-of-way contracts or otherwise, could have a material adverse effect on our business, financial condition, results of operations, and cash flows. ff Our business could be negatively impacted as a result of stockholder activism. In recent years, stockholder activism, including threatened or actual proxy contests, has been directed against numerous public companies, including ours. We were the target of a proxy contest from a stockholder activist, which resulted in our incurring significant costs. If stockholder activists were to again take or threaten to take actions against the Company or seek to involve themselves in the governance, strategic direction, or operations of the Company, we could incur significant costs as well as the distraction of management, which could have an tockholders may cause significant ff adverse effff ect on our business or f inancial results. In addition, actions of activist s fluctuations in our stock price based on temporary or speculative market per ceptions or other factors that do not ff necessarily reflect the underlying fundamentals and prospects of our business. ff ff Our costs and funding obligations for our defined benefit pension plans and costs for our other postretirement benefit plans are af actors beyond our control. ff fff ected by f ff ff We have defined benefit pension plans and other postretirement benefit plans. The timing and amount of our funding requirements under the def ff ined benefit pension plans depend upon a number of factors that we control, ff including changes to pension plan benefits, as well as factors outside of our control, such as asset returns, interest 35 rates, and changes in pension laws. Changes to these and other factors that can significantly increase our funding requirements could have a significant adverse effect on our financial condition and results of operations. Risks Related to Financing Our Business A downgrade of our credit ratings, wh could impact our liquidity, access to capital, and our costs of doing business. s ich are determined outside of our control by independent third parties, Downgrades of our credit ratings increase our cost of borrowing and could require us to provide collateral to our ties, negatively impacting our available liquidity. In addition, our ability to access capital markets could r counterpar be limited by the downgrading of our credit ratings. Credit rating agencies perforff m independent analysis when assigning credit ratings. The analysis includes a number of criteria such as, business composition, market and operational risks, as well as various financial tests. Credit rating agencies continue to review the criteria for industry sectors and various debt ratings and may make changes to those criteria frff om time to time. Credit ratings are subject to revision or withdrawal at any time by the ratings agencies. As of the date of the filing of this report, we have been assigned an investment-grade credit rating by the credit ratings agencies. ff Diffff icult condition business and results of operations. s in the global financial markets and the economy in general could negatively affect our ff Our businesses may be negatively impacted by adverse economic conditions or future disruptions in the global ff financial markets. Included among these potential negative impacts are industrial or economic contraction (including as a result of the COVID-19 pandemic) leading to reduced energy demand and lower prices for our products and services and increased difficulty in collecting amounts owed to us by our customers. The ongoing Russian invasion of Ukraine and the actions undertaken by western nations in response to Russia’s actions has had, and may continue to have, adverse impacts on global financial markets. If financing is not available when needed, or is available only on unfavorable terms, we may be unable to implement our business plans or otherwise take advantage of business opportunities or respond to competitive pressures. In addition, financial markets have periodically been affected by concerns over U.S. fiscal and monetary policies. These concerns, as well as actions taken by the U.S. federal government in response to these concerns, could significantly and adversely impact the global and U.S. economies and financial markets , which could negatively impact us in the manner described above. ff Restrictions in our debt agreements and the amount of our indebtedness may affect our future financial and ff operating flexibility. Our total outstanding long-term debt (including current portion) as of December 31, 2022, was $22.6 billion. The agreements governing our indebtedness contain covenants that restrict our and our material subsidiaries’ ability to incur certain liens to support indebtedness and our ability to merge or consolidate or sell all or substantially all of our assets in certain circumstances. In addition, certain of our debt agreements contain various covenants that restrict or limit, among other things, our ability to make certain distributions during the continuation of an event of default, the ability of our subsidiaries to incur additional debt, and our, and our material subsidiaries’, ability to enter into certain affiliate transactions and certain restrictive agreements. Certain of our debt agreements also contain, and those we enter into in the future may contain, financial covenants, and other limitations with which we will need to comply. Our debt service obligations and the covenants described above could have important consequences. For example, they could: • Make it more difficult for us to satisfy our obligations with respect to our indebtedness, which could in turn ff result in an event of default on such indebtedness; • • Impair our ability to obtain additional financing in the future for working capital, capital expenditures, acquisitions, general corporate purposes, or other purposes; Diminish our ability to withstand a continued or future downturn in our business or the economy generally; 36 • • Require us to dedicate a substantial portion of our cash flow from operations to debt service payments, thereby reducing the availability of cash for working capital, capital expenditures, acquisitions, the r payments of dividends, general corporate purposes, or other purposes; Limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, including limiting our ability to expand or pursue our business activities and preventing us from engaging in certain transactions that might otherwise be considered beneficial to us. ff Our ability to comply with our debt covenants, to repay, extend, or refinance our existing debt obligations and ur ability to refinance existing debt to obtain future credit will depend primarily on our operating performance. O obligations or obtain future credit w ill also depend upon the current conditions in the credit markets and the availability of credit generally. If we are unable to comply with these covenants, meet our debt service obligations, or obtain future credit on favorable terms, or at all, we could be forced to restructure or refinance our indebtedness, seek additional equity capital or sell assets. We may be unable to obtain financing or sell assets on satisfactory terms, or at all. ff ff Our failure to comply with the covenants in the documents governing our indebtedness could result in events of default, which could render such indebtedness due and payable. We may not have sufficient liquidity to repay our indebtedness in such circumstances. In addition, cross-default or cross-acceleration provisions in our debt agreements could cause a default or acceleration to have a wider impact on our liquidity than might otherwise arise from a default or acceleration of a single debt instrument. For more information regarding our debt agreements, please read Note 12 – Debt and Banking Arrangements of Notes to Consolidated Financial Statements. Changes to interest rates or increases in interest rates could adversely impact our access to credit, share price, our ability to issue securities or incur debt for acquisitions or other purposes, and our ability to make cash dividends at our intended levels. Interest rates may increase in the future. As a result, interest rates on future credit facilities and debt offerings could be higher than current levels, causing our financing costs to increase accordingly. As with other yield-oriented securities, our share price will be impacted by the level of our dividends and implied dividend yield. The dividend yield is often used by investors to compar e and rank yield-oriented securities for investment decision-making es. Therefore, changes in interest rates, either positive or negative, may affect the yield requirements of rr purpos investors who invest in our shares, and a rising interest rate environment could have an adverse impact on our share price and our ability to issue equity or incur debt for acquisitions or other purposes and to pay cash dividends at our intended levels. ff ff ff Our hedging activities might not be effective and could increase the volatility of our results. ff ff ff , financial s In an effort to manage our financial exposure related to commodity price and market fluctuations, we have entered, and may in the future enter into contracts to hedge certain risks associated with our assets and operations. In these hedging activities, we have used, and may in the future use, fixed-price, forwar d, physical purchase, and sales waps, and option contracts traded in the over-the-counter markets or on exchanges. contracts, futures Nevertheless, no single hedging arrangement can adequately address all risks present in a given contract. For act that would be effective in hedging commodity price volatility risks would not hedge the example, a forward contr ff contract’s counterparty credit or perforff mance risk. Therefore, unhedged risks w ill always continue to exist. While ff we attempt to manage counterparty credit risk within guidelines established by our credit policy, we may not be able to successfully manage all credit risk and as such, future cash flows and results of operations could be impacted by ff counterpar ty default. The difference in accounting treatment for the underlying position and the financial instrument used to hedge the value of the contract can cause volatility in our reported net income while the positions are open due to mark-to-market accounting. r ff r ff Our and our customers’ access to capital could be affected by financial institutions’ policies concerning fossil- fuff el related businesses. Public concern regarding the potential effects of climate change have directed increased attention towards the funding s ources of fossil-fuel energy companies. As a result, certain financial institutions, funds, and other sources ff of capital have restricted or eliminated their investment in certain market segments of fossil-fuel related energy. Ultimately, limiting fossil-fuel related companies’ access to capital could make it more difficult for our customers to 37 ff ation and production activities or for us to secure funding for growth projects. Such a lack secure funding for explor of capital could also both indirectly affect demand for our services and directly affect our ability to fund construction or other capital projects. r Risks Related to Regulations The operation of our businesses might be adversely affected by regulatory proceedings, changes in government regulations or in their interpretation or implementation, or the introduction of new laws or regulations applicable to our businesses or our customers. Public and regulatory scrutiny of the energy industry has resulted in the proposal and/or implementation of increased regulations. Such scrutiny has also resulted in various inquiries, investigations, and court proceedings, including litigation of energy industry matters. Both the shippers on our pipelines and regulators have rights to challenge the rates we charge under certain circumstances. Any successful challenge could materially affect our results of operations. rr ff Certain inquiries, investigations, and court proceedings are ongoing. Adverse effects may continue as a result of the uncertainty of ongoing inquiries, investigations, and court proceedings, or additional inquiries and proceedings tate regulatory agencies or private plaintiffs. In addition, we cannot predict the outcome of any of by federal or s these inquiries or whether these inquiries will lead to additional legal proceedings against us, civil or criminal fines and/or penalties, or other regulatory action, including legislation, which might be materially adverse to the operation of our business and our results of operations or increase our operating costs in other ways. Current legal proceedings or other matters, including environmental matters, suits, regulatory appeals, and similar matters might result in adverse decisions against us which, among other outcomes, could result in the imposition of substantial penalties and fines and could damage our reputation. The result of such adverse decisions, either individually or in the aggregate, could be material and may not be covered fully or at all by insurance. In addition, existing regulations, including those pertaining to financial assurances to be provided by our businesses in respect of potential asset decommissioning and abandonment activities, might be revised, reinterpreted, or otherwise enforced in a manner that differs from prior regulatory action. New laws and regulations, including those pertaining to oil and gas hedging and cash collateral requirements, might also be adopted or become applicable to us, our customers, or our business activities. The change in the U.S. governmental administration and its policies may increase the likelihood of such legal and regulatory developments. If new laws or regulations are imposed relating to oil and gas extraction, or if additional or revised levels of reporting, regulation, or permitting moratoria are required or imposed, including those related to hydraulic fracturing, the volumes of natural gas and other products that we transport, gather, process, and treat could decline, our compliance costs could increase, and our results of operations could be adversely affected. The natural gas sales, transportation, and storage operations of our gas pipelines are subject to regulation by the FERC, which could have an adverse impact on their ability to establish transportation and storage rates that would allow them to recover the full cost of operating their respective pipelines and storage assets, including a reasonable rate of return. s In addition to regulation by other federal, state, and local regulatory authorities, interstate pipeline transportation and storage service is subject to regulation by the FERC. Federal regulation extends to such matters as: • • • • • • • Transportation and sale for resale of natural gas in interstate commerce; Rates, operating terms, types of services, and conditions of service; Certification and construction of new interstate pipelines and storage facilities; ff Acquisition, extension, disposition, or abandonment of existing interstate pipelines and storage facilities; Accounts and records; Depreciation and amortization policies; Relationships with affiliated companies that are involved in marketing functions of the natural gas business; • Market manipulation in connection with interstate sales, purchases, or transportation of natural gas. 38 Regulatory or administrative actions in these areas, including successful complaints or protests against the rates s in many ways, including decreasing tariff rates and revenues, decreasing of the gas pipelines, can affff ect our busines volumes in our pipelines, increasing our costs, and otherwise altering the profitability of our pipeline business. ff Our operations are subject to environmental laws and regulations, including laws and regulations relating to climate change and greenhouse gas emissions, which may expose us to significant costs, liabilities, and expenditures that could exceed our expectations. tribal, and local to extensive federal, state, Our operations are subject laws and regulations governing environmental protection, endangered and threatened species, the discharge of materials into the environment, and the security of chemical and industrial facilities. Substantial costs, liabilities, delays, and other significant issues related to environmental laws and regulations are inherent in the gathering, transportation, storage, processing, and treating of natural gas, fractionation, transportation and production handling as well as waste disposal practices and construction activities. New or amended environmental laws and regulations can also result in significant increases in capital costs we incur to comply with such laws and regulations. Failure to comply with these laws, regulations, and permits may result in the assessment of administrative, civil and/or criminal penalties, the imposition of remedial obligations, the imposition of stricter conditions on or revocation of permits, the issuance of injunctions limiting or preventing some or all of our operations, and delays or denials in granting permits. transportation, and storage of NGLs, and crude oil ff Joint and several strict liability may be incurred without regard to fault under certain environmental laws and regulations, for the remediation of contaminated areas and in connection with spills or releases of materials associated with natural gas, oil, and wastes on, under, or from our properties and facilities. Private parties, including the owners of properties through which our pipeline and gathering systems pass and facilities where our wastes are eclamation or disposal, may have the right to pursue legal actions to enforce compliance as well as to seek taken for r ff damages for noncompliance w ith environmental laws and regulations or for personal injury or property damage ff arising frff om our operations. Some sites at which we operate are located near current or former third-party hydrocarbon s torage and processing or oil and natural gas operations or facilities, and there is a risk that r contamination has migrated frff om those sites to ours. We are generally responsible for all liabilities associated with the environmental condition of our facilities and assets, whether acquired or developed, regardless of when the liabilities arose and whether they are known or unknown. In connection with certain acquisitions and divestitures, we could acquire, or be required to provide indemnification against, environmental liabilities that could expose us to material losses, which may not be covered by insurance. In addition, the steps we could be required to take to bring certain facilities into compliance could be prohibitively expensive, and we might be required to shut down, divest, or alter the operation of those facilities, which might cause us to incur losses. ff ff In addition, climate change regulations and the costs that may be associated with such regulations and with the regulation of emissions of GHGs have the potential to affect our business. Regulatory actions by the Environmental Protection Agency or the passage of new climate change laws or regulations could result in increased costs to operate and maintain our facilities, install new emission controls on our facilities, or administer and manage any GHG emissions program. We believe it is possible that future governmental legislation and/or regulation may require us either to limit GHG emissions associated with our operations or to purchase allowances for such emissions. We could also be subjected to a carbon tax assessed on the basis of carbon dioxide emissions or otherwise. However, we cannot predict precisely what form these future regulations might take, the stringency of any such regulations or when they might become effective. Several legislative bills have been introduced in the United States Congress that would require carbon dioxide emission reductions. Previously considered proposals have included, among other things, limitations on the amount of GHGs that can be emitted (so called “caps”) together with systems of permitted emissions allowances. These proposals could require us to reduce emissions or to purchase allowances for such emissions. ff In addition to activities on the federal level, state and regional initiatives could also lead to the regulation of GHG emissions sooner than and/or independent of federal regulation. These regulations could be more stringent than any federal legislation that may be adopted. Future legislation and/or regulation designed to reduce GHG emissions could make some of our activities uneconomic to maintain or operate. We continue to monitor legislative and regulatory developments in this area and otherwise take efforts to limit and reduce GHG emissions from our ff ff 39 . Although the regulation of GHG emissions may have a material impact on our operations and rates, we ff facilities believe it is premature to attempt to quantify the potential costs of the impacts. If we are unable to recover or pass through a significant level of our costs related to complying with climate change regulatory requirements imposed on us, it could have a material adverse effect on our results of operations and financial condition. ff General Risk Factors ot insure against all potential risks and losses and could be seriously harmed by unexpected liabilities or WW We do n by the inability of our insurers to s rr atisfs y our claims. ff In accordance with customary industry practice, we maintain insurance against some, but not all, risks and losses, and only at levels we believe to be appropriate. The occurrence of any risks not fully covered by our insurance could have a material adverse effect on our business, financial condition, results of operations, and cash flowff s and our ability to repay our debt. Failure to attract and retain an appropriately qualified workforce could negatively impact our results of operations. Events such as an aging workforce without appropriate replacements, mismatch of skill sets to future needs, the challenges of attracting new, qualified workers to the midstream energy industry, or unavailability of contract labor may lead to operating challenges such as lack of resources, loss of knowledge, and a lengthy time period associated . Failure with skill development, including with the workforce needs associated with projects and ongoing operations to hire and adequately obtain replacement employees, including the ability to transfer significant internal historical knowledge and expertise to the new employees, or the future availability and cost of contract labor may adversely affect our ability to manage and operate the bus inesses. If we are unable to successfully attract and retain an ff including members of senior management, results of operations could be appropriately qualified workforce, negatively impacted. ff Holders of our common stock may n rr ot receive dividends in the amount expected or any dividends. We may not have sufficient cash each quarter to pay dividends or maintain current or expected levels of dividends. The actual amount of cash we dividend may fluctuate from quarter to quarter and will depend on various ff factor s, some of which are beyond our control, including: ff • • • • The amount of cash that our subsidiaries distribute to us; The amount of cash we generate from our operations, our working capital needs, our level of capital expenditures, and our ability to borrow; The restrictions contained in our indentures and credit facility and our debt service requirements; The cost of acquisitions, if any. e either to pay dividends or to pay dividends at expected levels could result in a loss of investor confidence, A failur ff reputational damage, and a decrease in the value of our stock price. Item 1B. UnUU resolved Staff Comments Not applicable. Item 2. Properties Please read “Business” for a description of the location and general character of our principal physical properties. We generally own our facilities, although a substantial portion of our pipeline and gathering facilities is constructed and maintained pursuant to r ights-of-way, easements, permits, licenses, or consents on and across properties owned by others. r 40 Item 3. Legal Proceedings Environmental Certain reportable legal proceedings involving governmental authorities under federal, state, and local laws regulating the discharge of materials into the environment are described below. While it is not possible for us to predict the final outcome of the proceedings that are still pending, we do not anticipate a material effect on our consolidated financial position if we receive an unfavorable outcome in any one or more of such proceedings. Our legal proceedings involving a governmental authority where threshold for dis potential monetary sanctions are involved is $1 million. closing material environmental ff rr On January 19, 2016, we r eceived a Notice of Noncompliance with certain Leak Detection and Repair (LDAR) regulations under the Clean Air Act at our Moundsville Fractionator Facility from the EPA, Region 3. Subsequently, the EPA alleged similar violations of certain LDAR regulations at our Oak Grove Gas Plant. On March 19, 2018, we received a Notice of Violation of certain LDAR regulations at our former Ignacio Gas Plant from the EPA, Region 8, following an on-site inspection of the facility. On March 20, 2018, we also received a Notice of Violation of certain LDAR regulations at our Parachute Creek Gas Plant from the EPA, Region 8. All such notices were subsequently referred to a common attorney at the Department of Justice (DOJ). We have reached an agreement in principle with the DOJ and other agencies regarding global resolution of the claims at these facilities, as well as alleged violations at certain other facilities. The proposed global resolution includes both payment of a civil penalty in the amount of $3.75 million and an injunctive relief component. We continue to work with the DOJ and the other agencies towards finalization of the global resolution. Other environmental matters called for by this Item are described under the caption “Environmental Mattersrr ” in Note 17 – Contingent Liabilities and Commitments of Notes to Consolidated Financial Statements included under ff Part II, Item 8 Financial Statements of this report, which information is incorporated by reference into this Item. Other litigation ff The additional information called for by this Item is provided in N ote 17 – Contingent Liabilities and Commitments of Notes to Consolidated Financial Statements included under Part II, Item 8 Financial Statements of r this report, which information is incor ated by reference into this Item. por ff Item 4. Mine Safety Disclosures Not applicable. 41 Informff ation About Our Executive Officers The name, title, age, period of service, and recent business experience of each of our executive officers as of rr Februar r e listed below. y 27, 2023, ar Name and Position Age Business Experience in Past Five Years Alan S. Armstrong 60 2011 to present Director, Chief Executive Officer, and President, The Williams Companies, Inc. Director, Chief Executive Officer, and President 2015 to 2018 Chairman of the Board, Williams Partners L.P. 2014 to 2018 Chief Executive Officer, Williams Partners L.P. 2012 to 2018 Director of the general partner, Williams Partners L.P. Debbie Cowan 45 2018 to present Senior Vice President and Chief Human Resources Officer , The Williams Companies, Inc. ff Senior Vice President and Chief Human Resources Officer 2013 to 2018 Global Vice President of Human Resources, Koch Chemical Technology Group, LLC Micheal G. Dunn 57 2017 to present Executive Vice President and Chief Operating Officer, The Williams Companies, Inc. Executive Vice President and Chief Operating Officer Scott A. Hallam 2017 to 2018 Director of the general partner, Williams Partners L.P. 46 2020 to present Senior Vice President Transmission & Gulf of Mexico, The Williams Companies, Inc. Senior Vice President Transmission & Gulf of Mexico 2019 Senior Vice President – Atlantic-Gulf, The Williams Companies, Inc. 2017 to 2019 Vice President GM Atlantic-Gulf, The Williams Companies, Inc. ff 2015 to 2017 Vice President Northeast OA, The Williams Companies, Inc. Mary A. Hausman 51 2022 to present Vice President, Chief Accounting Officer and Controller, The Williams Companies, Inc. Vice President, Chief Accounting Officer and Controller 2019 to 2022 Staff Vice President of Internal Audit, The Williams Companies, Inc. 2019 Director Special Projects, The Williams Companies, Inc. 2013 to 2019 Vice President and Chief Accounting Officer, NV Energy (a Berkshire Hathaway Energy Company) Larry C. Larsen 48 2022 to present Senior Vice President Gathering & Processing, The Williams Companies, Inc. Senior Vice President Gathering & Processing 2020 to 2021 Vice President Strategic Development, The Williams Companies, Inc. 2019 to 2020 Vice President Rocky Mountain Midstream, The Williams Companies, Inc. 2018 to 2019 Vice President GM Rocky Mountain Midstream, The Williams Companies, Inc. 2017 to 2018 Vice President Central Services, The Williams Companies, Inc. 42 Name and Position Age Business Experience in Past Five Years John D. Porter 53 2022 to present Senior Vice President and Chief Financial Officer, The Williams Companies, Inc. Senior Vice President and Chief Financial Officer 2020 to 2021 Vice President, Chief Accounting Officer, Controller and Financial Planning & Analysis, The Williams Companies, Inc. 2017 to 2019 Vice President Enterprise Financial Planning & Analysis and Investor Relations, The Williams Companies, Inc. 2013 to 2017 Director of Investor Relations & Enterprise Planning, The Williams Companies, Inc. Chad A. Teply 51 2020 to present Senior Vice President – Project Execution, The Williams Companies, Inc. Senior Vice President – Project Execution 2017 to 2020 Senior Vice President – Business Policy and Development, PacifiCorp (a Berkshire Hathaway Energy Company) 2009 to 2017 Vice President – Resource Development and Construction, PacifiCorp (a Berkshire Hathaway Energy Company) T. Lane Wilson 56 2017 to present Senior Vice President and General Counsel, The Williams Companies, Inc. Senior Vice President and General Counsel 2009 to 2017 United States Magistrate Judge for the Northern District of Oklahoma Chad J. Zamarin 46 2023 to present Executive Vice President of Corporate Strategic Development, The Williams Companies, Inc. Executive Vice President of Corporate Strategic Development 2017 to 2023 Senior Vice President – Corporate St Development, The Williams Companies, Inc. rategic rr 2017 to 2018 Director of the general partner, Williams Partners L.P. 2014 to 2017 President – Pipeline and Midstream, Cheniere Energy 43 PART II rr Item 5. Market for Registrant’s Common Equity, Related Stockholder Matter s and Issuer Purchases of Equity ff rities SecuSS Our common stock is listed on the New York Stock Exchange under the symbol “WMB.” At the close of business on February 17, 2023, we had 6,013 holders of record of our common s r tock. Share Repurchase Program ISSUER PURCHASES OF EQUITY SECURITIES Period October 1 - October 31, 2022 November 1 - November 30, 2022 December 1 - December 31, 2022 Total (a) Total Number of Shares Purchased (b) Average Price Paid Per Share — $ — $ — $ — — — — (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) (d) Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs — $1,491,248,057 — $1,491,248,057 — $1,491,248,057 — (1) We announced a stock repurchase program on September 8, 2021. Our board of directors has authorized the repurchase of up to $1.5 billion of the company’s common stock. The stock repurchase program has no expiration date. We intend to purchase shares of our stock from time to time in open market transactions, block purchases, privately negotiated or structured transactions, or in such other manner as determined at our discretion, subject to market conditions and other factors. Performff ance Graph Set forth below is a line graph comparing our cumulative total stockholder return on our common stock (assuming reinvestment of dividends) with the cumulative total return of the S&P 500 Stock Index, the Bloomberg Americas Pipelines Index, and the Arca Natural Gas Index for the period of five fisff cal years commencing January 1, 2018. The Bloomberg Americas Pipelines Index is composed of Enbridge Inc., TC Energy Corporation, Kinder Morgan, Inc., ONEOK, Inc., Cheniere Energy, Inc., Pembina Pipeline Corporation, Targa Resources Corp., New Fortress Energy Inc., and Williams. The Arca Natural Gas Index is comprised of over 20 highly capitalized companies in the natural gas industry involved primarily in natural gas exploration and production and natural gas pipeline transportation and transmission. The graph below assumes an investment of $100 at the beginning of the period. 44 The Williams Companies, Inc................ S&P 500 Index ....................................... Bloomberg Americas Pipelines Index.... Arca Natural Gas Index.......................... 2017 100.0 100.0 100.0 100.0 2018 74.5 94.8 83.8 66.4 2019 85.1 124.7 113.4 65.5 2020 78.7 147.6 89.7 56.7 2021 108.9 189.9 120.3 91.0 2022 144.8 155.5 139.0 116.5 45 Item 7. Management’s Dis ’ cussion and Analysis of Financial Condition and Results of Operations General We are an energy company committed to being the leader in providing infrastructure that safely delivers natural gas products to reliably fuel the clean energy economy. Our operations are located in the United States. Our interstate natural gas pipeline strategy is to create value by maximizing the utilization of our pipeline capacity by providing high-quality, low-cost transportation of natural gas to large and growing markets. Our gas pipeline businesses’ interstate transmission and storage activities are subject to regulation by the FERC and as such, our rates and charges for the transportation of natural gas in interstate commerce, and the extension, expansion or abandonment of jurisdictional facilities and accounting, among other things, are subject to regulation. The rates are established primarily through the FERC’s ratemaking process, but we also may negotiate rates with our customers pursuant to the terms of our tariffs and FERC policy. Changes in commodity prices and volumes transported have limited near-term impact on these revenues because the majority of cost of service is recovered through firm capacity reservation charges in transportation rates. The ongoing strategy of our midstream operations is to safely and reliably operate large-scale midstream infrff astructure where our assets can be fully utilized and drive low per-unit costs. We focus on consistently attracting new business by providing highly reliable service to our customers. These services include natural gas gathering, processing, treating, compression, and storage, NGL fractionation, transpor tation and storage, crude oil production handling and transportation, as well as marketing services for NGL, crude oil, and natural gas. ff Our operations are conducted, managed, and presented within the following reportable segments: 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 and corporate activities, are included in Other. Our reportable segments are comprised of the following business activities: • • Transmission & Gulf of Mexico is comprised of our interstate natural gas pipelines, Transco and 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 r interest in Gulfstar One (a consolidated variable interest entity, or VIE), a 50 percent equity-method investment in Gulfstream, and a 60 percent equity-method investment in Discovery. Transmission & Gulf of Mexico also includes natural gas storage facilities and pipelines providing services in north Texas. Northeast G&P is comprised of our midstream gathering, processing, and fractionation businesses in the Marcellus Shale region primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio, as well as a 65 percent interest in our Northeast JV (a consolidated VIE) which operates in West Virginia, Ohio, and Pennsylvania, a 66 percent interest in Cardinal (a consolidated VIE) which operates in Ohio, a 69 percent equity-method investment in Laurel Mountain, a 50 percent equity-method investment in Blue Racer, and Appalachia Midstream Investments. • 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, and the Mid-Continent region which includes the Anadarko and Permian basins. This segment also includes our NGL storage facilities, an undivided 50 percent interest in an NGL fractionator near Conway, Kansas, a 50 percent ff equity-method investment in OPPL, a 50 percent equity-method investment in RMM, a 20 percent equity- method investment in Targa Train 7, and a 15 percent equity-method investment in Brazos Permian II. • 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 NGLs on strategically positioned assets. 46 Unless indicated otherwise, the following discussion and analysis of results of operations and financial condition and liquidity relates to our current continuing operations and should be read in conjunction with the consolidated financial statements and notes thereto included in Part I I, Item 8 of this report. ff Dividends In December 2022, we paid a regular quarterly dividend of $0.425 per share. On January 31, 2023, our board of directors approved a regular quarterly dividend of $0.4475 per share payable on March 27, 2023. Overview of the Results of Operations Net income (loss) attributable to The Williams Companies, Inc. for the year ended December 31, 2022, increased by $532 million over the prior year. Further discussion of our results is found in this report in the Results of Operations. Recent Developments MouMM ntainWest Acquisition r rr On Februar y 14, 2023, we closed on the acquisition of 100 per cent of MountainWest Pipelines Holding Company (MountainWest) which includes FERC-regulated interstate natural gas pipeline systems and natural gas storage capacity, for $1.08 billion of cas h 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. ff NorNN thwest Pipeline FERC Rate Case Settlement On November 15, 2022, Northwest Pipeline received approval from the FERC for a stipulation and settlement agreement which generally reduces rates effective January 1, 2023, resolves other rate issues, establishes a Modernization and Emission Reduction Program, and satisfies its rate case filing obligation. Provisions were included in the settlement that establishes a moratorium on any proceedings that would seek to place new rates in ff effect any earlier than January 1, 2026, and that a general rate case f iling will be made for rates to become effective ff not later than April 1, 2028, unless we have entered into a pre-filing settlement prior to that date. NorNN Tex Asset Purchase On August 31, 2022, we purchased a group of assets in north Texas, primarily natural gas storage facilities and pipelines, frff om NorTex Midstream Holdings, LLC for $424 million. 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. The purpos e of the Trace Acquisition was to expand our footprint into the east Texas area of the Haynesville Shale rr region, increasing in-basin scale in one of the largest growth basins in the country. Company Outlook Our strategy is to provide a large-scale, reliable, and clean energy infrastructure designed to maximize the opportunities created by the vast supply of natural gas and natural gas products that exists in the United States. We accomplish this by connecting the growing demand for cleaner fuels and feedstocks with our major positions in the premier natural gas and natural gas products supply basins. We continue to maintain a strong commitment to safety, environmental stewardship including seeking opportunities for renewable energy ventures, operational excellence, and customer satisfaction. We believe that accomplishing these goals will position us to deliver safe, reliable, clean energy services to our customers and an attractive return to our shareholders. Our business plan for 2023 includes a continued focus on earnings and cash flow growth. 47 In 2023, our operating results are expected to benefit from the MountainWest Acquisition, volume growth in the Haynesville and Northeast G&P areas, and annual inflation-based rate increases across our gathering and processing business. We also anticipate increases resulting from the development of our upstream oil and gas properties and a full year of contr ecently acquired Trace and NorTex assets. These increases are partially offset by a ff lower expected commodity price environment. ff ibution from r ff We seek to maintain a strong financial position and liquidity, as well as manage a diversified portfolio of safe, clean, and reliable energy infrastructure assets that continue to serve key growth markets and supply basins in the United States. Our growth capital and investment expenditures in 2023 are expected to be in a range from $1.40 billion to $1.70 billion, excluding the MountainWest Acquisition. Growth capital spending in 2023 primarily includes Transco expansions, all of which are fully contracted with firm transportation agreements, projects supporting the Northeast G&P business and projects supporting growth in the Haynesville basin, including the Louisiana Energy Gateway project. We also expect to invest capital in the development of our upstream oil and gas properties. In addition to growth capital and investment expenditures, we also remain committed to projects that maintain our assets for safe and reliable operations, as well as projects that reduce emissions, and meet legal, regulatory, and/or contr actual commitments. ff rr Potential risks and obstacles that could impact the execution of our plan include: • • • • • • • • • A global recession, which could result in downturns in financial markets and commodity prices, as well as impact demand for natural gas and r elated products; ff Opposition to, and regulations affecting, our infrastructure projects, including the risk of delay or denial in permits and approvals needed for our projects; Counterparty credit and performance risk; r Unexpected significant incr increases from inflation or delays caused by supply chain disruptions; ff ff eases in capital expenditures or delays in capital project execution, including Unexpected changes in customer drilling and production activities, which could negatively impact gathering and processing volumes; Lower than anticipated demand for natural gas and natural gas products which could result in lower-than- expected volumes, energy commodity prices, and margins; General economic, financial markets, or industry downturns, including increased inflation and interest rates; Physical damages to facilities, including damage to offshore facilities by weather-related events; Other risks set forth under Part I, Item 1A. Risk Factors in this report. Expansion Projects Our ongoing major expansion projects include the following: TrTT ansmission & Gulf of Mexico Deepwater Shenandoah Project p j In June 2021, we reached an agreement with two third-parties to provide offshore natural gas gathering and transportation services as well as onshore natural gas processing services. The project expands our existing Gulf of Mexico offff sff hore infrastructure via a 5-mile offshore lateral pipeline from the Shenandoah platform to Discovery’s existing Keathley Canyon Connector pipeline, adds onshore processing facilities at Larose, Louisiana to handle the expected rich Shenandoah production, and the natural gas liquids will be fractionated and marketed at Discovery’s Paradis plant in Louisiana. We plan to place the project into service in the fourth quarter of 2024. rr 48 Deepwater W p hale Project j In August 2021, we reached an agreement with two third-parties to provide offshore natural gas gathering and crude oil transportation services as w ell as onshore natural gas processing services. The project expands our r existing Western Gulf of Mexico offff sff hore infrastructure via a 26-mile gas lateral pipeline from the Whale platform to the existing Perdido gas pipeline and adds a new 125-mile oil pipeline from the Whale platform to our existing junction platform. We plan to place the project into service in the fourth quarter of 2024. ff Regional Energy Access gy g rr In January 2023, w e received approval from the FERC for the project to expand Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from receipt points in northeastern Pennsylvania to multiple delivery points in Pennsylvania, New Jersey, and Maryland. We plan to place the full project into service as early as the fourth quarter of 2024, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 829 Mdth/d. Southside Reliability Enhancement y In May 2022, we filed an application with the FERC for the project, which is an expansion of Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from receipt points in Virginia and North Carolina to delivery points in North Carolina. We plan to place the project into service as early as the 2024/2025 winter heating season assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 423 Mdth/d. y Texas to Louisiana Energy Pathway gy In August 2022, we filed an application with the FERC for the project, which involves an expansion of Transco’s existing natural gas transmission system to provide firm transportation capacity from receipt points in south Texas to delivery points in Texas and Louisiana. We plan to place the project into service as early as the firff st quarter of 2025, assuming timely receipt of all necessary regulatory approvals. The project is expected to provide 364 Mdth/d of new firm transportation service through a combination of increasing capacity, converting interruptible capacity to firm, and utilizing existing capacity. Southeast Energy Connector gy ff In August 2022, we filed an application with the FERC for the project, which is an expansion of Transco’s existing natural gas transmission system to provide incremental firm transportation capacity from receipt points in Mississippi and Alabama to a delivery point in Alabama. We plan to place the project into service in the first quarter of 2025, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 150 Mdth/d. Commonwealth Energy Connector gy In August 2022, we filed an application with the FERC for the project, which involves an expansion of Transco’s existing natural gas transmission system to provide incremental firm transportation capacity in Virginia. We plan to place the project into service as early as the fourth quarter of 2025, assuming timely receipt of all necessary regulatory approvals. The project is expected to increase capacity by 105 Mdth/d. WesWW t y Louisiana Energy Gateway gy In June 2022, we announced our intention to construct new natural gas gathering assets which are expected to gather 1.8 Bcf/d of natural gas pr oduced in the Haynesville Shale basin for delivery to premium markets, including Transco, industrial markets, and growing LNG export demand along the Gulf Coast. This project is expected to go into service in the fourth quarter of 2024. ff 49 Haynesville Gathering Expansion g p y rr In February 2023, we announced our agreement with a third party to facilitate natural gas production growth in the Haynesville basin. We plan to construct a greenfield gathering system in support the third party’s 26,000 acre dedication. The system, once constructed, will provide natural gas gathering services to the third party. The third party has also agreed to a long-term capacity commitment on our Louisiana Energy Gateway project. Critical Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. We believe that the nature of these estimates and assumptions is material due to the subjectivity and judgment necessary, or the susceptibility of such matters to change, and the impact of these on our financial condition or results of oper ations. ff Pension and Postretirement Obligations ff We have pension and other postretirement benefit plans that require the use of assumptions and estimates to ignificant judgement and determine the benefit obligations and costs. These estimates and assumptions involve s actual results will likely be different than anticipated. Estimates and assumptions utilized include the expected long- term rates of return on plan assets, discount rates, cash balance interest crediting rate, and employee demographics, including retirement age and mortality. These assumptions are reviewed annually and adjustments are made as needed. The assumptions utilized to compute the benefit obligations and costs are shown in Note 7 – Employee Benefit Plans of Notes to Consolidated Financial Statements. ff The follow ing table presents the estimated increase (decrease) in net periodic benefit cost and obligations resulting frff om a one-percentage-point change in the specific assumption. Benefiff t Cost Benefiff t Obligation One- Percentage- Point Increase One- Percentage- Point Decrease One- Percentage- Point Increase One- Percentage- Point Decrease Pension benefits: Discount rate........................................................................ $ Expected long-term rate of return on plan assets ................ Cash balance interest crediting rate..................................... Other postretirement benefits: Discount rate........................................................................ Expected long-term rate of return on plan assets ................ (21) $ (11) 5 (3) (2) (Millions) (1) $ 11 (25) 2 2 (69) $ — 50 (14) — 80 — (43) 16 — Our expected long-term rates of return on plan assets, as determined at the beginning of each fiscal year, are based on historical returns, forff ward-looking capital market expectations of at least 10 years from our third-party independent investment advisor, as well as the investment strategy and relative weightings of the asset classes within the investment portfolio. Our expected long-term rate of return on plan assets used for our pension plans was 3.81 percent in 2022. The 2022 actual return on plan assets for our pension plans was a loss of approximately 9.7 percent. The 10-year average rate of return on pension plan assets through December 2022 was approximately 6.8 percent. The expected rates of return on plan assets are long-term in nature and are not significantly impacted by short-term market perforff mance. The discount rates for our pension and other postretirement benefit plans are determined separately based on an approach specific to our plans, which considers a yield curve of high-quality corporate bonds and the duration of the expected benefit cas s of each plan. h flowff ff ff ff 50 The cash balance interest crediting rate assumption represents the average long-term rate by which the pension plans’ cash balance accounts are expected to grow. Interest on the cash balance accounts is based on the 30-year U.S. Treasury securities rate. rr 51 Results of Operations Consolidated Overview The following table and discussion is a summary of our consolidated results of operations for the three years ended December 31, 2022. The results of operations by segment are discussed in further detail following this consolidated overview discussion. Year Ended December 31, $ Change frff om 2021* % Change frff om 2021* 2022 2021 (Millions) $ Change frff om 2020* % Change frff om 2020* 2020 Revenues: Service revenues .......................................... $ 6,536 Service revenues – commodity consideration ............................................ Product sales ................................................ Net gain (loss) on commodity derivatives ... Total revenues.......................................... 260 4,556 (387) 10,965 Costs and expenses: Product costs ................................................ Net processing commodity expenses ........... Operating and maintenance expenses .......... Depreciation and amortization expenses ..... Selling, general, and administrative expenses ................................................... Impairment of certain assets ........................ Impairment of goodwill ............................... Other (income) expense – net ...................... Total costs and expenses.......................... Operating income (loss)................................... Equity earnings (losses) ................................... Impairment of equity-method investments ...... Other investing income (loss) – net ................. Interest expense................................................ Other income (expense) – net .......................... Income (loss) before income taxes .................. Less: Provision (benefit) for income taxes .. Net income (loss) ......................................... Less: Net income (loss) attributable to noncontrolling interests.......................... Net income (loss) attributabla e to The 3,369 88 1,817 2,009 636 — — 28 7,947 3,018 637 — 16 (1,147) 18 2,542 425 2,117 +535 +22 +20 -239 +562 +13 -269 -167 -78 +2 — -14 +29 — +9 +32 +12 +86 +9% $ 6,001 +77 +1% $ 5,924 +109 +2,865 -143 +84% +171% NM +9% —% -161% 238 4,536 (148) 10,627 +14% +13% -17% -9% 3,931 101 1,548 1,842 -14% +100% —% -100% 558 2 — 14 7,996 2,631 608 — 7 +3% (1,179) 6 2,073 511 1,562 +5% —% +129% +200% +17% -2,386 -33 -222 -121 -92 +180 +187 +8 +280 +1,046 -1 -7 +49 -432 129 1,671 (5) 7,719 1,545 68 1,326 1,721 -154% -49% -17% -7% -20% +99% +100% +36% 466 182 187 22 5,517 2,202 +85% 328 +100% (1,046) 8 -1% (1,172) (43) NM 277 79 198 -13% NM 68 -23 -51% 45 -58 NM (13) Williams Companies, Inc......................... $ 2,049 +532 +35% $ 1,517 +1,306 NM $ 211 _______ * + = Favorable change; - = Unfavorable change; NM = A percentage calculation is not meaningful due to a change in signs, a zero-value denominator, or a percentage change greater than 200. 2022 vs. 2021 Service revenues increased primarily due to higher gathering and processing rates driven by favorable commodity prices and annual contractual rate escalations for certain of our West and Northeast G&P operations, higher volumes including from the Trace Acquisition and NorTex Asset Purchase, higher transportation fee revenues associated with the Leidy South expansion project placed fully in service at Transco in December 2021, 52 and higher reimbursable electric power costs and storage rates which are substantially offset in OperO ating and maintenance expenses. Service revenues – commodity consideration increased primarily due to higher NGL prices, partially offset by lower NGL volumes. These revenues represent consideration we receive in the form of commodities as full or partial ocessing services provided. Most of these NGL volumes are sold during the month processed and payment for pr fsff et within Product costs below. therefore are of ff ff Product sales increased primarily due to higher marketing sales prices and volumes, including increased volumes associated with the Sequent Acquisition in third-quarter 2021 and the Trace Acquisition in second-quarter 2022. Product sales also increased due to higher sales volumes and prices associated with our upstream operations and system management gas sales, as well as higher prices and lower volumes related to our equity NGL sales activities. These increases were partially offset by an unfavorable change in natural gas marketing sales primarily due to the impact of netting the 2022 legacy natural gas marketing revenues with the associated costs (see Note 1 – General, Description of Business, and Basis of Presentation of Notes to Consolidated Financial Statements). As we are acting as agent for natural gas marketing customers of our Gas & NGL Marketing Services segment, our natural gas marketing product sales are presented net of the related costs of those activities, including significant 2022 lower of cost or net realizable value adjustments to our natural gas inventory. ff The unfavorable change in Net gain (loss) on commodity derivatives primarily reflects higher net unrealized losses in our Gas & NGL Marketing Services segment, and higher net realized losses related to derivative contracts in our Other segment. Lower net realized losses at our West segment and a net unrealized gain at our Other segment in 2022 partially offff sff et these impacts. 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 transpor tation and storage portfolio as well as upstream related production. However, the unrealized fair value measurement gains and losses are generally offsff et 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. ff ff Product costs decreased primarily due to the impact of netting the 2022 legacy natural gas marketing revenues with the associated costs. This decrease was partially offset by higher prices and volumes associated with our NGL marketing activities, including the increase in volumes associated with the Trace Acquisition in second-quarter 2022, as well as significant 2022 lower of cost or net realizable value adjustments to our NGL inventory. Product costs also increased due to higher system management gas purchases and higher NGL prices associated with volumes acquired as commodity consideration related to our equity NGL production activities. Net processing commodity expenses decreased primarily due to the impact of a 2022 net unrealized gain on derivatives for processing plant shrink gas purchases and lower volumes for natural gas purchases associated with our equity NGL production activities, partially offset by higher net realized prices. The net sum of Service revenues – commodity consideration, Product sales, Product costs, net realized gains and losses on commodity derivatives related to sales of product, and net realized processing commodity expenses comprise our Commodity margins . However, Product sales and net realized gains and losses on commodity derivatives at our Other segment reflecting sales related to our oil and gas producing properties comprise Net realized product sales and are excluded from our Commodity margins. See Results of Operations— Year-Over-Year Operating Results - Segments for additional discussion of Commodity margins and Net realized product sales on a segment basis. r OperO ating and maintenance expenses increased primarily due to higher operating and maintenance costs, including $63 million of higher reimbursable electric power and storage costs which are substantially offset in Service revenues. The increase was also a result of higher expenses associated with our upstream operations, increased costs associated with Transco's Leidy South expansion project placed in service in December 2021, higher employee-related expenses, and higher expenses associated with the 2022 Trace Acquisition and NorTex Asset Purchase. 53 Depreciation and amortization expenses increased primarily due to amortization of intangibles acquired in the Sequent and Trace Acquisitions and an increase in depreciation at Transco related to ARO revisions (offset in Other (incom resulting in no net impact on our results of operations), loss) (( partially offset by the absence of 2021 depreciation on certain decommissioned facilities in our West segment. (( e) expense – net within Operating income ( O Selling, general, and administrative expenses increased primarily due to higher employee-related expenses porate costs, including ff ts to track and quantify emissions associated with natural gas procurement, driven by the Sequent Acquisition in July 2021 and higher expenses for various cor r technology costs to support effff orff transmission, and delivery.rr (( Other (incom e) expense – net within Operating incom s) changed unfavorably primarily due to charges related to Eminence storage cavern abandonments and monitoring, as well as regulatory charges associated with a decrease in Transco’s estimated deferred state income tax rate, offset by the deferral of ARO depreciation (offset in Depreciation and amortization expenses resulting in no net impact on our results of operations). e (los(( O ff Equity earnings (losses) changed favorably pr ff imarily due to increases at investments across our West segment, including RMM, and at Laurel Mountain, partially offset by a decrease at Appalachia Midstream Investments. (( Provision (benefit) for income taxes changed favorably primarily due to a benefit associated with a decrease in our estimate of the state deferred income tax rate, a benefit related to the release of a valuation allowance, and feder al settlements, partially offset by higher pre-tax income. See Note 6 – Provision (Benefit) for Income Taxes of ff Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods. The unfavor ff able change in Net income (loss) attributable to noncontrolling interests is primarily due to higher results at the Northeast JV. 2021 vs. 2020 Service revenues increased primarily due to higher transportation fee revenues associated with expansion projects placed in service at Transco in 2020 and 2021, higher revenue associated with reimbursable electricity expenses, and higher processing and fractionation revenues in our Northeast G&P segment. This increase was partially offset by lower volume deficiency fee revenues, lower gathering volumes, and lower deferred revenue amortization. ff Service revenues – commodity consideration increased primarily due to higher NGL prices. These revenues represent consideration we receive in the forff m of commodities as full or partial payment for processing services provided. Most of these NGL volumes are sold during the month processed and therefore are offset within Product costs below. Product sales increased primarily due to higher prices and volumes associated with our natural gas and NGL marketing activities, as well as the inclusion of our recently acquired upstream operations. This increase also includes higher prices related to our equity NGL sales activities. These increases were partially offset by negative product marketing sales from operations acquired in the Sequent Acquisition in 2021 (which does not reflect commodity derivative net realized gains discussed below). Net gain (loss) on commodity derivatives includes realized and unrealized gains and losses from derivative instruments. The unfavorable change primarily reflects net unrealized losses in our Gas & NGL Marketing Services segment, and net realized losses related to derivative contracts in our West and Other segments. Net realized gains at our Gas & NGL Marketing Services segment partially offset these impacts. Product costs increased primarily due to higher prices and volumes associated with our natural gas and NGL marketing activities, as well as higher NGL prices associated with volumes acquired as commodity consideration related to our equity NGL production activities. 54 Net processing commodity expenses increased primarily due to higher prices for natural gas purchases ff associated with our equity NGL production activities, partially offset by lower volumes. OperO ating and maintenance expenses increased primarily due to the inclusion of our recently acquired upstream operations and higher employee-related expenses, which reflect the absence of a 2020 favorable impact of a change in an employee benefit policy and increased incentive compensation costs associated with improved company performance, as well as higher reimbursable electricity expenses. Depreciation and amortization expenses increased primarily due to the inclusion of our recently acquired upstream operations, reduced estimated useful lives for certain facilities in our West segment decommissioned during 2021, new assets placed in-service at Transco, and the amortization of intangible assets resulting from the Sequent Acquisition. ff Selling, general, and administrative expenses increased primarily due to higher employee-related expenses, which reflect increas ed incentive compensation costs associated with improved company performance, Sequent Acquisition employee-related costs, and the absence of a 2020 favorable impact of a change in an employee benefit policy, partially offff sff et by lower expenses for various corporate costs. ff ImII pairm ment of certain assets reflects the 2020 impairment of our Northeast Supply Enhancement development project and certain gathering assets in the Marcellus Shale region (see Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk of Notes to Consolidated Financial Statements). ImII pairm ment of goodwill reflects the goodwill impairment charge at the Northeast reporting unit in 2020 (see Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk of Notes to Consolidated Financial Statements). Equity earnings (los(( ses) changed favorably primarily due to the absence of the 2020 impairment of goodwill at RMM, increases at Appalachia Midstream Investments, Laurel Mountain, Blue Racer, Aux Sable, and Discovery, partially offset by a decrease at OPPL. ImII pairm ment of equity-method investments reflects the absence of 2020 impairments to various equity-method investments (see Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk of Notes to Consolidated Financial Statements). ff ff The favorable change in reflects the absence of a 2020 charge for a legal settlement associated with former olefins operations and the absence of 2020 write-offs of certain regulatory assets related to cancelled projects, partially offset by the unfavorable impact of a 2021 accrual for a loss contingency. Other income (expense) – net below OperO ating income (loss) ff (( ff Provision (benefit) for income taxes changed unfavorably primarily due to higher pre-tax income. See Note 6 – Provision (Benefit) for Income Taxes of Notes to Consolidated Financial Statements for a discussion of the effective tax rate compared to the federal statutory rate for both periods. ff ff The unfavorable change in Net income (loss) attributable to noncontrolling interests is primarily due to the absence of our partner’s share of the 2020 goodwill impairment at the Northeast reporting unit. Year-rr Over-rr Year Operatin OO g Results – Segments SS We evaluate segment operating performance based upon Modified EBITDA . Note 18 – Segment Disclosures of Notes to Consolidated Financial Statements includes a reconciliation of this non-GAAP measure to Net income (loss). Management uses Modified EBI TII DTT ADD because it is an accepted financial indicator used by investors to compare company perforff mance. In addition, management believes that this measure provides investors an enhanced should not be considered in isolation or as perspective of the operating perforff mance of our assets. Modified EBITDA a substitute for a measure of performance prepared in accordance with GAAP. MM II II 55 Transmission & Gulf of Mexico Year Ended December 31, 2022 2021 2020 Service revenues .............................................................................................. $ Service revenues – commodity consideration (1)............................................ Product sales (1) .............................................................................................. Segment revenues ....................................................................................... Product costs (1) .............................................................................................. Net processing commodity expenses (1) ......................................................... Other segment costs and expenses................................................................... Impairment of certain assets ............................................................................ A of equity-method investments ..................... Proportional Modified EBITD ff Transmission & Gulf of Mexico Modified EBITDA ................................. $ 3,579 64 404 4,047 (399) (26) (1,141) — 193 2,674 Commodity margins ........................................................................................ $ 43 $ (Millions) 3,385 52 349 3,786 (349) (17) (980) (2) 183 2,621 35 $ $ $ $ $ 3,257 21 191 3,469 (193) (7) (886) (170) 166 2,379 12 _______________ (1) Included as a component of Commodity margins. 2022 vs. 2021 MM TrTT ansmission & Gulf of Mexico M MM odified EBITDA increased primarily due to higher Service revenues, partially offff sff et by higher Other segment costs and expenses. Service revenues increased primarily due to: • • • • A $163 million increase in Transco’s service revenues primarily associated with the Leidy South expansion project placed fully in service in December 2021, park and loan services, short-term firm transportation, overall demand, and commodity fee revenues. Additionally, 2022 benefited from higher reimbursable electric power costs and storage rates effective since the second quarter of 2022, partially offset by lower cash out surcharges, all of which are offset by similar changes in electricity, storage and cash out charges reflected in Other segment costs and expenses; A $21 million increase in the Eastern Gulf Coast region primarily due to higher production handling and gathering volumes from the absence of temporary shut-ins due to producer operational issues and weather- related events in 2021, partially offset by a decrease at Gulfstar One for the Tubular Bells field primarily due to lower production handling, gathering and transportation volumes from natural decline; ff A $16 million increase primarily related to storage and transportation revenues due to the acquisition of NorTex in August 2022; partially offset by A $13 million decrease in the Western Gulf Coast region primarily at Perdido due to lower transportation and gathering volumes from temporary downtime from producer operational issues in 2022. Commodity margins associated with our equity NGLs increased $5 million primarily driven by favorable NGL sales prices, partially offset by higher prices for natural gas purchases associated with our equity NGL production activities. r ff ff Other segment costs and expenses increased primarily due to higher operating costs including higher reimbursable electric power costs and storage costs, partially offset by favorable cash out charges, all of which are offff sff et by similar changes in electricity reimbursements, cash out charges, and storage revenues reflected in Service revenues. Additionally, 2022 was impacted by higher costs associated with the Leidy South expansion project; 56 maintenance costs primarily related to general maintenance at Transco, Gulf Coast region, and Northwest Pipeline; charges related to Eminence storage cavern abandonments and monitoring; and regulatory charges associated with a decrease in Transco’s estimated deferred state income tax r ate, higher employee-related costs, corporate allocations, and operations acquired in the NorTex Asset Purchase. These increases are partially offset by a favorable change in the deferff ral of ARO related depreciation at Transco. ff 2021 vs. 2020 MM TrTT ansmission & Gulf of Mexico Modified EBITDA increased primarily due to favorable changes to Impairment of certain assets and Service revenues, partially offset by higher ff Other segment costs and expenses. Service revenues increased primarily due to: • • • • • A $135 million increase in Transco’s and Northwest Pipeline’s natural gas transportation and storage revenues primarily associated with expansion projects placed in service in 2020 and 2021, higher reimbursable electric power costs and a cash out surcharge, which are offset by similar changes in electricity and cash out charges, reflected in Other segment costs and expenses; A $21 million increase from the Norphlet pipeline associated primarily with higher deferred revenue amortization and higher volumes; An $18 million increase at Perdido primarily driven by higher volumes due to the absence of temporary shut-ins in 2020 related to scheduled maintenance and fewer Western Gulf of Mexico weather-related events; partially offsff et by A $25 million decrease at Gulfstar One for the Tubular Bells field primarily associated with lower deferred revenue amortization from lower contractually determined maximum daily quantities; A $17 million decrease due to lower volumes at Gulfstar One in the Gunflint field due to ongoing producer operational issues, partially offset by the lower temporary shut-ins related to pricing in 2020. Commodity margins r associated with our equity NGLs increased $21 million primarily driven by favorable NGL sales prices. Other segment costs and expenses increased primarily due to higher incentive and benefit employee-related costs as previously discussed; higher operating costs, including higher reimbursable electric power costs; and a cash out surcharge reserve, which are offset by similar changes in electricity and cash out reimbursements, reflected in Service revenues; and higher operating taxes, partially offsff et by a favorable change associated with the deferral of asset retirement obligation-related depreciation at Transco. ImII pairm ment of certain assets reflects the absence of the impairment of our Northeast Supply Enhancement development project in 2020 (see Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk of Notes to Consolidated Financial Statements). ff Proportional Modified EBITDA of equity-method investments increased at Discovery driven by higher NGL sales prices and higher volumes due to the absence of prior year scheduled maintenance. 57 Northeast G&P Year Ended December 31, 2022 2021 2020 Service revenues .............................................................................................. $ Service revenues – commodity consideration (1)............................................ Product sales (1) .............................................................................................. Segment revenues ....................................................................................... Product costs (1) .............................................................................................. Net processing commodity expenses (1) ......................................................... Other segment costs and expenses................................................................... Impairment of certain assets ............................................................................ A of equity-method investments ..................... Proportional Modified EBITD ff Northeast G&P Modified EBITDA ............................................................ $ 1,654 14 134 1,802 (135) (3) (522) — 654 1,796 Commodity margins ........................................................................................ $ 10 $ (Millions) 1,528 7 99 1,634 (99) (2) (503) — 682 1,712 5 $ $ $ $ $ 1,465 7 57 1,529 (57) (3) (441) (12) 473 1,489 4 (1) Included as a component of Commodity margins. 2022 vs. 2021 Northeast G&P Modified EBITDA MM Proportional Modified EBITDA of equity- MM increased primarily due to higher Service revenues, partially offset by low ff er method investments and higher Other segment costs and expenses. Service revenues increased primarily due to: • • • • A $64 million increase in revenues at the Northeast JV primarily related to higher gathering, processing, and fractionation volumes as well as higher processing rates; A $43 million increase in revenues in the Utica Shale region primarily related to higher gathering rates resulting from annual cost of ser vice contract redeterminations, as well as proceeds from the release of an ff acreage dedication; A $14 million increase in revenues associated with reimbursable expenses, which is offset by similar changes in the charges reflected in Other segment costs and expenses; ff No change in revenues at Susquehanna Supply Hub primarily related to higher gathering rates, offset by lower gathering volumes. Other segment costs and expenses increased primarily due to higher operating expenses, including higher electricity and fuel, which is partially offset in ff Service revenues. MM Proportional Modified EBITDA of equity-method investments decreased at Appalachia Midstream Investments primarily driven by lower gathering rates resulting from annual cost of service contract redeterminations as well as lower volumes. Additionally, there was a decrease at Blue Racer primarily due to lower volumes. The decrease was partially offset by an increase at Laurel Mountain primarily due to higher commodity-based gathering rates. 58 2021 vs. 2020 Northeast G&P Modified EBITII DTT ADD increased primarily due to increased Proportional Modified EBITDA of equity-method investments and higher Service revenues, partially offset by increased Other segment costs and expenses. MM Service revenues increased primarily due to: • • • A $27 million increase in revenues associated with reimbursable electricity expenses, which is offset by similar changes in electricity charges, reflected in Other segment costs and expenses; A $23 million increase in revenues at the Northeast JV primarily related to higher processing and frff actionation volumes, partially offset by lower gathering volumes; A $6 million increase in revenues at Susquehanna Supply Hub primarily related to higher gathering rates, partially offset by lower gathering volumes. Other segment costs and expenses increased primarily due to higher maintenance and operating expenses, including higher electricity charges, as well as higher incentive and benefit employee-related costs as previously discussed. ImII pairm ff ment of certain assets reflects a $12 million impair ment of certain gathering assets in the Marcellus Shale region in 2020 (see Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk of Notes to Consolidated Financial Statements). Proportional Modified EBITDA of equity-method investments increased at Appalachia Midstream Investments primarily driven by higher volumes as well as the absence of our $26 million share of an impairment of certain assets in 2020 that were subsequently sold. Additionally, there was an increase at Blue Racer primarily due to the favorable impact of incr eased ownership as well as the absence of our $10 million share of an impairment of certain ff assets in 2020. There was also an increase at Laurel Mountain due to higher commodity-based gathering rates as well as the absence of our $11 million share of an impairment of certain assets in 2020 that were subsequently sold and higher MVC revenue, partially offset by lower volumes, and an increase at Aux Sable. 59 West Year Ended December 31, 2022 2021 2020 Service revenues .............................................................................................. $ Service revenues – commodity consideration (1)............................................ Product sales (1) .............................................................................................. 1,542 182 841 $ (Millions) 1,248 179 643 $ Net realized gain (loss) on commodity derivatives – service revenues ............ Net realized gain (loss) on commodity derivatives – product sales (1)........... Net realized gain (loss) on commodity derivatives..................................... (1) (3) (4) (15) (29) (44) 1,272 101 152 — (2) (2) Segment revenues ....................................................................................... 2,561 2,026 1,523 Product costs (1) .............................................................................................. Net processing commodity expenses (1) ......................................................... Other segment costs and expenses................................................................... A of equity-method investments ..................... Proportional Modified EBITD ff West Modified EBITDA............................................................................. $ (813) (105) (564) 132 1,211 Commodity margins ........................................................................................ $ 102 (608) (85) (477) 105 961 100 $ $ (154) (58) (474) 110 947 39 $ $ ________________ . (1) Included as a component of Commodity margins r 2022 vs. 2021 WesWW t Modified EBI MM TII DTT ADD increased primarily due to higher Service revenues and a favorable change in Net realized gain (los(( s s) on commodity derivatives, ff partially offset by higher Other segment costs and expenses. Service revenues increased primarily due to: • • • • • A $186 million increase in the Haynesville Shale region primarily due to higher gathering volumes including volumes from the Trace Acquisition as well as higher gathering rates driven by favorable commodity pricing; A $96 million increase in the Barnett Shale region primarily due to higher gathering rates driven by ff favorable commodity pricing; A $14 million increase associated with higher fractionation fees primarily due to higher fractionation volumes from a new contract; A $4 million increase in the Eagle Ford region primarily due to higher MVC revenues, escalated gathering rates, and higher deferred revenue amortization, substantially offset by lower volumes due to decreased producer activity; partially offset by A $10 million decrease in the Wamsutter region primarily due to lower MVC revenue. Net realized gain (loss) on commodity derivatives – service revenues changed favorably due to a change in settled commodity prices relative to our hedge positions. Product margins from our equity NGLs increased $6 million primarily due to higher net realized NGL sales prices, partially offsff et by higher net realized prices for natural gas purchases associated with our equity NGL production activities. Additionally, volumes of equity NGL sold and natural gas purchased associated with our 60 equity NGL production activities were lower primarily due to a customer contract change. Margins from other sales activities increased $16 million primarily due to higher condensate sales and favorable pricing. Marketing margins decreased $20 million primarily due to the absence of the favorable impact of Winter Storm Uri in the first quarter of 2021. Other segment costs and expenses increased primarily due to higher operating expenses related to timing and scope of activities including from operations acquired in the Trace Acquisition, the absence of gains on asset sales in 2021, higher corpor ate allocations, acquisition-related costs associated with the Trace Acquisition in 2022, and an unfavorable change in our net imbalance liability due to changes in pricing. r ff Proportional Modified EBITDA of equity-method investments increased primarily due to higher volumes at OPPL and higher commodity prices and volumes at RMM. 2021 vs. 2020 WesWW t Modified EBI MM TII DTT ADD increased primarily due to higher Commodity margins, r partially offsff et by lower Service revenues. Service revenues decreased primarily due to: • • • • • A $63 million decrease associated with lower volumes, primarily due to production declines in the Eagle Ford Shale region which impact is substantially offset by recognition of higher MVC revenue (see below); A $22 million decrease driven by lower deferred revenue amortization, primary in the Barnett Shale region; partially offset by A $37 million increase associated with higher MVC revenue primarily in the Eagle Ford Shale region, partially offset by lower MVC revenue in the Wamsutter region; A $17 million increase in revenues associated primarily with reimbursable compressor power and fuel purchases due to higher prices related to the impact of Winter Storm Uri in the first quarter of 2021, which are offff set by similar changes in Other segment costs and expenses; ff ff A $10 million increase associated with higher net realized gathering and processing rates, primarily in the Barnett Shale and Piceance regions due to higher commodity pricing, along with escalated gathering rates in the Eagle Ford Shale region, partially offset by a decrease in gathering rates in the Haynesville Shale region due to a customer contract change. Marketing margins increased by $36 million primarily due to favorable changes in net realized natural gas and NGL prices, including the impact of Winter Storm Uri in the first quarter of 2021. Product margins from our equity NGLs increased by $13 million, primarily due to favorable net realized commodity price changes, partially offset by lower sales volumes. Margins on other sales of products increased $12 million primarily due to higher commodity prices. ff Other segment costs and expenses increased primarily due to higher incentive and benefit employee-related expenses as previously discussed, higher reimbursable compressor power and fuel purchases which are offset in Service revenues, and higher compressor and plant fuel expenses which are not reimbursable, partially offset by gains on asset sales in 2021, lower leased compressor expenses, favorable changes in system gains and losses, lower legal and consulting expenses, and favorable settlements. Proportional Modified EBITDA of equity-method investments decreased primarily due to lower volumes at OPPL, partially offset by higher volumes and commodity prices at Brazos Permian II. 61 Gas & NGL Marketing Services Year Ended December 31, 2022 2021 (Millions) 2020 Service revenues..................................................................... $ Product sales (1) ..................................................................... 3 $ 3,534 3 $ 4,292 32 1,602 Net realized gain (loss) frff om derivative instruments (1)........ Net unrealized gain (loss) from derivative instruments.......... Net gain (loss) on commodity derivatives ......................... 17 (321) (304) 25 (109) (84) Segment revenues .............................................................. 3,233 4,211 Net unrealized gain (loss) from derivative instruments within Net processing commodity expenses....................... Product costs (1) ..................................................................... Other segment costs and expenses ......................................... Gas & NGL Marketing Services Modified EBITDA ........ $ 47 (3,228) (92) (40) $ — (4,152) (37) 22 $ (3) — (3) 1,631 — (1,569) (11) 51 Commodity margins ............................................................... $ 323 $ 165 $ 30 ________________ . (1) Included as a component of Commodity margins r 2022 vs. 2021 rr Gas & NGL Mar keting Services Modified EBITDA decreased primarily due to higher net unrealized loss from Other segment costs and expenses, partially offsff et by higher Commodity margins. derivative instruments and higher GG rr Commodity margins r increased $158 million primarily due to: • A $188 million increase in natural gas marketing margins which included the following: ◦ ◦ ◦ A $301 million increase in natural gas transportation capacity marketing margins primarily resulting frff om the Sequent Acquisition in the third quarter of 2021 and an increase in favorable pricing spreads in 2022 compared to 2021; partially offsff et by A $58 million decrease associated with our legacy natural gas marketing operations primarily due to the absence of the favorable impact of Winter Storm Uri in the first quarter of 2021; ff A $55 million decrease in natural gas storage marketing margins due primarily to an increase in lower of cost or net realizable value inventory adjustments of $115 million and higher storage fees, partially offff sff et by higher storage withdrawals in 2022 compared to 2021. • A $30 million decrease in our NGL marketing margins primarily due to lower of cost or net realizable value inventory adjustments in 2022. rr Net unrealized gain (loss) from derivative instruments changed primarily due to the Sequent Acquisition in July 2021, and a change in forward commodity prices relative to our hedge positions in 2022 compared to 2021. Other segment costs and expenses increased primarily due to higher employee-related costs related to the Sequent Acquisition and higher corporate allocations. 62 2021 vs. 2020 Gas & NGL MGG rr arMM keting Services Modified EBITDA decreased primarily due to higher net unrealized losses from Service revenues, and higher segment costs and expenses, partially offset by higher derivative instruments, lower rr Commodity margins. Service revenues decreased due to the absence of a temporary volume deficiency fee as ff sociated with reduced volumes frff om a shipper on OPPL in 2020. Commodity margins increased $135 million primarily due to: • • A $112 million increase associated with our legacy natural gas and NGL marketing operations primarily due to favorable changes in net realized natural gas prices, including the impact of Winter Storm Uri in the firff st quarter of 2021; A $23 million increase associated with the operations acquired in the Sequent Acquisition in 2021 including $35 million primarily related to favorable pricing spreads on transportation capacity reflecting losses on physical transaction settlements more than offset by net realized gains on derivatives. The ff transportation related margin was partially offset by a $12 million unf avorable margin related to storage activity. The unfavorable s torage margin reflects gains on physical transaction settlements offset by an $18 million charge related to the partial recognition of a purchase accounting inventory fair value adjustment which increased the weighted-average cost of inventory and $13 million related to a lower of cost or net realizable value inventory adjustment. ff ff The Net unrealized gain (loss) from derivative instruments changed primarily due to the Sequent Acquisition in July 2021, and a change in forward commodity prices relative to our hedge positions. Other segment costs and expenses increased primarily due to employee-related costs associated with the operations acquired in the Sequent Acquisition in 2021. Other Year Ended December 31, 2022 2021 (Millions) 2020 Service revenues................................................................................... $ Product sales (1) ................................................................................... $ 24 706 $ 32 333 Net realized gain (loss) frff om derivative instruments (1)...................... Net unrealized gain (loss) from derivative instruments ....................... Net gain (loss) on commodity derivatives....................................... Segment revenues............................................................................ Other segment costs and expenses ....................................................... Other Modified EBITDA ................................................................ $ (104) 25 (79) 651 (217) 434 Net realized product sales..................................................................... $ 602 ________________ (1) Included as a component of Net realized product sales. (20) — (20) 345 (167) 178 313 $ $ $ $ 34 — — — — 34 (49) (15) — 63 2022 vs. 2021 Other Modified EBITDA which included the following: MM increased primarily due to $248 million higher results from our upstream operations • • • A $289 million increase in Net realized product sales primarily due to higher commodity prices in 2022, partially offset by the absence of the favorable impact of Winter Storm Uri in 2021 and an unfavorable change in Net realized gain (loss) from derivative instruments due to an increase in commodity prices relative to our hedge positions and an increase in the volume of production hedged in 2022 compared to 2021. Net realized product sales also increased due to higher production from new w ells and higher ff volumes associated with acquisitions of additional ownership interests in 2021; ff A $25 million favorable change in Net unrealized gain (loss) from derivative ins truments due to a change in forff ward commodity prices relative to our hedge positions and an increase in the volume of production hedged in 2022 compared to 2021; partially offset by (( A $66 million increase in Other segment costs and expenses primarily due to the increased scale of our upstream operations and higher associated production taxes which were also impacted by higher commodity prices and higher volumes as well as higher tax rates. Other segment costs and expenses also includes an $11 million charge related to an accrual for loss contingency in 2022, substantially offset by the absence of a $10 million charge related to an accrual for loss contingency in 2021. 2021 vs. 2020 Other Modified EBI MM TII DTT ADD increased primarily due to: • • • • A $168 million increase related to our upstream operations, including the favorable commodity price impact of Winter Storm Uri in the first quarter of 2021; A $24 million increase due to the absence of a 2020 charge related to a legal settlement associated with our forff mer olefins operations; ff A $15 million increase due to the absence of 2020 charges related to write-offs of certain regulatory assets associated with cancelled projects; partially offset by A $10 million decrease associated with a 2021 charge related to a legal settlement. 64 Management’s Discussion and Analysis of Financial Condition and Liquidity Overview We have continued to focus on earnings and cash flow growth, while continuing to improve leverage metrics and operating costs metrics. During 2022, we issued approximately $1.75 billion of new long-term debt primarily to fund cur rent or near-term maturities. In April 2022, we completed the Trace Acquisition; and in August 2022, we ff completed the NorTex Asset Purchase, both of which were funded with available sources of short-term liquidity (see Note 3 – Acquisitions of Notes to Consolidated Financial Statements). See also the section titled Sources (Uses) of Cash. Outlook Our growth capital and investment expenditures in 2023 are currently expected to be in a range from $1.40 billion to $1.70 billion, excluding the MountainWest Acquisition. Growth capital spending in 2023 primarily includes Transco expansions, all of which are fully contracted with firm transportation agreements, projects supporting the Northeast G&P business and projects supporting growth in the Haynesville basin, including the Louisiana Energy Gateway project. We also expect to invest capital in the development of our upstream oil and gas properties. In addition to growth capital and investment expenditures, we also remain committed to projects that maintain our assets for safe and reliable operations, as well as projects that reduce emissions, meet legal, regulatory, and/or contractual commitments. We intend to fund substantially all planned 2023 capital spending with cash . We retain the flexibility to adjust planned levels of growth capital and investment available after paying dividends expenditures in response to changes in economic conditions or business opportunities including the repurchase of our common stock. ff r rr On Februar y 14, 2023, w e acquired 100 percent of MountainWest which includes FERC-regulated interstate natural gas pipeline systems and natural gas storage capacity, for $1.08 billion of cash and assumption of $430 million outstanding principal amount of long-term debt, subject to working capital and post-closing adjustments. The acquisition was funded with available sources of short-term liquidity. ff As of December 31, 2022, we have approximately $627 million of long-term debt due within one year. Our potential sources of liquidity available to address these maturities include cash on hand, proceeds from refinancing, our credit facility, or our commercial paper program, as well as proceeds from asset monetizations. ff Liquidity Based on our forecasted levels of cash flow from operations and other sources of liquidity, we expect to have ses in 2023. Our potential material internal and external sources and uses ff suffff icient liquidity to manage our busines of liquidity are as follows: ff Sources: Uses: g Cash and cash equivalents on hand Cash generated from ope Distributions from our equity-method inve y Utilization of our credit facility and/or commercial paper program Cash proceeds from issuance of debt and/or equity securities Proceeds from asset monetizations rations y stees y g a g l requirements Working cg apita Capital and investment expenditures Product costs Gas & NGL Marketing Services pa Other operating costs including human capital expenses Quarterly dividends to our shareholders Repayments of borrowings under our credit facility and/or commercial paper program Debt service payments, including pa Distributions to noncontrolling inte Share repurc yments of long-term debt y rests y yments for transportation and storage c hase program y g y g g g g y y g g g g y y apacity and gas supply g 65 At December 31, 2022, we have approximately $21.927 billion of long-term debt due after one year. See Note 12 – Debt and Banking Arrangements of Notes to Consolidated Financial Statements for the aggregate ities include maturities over the next five years. Our potential sources of liquidity available to address these matur cash generated from operations, proceeds from refinancing, our credit facility, or our commercial paper pr ogram, as well as proceeds from asset monetizations. ff ff Potential risks associated with our planned levels of liquidity discussed above include those previously discussed in Company Outlook. At December 31, 2022, we had a working capital deficit of $1.093 billion, including cash and cash equivalents and long-term debt due within one year. Our available liquidity is as follows: Available Liquidity December 31, 2022 (Millions) Cash and cash equivalents........................................................................................................... $ Capacity available under our $3.75 billion credit facility, less amounts outstanding under our $3.5 billion commercial paper program (1)............................................................................. $ 152 3,400 3,552 __________ (1) In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of our credit facility inclusive of any outstanding amounts under our commercial paper program. We had $350 million of commercial paper outstanding at December 31, 2022. The highest amount outstanding under our commercial paper program and credit facility during 2022 was $1.219 billion. At December 31, 2022, we were in compliance with the financial covenants associated with our credit facility. See Note 12 – Debt and Banking Arrangements of Notes to Consolidated Financial Statements for additional information on our credit facility and commercial paper program. Dividends We increased our regular quarterly cash dividend to common stockholders by approximately 3.7 percent from the $0.41 per share paid in each quarter of 2021, to $0.425 per share paid in each quarter of 2022. Registrations rr In Februar r y 2021, w e filed a shelf registration statement as a well-known seasoned issuer. Distributions frff om Equity-Method Investees The organizational documents of entities in which we have an equity-method investment generally require periodic distributions of their available cash to their members. In each case, available cash is reduced, in part, by reserves appropriate for operating their respective businesses. See Note 8 – Investing Activities of Notes to Consolidated Financial Statements for our more significant equity-method investees. ff Credit Ratings The interest rates at which we are able to borrow money are impacted by our credit ratings. The current ratings are as follows: Rating Agency S&P Global Ratings Moody’s Investors Service Fitch Ratings Outlook Stable Stable Stable Senior Unsecured Debt Rating BBB Baa2 BBB These credit ratings are included for informational purposes and are not recommendations to buy, sell, or hold our securities, and each rating should be evaluated independently of any other rating. No assurance can be given that 66 the credit rating agencies will continue to assign us investment-grade ratings even if we meet or exceed their current criteria for investment-grade ratios. A downgrade of our credit ratings might increase our future cost of borrowing and, if ratings were to fall below investment-grade, could require us to provide additional collateral to third parties, negatively impacting our available liquidity. SouSS rces (U(( sUU es) of Cash The following table summarizes the sour ff ces (uses) of cash and cash equivalents for each of the periods presented (see Notes to Consolidated Financial Statements for the Notes referenced in the table): ff h Flow Category 2022 Year Ended December 31, 2021 (Millions) 2020 Sources of cash and cash equivalents: Operating activities – net .......................................................... Operating Financing Proceeds from long-term debt (see Note 12) ............................ Financing Proceeds from credit-facility borrowings ................................. Financing Proceeds from commercial paper - net ..................................... Investing Contributions in aid of construction ......................................... $ $ 4,889 1,755 — 345 12 $ 3,945 2,155 — — 52 3,496 2,199 1,700 — 37 Uses of cash and cash equivalents: Payments of long-term debt (see Note 12) ............................... Common dividends paid ........................................................... Payments on credit-facility borrowings .................................... Capital expenditures.................................................................. Purchases of businesses, net of cash acquired (see Note 3)...... Dividends and distributions paid to noncontrolling interests ... Purchases of and contributions to equity-method investments (see Note 8) ........................................................................... Financing Financing Financing Investing Investing Financing (2,876) (2,071) — (2,253) (933) (204) (894) (1,992) — (1,239) (151) (187) (2,141) (1,941) (1,700) (1,239) — (185) Investing (166) (115) (325) Other sources / (uses) – net .......................................................... Increase (decrease) in cash and cash equivalents ......................... Financing and Investing (26) $ (1,528) $ (36) 1,538 $ (48) (147) OperO ating activities ff The factor s that determine operating activities are largely the same as those that affect Net income (loss), with the exception of noncash items such as Depreciation and amortization, Provision (benefit) for deferred income taxes, Equity (earnings) losses ment of goodwill, Impairment of equity-method investments, Impairment of (( certain assets, Net unrealized (gain) loss from derivative instruments, and Inventory wr ite-downs. , ImII pairm r (( Our Net cash provided (used) by operating activities in 2022 increased from 2021 primarily due to higher operating income (excluding noncash items as previously discussed), favorable changes in margin requirements, and higher Distributions from equity-method investees, partially offset by net unfavorable changes in net operating working capital. Our Net cash provided (used) by operating activities in 2021 increased from 2020 primarily due to higher operating income (excluding noncash items as previously discussed), favorable changes in net operating working capital reflecting the abs ence in 2021 of the Transco rate refund payment made in 2020, and higher distributions frff om unconsolidated affiliates in 2021, partially offset by unfavorable changes in current and noncurrent derivative assets and liabilities. ff 67 Environmental We are a participant in certain environmental activities in various stages including assessment studies, cleanup operations, and/or remedial processes at certain sites, some of which we currently do not own (see Note 17 – Contingent Liabilities and Commitments of Notes to Consolidated Financial Statements). We are monitoring these sites in a coordinated effort with other potentially responsible parties, the EPA, or other governmental authorities. We are jointly and severally liable along with unrelated third parties in some of these activities and solely responsible in others. Current estimates of the most likely costs of such activities are approximately $40 million, all of which are included in Accrued and other current liabilities and Regulatory liabilities, deferred income, and other in the Consolidated Balance Sheet at December 31, 2022. We will seek to recover approximately $4 million of accrued costs related to remediation activities by our interstate gas pipelines through future natural gas transmission rates. The remainder of these costs will be funded from operations. Dur ing 2022, we paid approximately $5 million emediation and monitoring activities. We expect to pay approximately $11 million in 2023 for ff for cleanup and/or r these activities. Estimates of the most likely costs of cleanup are generally based on completed assessment studies, esults of studies, or our experience with other similar cleanup operations. At December 31, 2022, preliminary r certain assessment studies were still in process for which the ultimate outcome may yield different estimates of mos t likely costs. Therefore, the actual costs incurred will depend on the final amount, type, and extent of contamination discovered at these sites, the final cleanup standards mandated by the EPA or other governmental authorities, and ff other factors. rr ff ff 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 exis ting source performance standards for volatile organic compounds and methane. We continuously monitor these regulatory changes and how they may impact our operations. Implementation of new or modified regulations may result in impacts to our operations and increase the cost of additions to Property, plant, and equipment – net in the Consolidated Balance Sheet for both new and existing facilities in aff ever, due to regulatory uncertainty on final rule content and applicability ff timefrff ames, we are unable to reasonably estimate the cost these regulatory impacts at this time. ected areas; how r rr ff We consider prudently incurred environmental assessment and remediation costs and the costs associated with compliance with environmental standards to be recoverable through rates for our interstate natural gas transmission pipelines. Historically, with limited exceptions, we have been permitted recovery of these environmental costs, and . it is our intent to continue seeking recovery of such costs through future rate filings ff 68 Item 7A. Quantitative and Qualitative Disclosures About Market Risk InII terest Rate Risk ff Our current interest rate risk exposure is related primarily to our debt portfolio. Our debt portfolio is primarily comprised of fixed rate debt, which mitigates the impact of fluctuations in interest rates. Any borrowings under our credit facility and any issuances under our commercial paper program could be at a variable interest rate and could expose us to the risk of increasing interest rates. The maturity of our long-term debt portfolio is partially influenced by the expected lives of our operating assets. (See Note 12 – Debt and Banking Arrangements of Notes to Consolidated Financial Statements.) ff The tables below provide information by maturity date about our interest rate risk-sensitive instruments as of December 31, 2022 and 2021. See Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk of Notes to Consolidated Financial Statements for the methods used in determining the fair value of our long- term debt. 2023 2024 2025 2026 2027 (Millions) Thereafter (1) Total Fair Value December 31, 2022 Long-term debt, including current portion: Fixed rate........................ Weighted-average interest rate................. $ 629 $ 2,281 $ 1,619 $ 1,245 $ 1,993 5.0 % 5.0 % 5.1 % 5.0 % 5.0 % Commercial paper (2) ......... $ 350 $ — $ — $ — $ — $ $ 14,787 $ 22,554 $ 21,569 5.1 % — $ 350 $ 350 2022 2023 2024 2025 2026 (Millions) Thereafter (1) Total Fair Value December 31, 2021 Long-term debt, including current portion: Fixed rate........................ Weighted-average interest rate................. $ 2,026 $ 1,478 $ 2,281 $ 1,619 $ 1,244 $ 15,027 $ 23,675 $ 27,768 4.9 % 5.0 % 5.1 % 5.1 % 5.1 % 5.1 % __________________ (1) Includes unamortized discount / premium and debt issuance costs. (2) The weighted-average interest rate for commercial paper was 4.8 percent as of December 31, 2022. Commodity Price Risk We are exposed to commodity price risk through our natural gas and NGL marketing activities, including contracts to purchase, sell, transport, and store product. We routinely manage 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. We are also exposed to commodity prices through our upstream business and certain gathering and processing contracts. We use derivative instruments to lock in forward sales prices on a portion of our expected future production. These economic hedges are not designated for hedge accounting treatment. 69 The maturities of our derivative contracts at December 31, 2022, as well as the maturities of the derivative contracts related to the operations acquired in the Sequent Acquisition at December 31, 2021, were as follows: Fair Value Measurements Using (1) Total Fair Value Maturity 2023 2024 - 2025 2026 - 2027+ Level 1 (2) ......................................................................................... $ (2) $ (Millions) 11 $ Level 2 ............................................................................................... Level 3 ............................................................................................... (586) (56) (171) (19) (9) $ (224) 2 Fair value of contracts outstanding at December 31, 2022 .......... $ (644) $ (179) $ (231) $ (4) (191) (39) (234) Fair Value Measurements Using (1) Total Fair Value Maturity 2022 2023 - 2024 2025 - 2026+ (Millions) Level 1 (3) ......................................................................................... $ (69) $ (49) $ (30) $ Level 2 ............................................................................................... Level 3 ............................................................................................... (317) (16) (77) (13) (108) (11) Fair value of contracts outstanding at December 31, 2021 .......... $ (402) $ (139) $ (149) $ 10 (132) 8 (114) _______________ (1) See Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk of Notes to Consolidated Financial Statements for discussion of valuation techniques by level within the fair value hierarchy. See Note 16 – Derivatives of Notes to Consolidated Financial Statements for the amount of change in ff fair value recognized in our Cons olidated Statement of Income. ff (2) Net commodity derivative assets and liabilities exclude $202 million of net cash collateral in Level 1. (3) Net commodity derivative assets and liabilities related to the operations acquired in the Sequent Acquisition exclude $267 million of net cash collateral in Level 1. Value at Risk (VaR) ff ff 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. Our VaR may not be comparable to that of other companies due to ed to calculate VaR. Our VaR is determined using parametric models with 95 percent diffff erff ences in the factors us confidence intervals and one-day holding periods, which means that 95 percent of the time, the risk of loss in a day frff om a portfolio of positions is expected to be less than or equal to the amount of VaR calculated. Our open exposure is managed in accordance with established policies that limit market risk and require daily reporting of predicted ally manage physical gas assets and economically protect our ff financial loss to management. Because we gener positions by hedging in the futures markets, our open exposure is generally mitigated. We employ daily risk testing, using both VaR and stress testing, to evaluate the risk of our positions. We actively monitor 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. Starting in the second quarter of 2022, following the further integration of our legacy trading activities with the oper ations acquired in the Sequent Acquisition, we now present VaR for our integrated natural gas trading operations. For the second half of 2021 and the first quarter of 2022, the VaR presented reflects the legacy Sequent operations only. ff ff 70 At December 31, 2022, the VaR associated with this activity was $10 million. We had the following VaRs for the periods shown: Average..................................................................... $ High .......................................................................... $ Low........................................................................... $ Nine Months Ended December 31, 2022 Trading Three Months Ended March 31, 2022 Sequent Only Six Months Ended December 31, 2021 Sequent Only 10 39 4 $ $ $ (Millions) 6 10 4 $ $ $ 4 7 2 Our non-trading portfolio primarily consists of derivatives that hedge our upstream business and certain gathering and processing contracts. At December 31, 2022, the VaR associated with these derivatives was $8 million. 71 Item 8. Financial Statements and Supplementary D u ata Report of Independent Registered Public Accounting Firm The Stockholders and the Board of Directors of The Williams Companies, Inc. Opinion on the Financial Statements 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 In our opinion, based on our audits and the report of other auditors, the “consolidated financial statements”). 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. generally accepted accounting principles. r ff We did not audit the 2020 financial statements of Gulfstream Natural Gas System, L.L.C. (Gulfstream), a limited liability corporation in w hich 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 Gff ulfsff tream 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, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 frff amework) and our report dated February 27, 2023 expressed an unqualified opinion thereon. ff Basis for Op inion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with r espect 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. ff r We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks tatements, whether due to error or fraud, and performing of material misstatement of the consolidated financial s procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. 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. ff 72 Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. 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. ff Pension and Other Postretirement Benefit Obligations Description of the MatterMM At December 31, 2022, the Company’s aggregate pension and other postretirement benefitff 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. ff How We Addressed the Matter in O ur MM 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. 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 r ates 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. To test the cash balance interest crediting rate, we independently calculated a range of rates and compared them to the rate used by management. We also tested the completeness and accuracy of the underlying data, including the participant data. ff ff /s/ Ernst & Young LLP We have served as the Company’s auditor since 1962. Tulsa, Oklahoma rr y 27, 2023 r Februar 73 Report of Independent Registered Public Accounting Firm To the Management Committee and Members of Gulfstream Natural Gas System, L.L.C.: OO Opinion on the Financial Statements We have audited the statements of earnings, comprehensive income, changes in members’ equity and cash flows of Gulfsff tream 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 pres ent fairly, in all material respects, the results of operations and cash flows of the Company ff for the year ended December 31, 2020 in conformity with accounting principles generally accepted in the United ff States of America. OO Basis for Off pinion ff These financial statements are the responsibility of the Company’s management. Our responsibility is to express an egistered with opinion on the Company’s financial statements based on our audit. We are a public accounting firm r 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. ff 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 perforff m the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. ff 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 ff for our opinion. ff /s/ PricewaterhouseCoopers LLP Houston, Texas rr r Februar y 27, 2023 We have served as the Company’s auditor since 2018. 74 The Williams Companies, Inc. Consolidated Statement of Income Year Ended December 31, 2022 2021 (Millions, except per-share amounts) 2020 Revenues: Service revenues.................................................................................... $ Service revenues – commodity consideration....................................... Product sales.......................................................................................... Net gain (loss) on commodity derivatives............................................. Total revenues .................................................................................. $ 6,536 260 4,556 (387) 10,965 $ 6,001 238 4,536 (148) 10,627 Costs and expenses: Product costs ......................................................................................... Net processing commodity expenses .................................................... Operating and maintenance expenses ................................................... Depreciation and amortization expenses............................................... Selling, general, and administrative expenses....................................... Impairment of certain assets (Note 15) ................................................. Impairment of goodwill (Note 15) ........................................................ Other (income) expense – net................................................................ Total costs and expenses .................................................................. Operating income (loss) ........................................................................... Equity earnings (losses) (Note 8)............................................................. Impairment of equity-method investments (Note 15).............................. Other investing income (loss) – net ......................................................... Interest incurred ....................................................................................... Interest capitalized ................................................................................... Other income (expense) – net .................................................................. Income (loss) before income taxes........................................................... Less: Provision (benefit) for income taxes............................................ Net income (loss) .................................................................................. Less: Net income (loss) attributable to noncontrolling interests...... Net income (loss) attributable to The Williams Companies, Inc. ......... Less: Preferred stock dividends ....................................................... Net income (loss) available to common stockholders........................... $ 3,369 88 1,817 2,009 636 — — 28 7,947 3,018 637 — 16 (1,167) 20 18 2,542 425 2,117 68 2,049 3 2,046 Basic earnings (loss) per common share: Net income (loss) available to common stockholders ................... $ 1.68 $ $ 3,931 101 1,548 1,842 558 2 — 14 7,996 2,631 608 — 7 (1,190) 11 6 2,073 511 1,562 45 1,517 3 1,514 1.25 $ $ 5,924 129 1,671 (5) 7,719 1,545 68 1,326 1,721 466 182 187 22 5,517 2,202 328 (1,046) 8 (1,192) 20 (43) 277 79 198 (13) 211 3 208 .17 Weighted-average shares (thousands) .............................................. 1,218,362 1,215,221 1,213,631 Diluted earnings (loss) per common share: Net income (loss) available to common stockholders ................... $ 1.67 $ 1.24 $ .17 Weighted-average shares (thousands) .............................................. 1,222,672 1,218,215 1,215,165 See accompanying notes. 75 The Williams Companies, Inc. Consolidated Statement of Comprehensive Income (Loss) Net income (loss) ........................................................................................................ $ 2,117 $ 1,562 $ 198 Year Ended December 31, 2022 2021 (Millions) 2020 (2) 1 81 23 103 301 (13) 314 Other comprehensive income (loss): Designated cash flow hedging activities: Net unrealized gain (loss) from derivative instruments, net of taxes of $1, $14, and $— in 2022, 2021, and 2020, respectively ....................................... Reclassifications into earnings of net derivative instruments ( gain) loss, net of taxes of $—, ($14), and $— in 2022, 2021, and 2020, respectively ............... rr Pension and other postretirement benefits: Net actuarial gain (loss) arising during the year, net of taxes of $1, ($18), and ($27) in 2022, 2021, and 2020, respectively ................................................... Amortization of actuarial (gain) loss and net actuarial loss from settlements included in net periodic benefit cost (credit), net of taxes of ($4), ( ($7) in 2022, 2021, and 2020, respectively ..................................................... $4), and ff Other comprehensive income (loss)............................................................................ Comprehensive income (loss)..................................................................................... Less: Comprehensive income (loss) attributable to noncontrolling interests .......... (3) — 1 11 9 (40) 41 51 11 63 2,126 68 1,625 45 Comprehensive income (loss) attributable to T a he Williams Companies, Inc............. $ 2,058 $ 1,580 $ See accompanying notes. 76 The Williams Companies, Inc. Consolidated Balance Sheet December 31, 2022 2021 (Millions, except per-share amounts) ASSETS Current assets: ff Cash and cash equivalents......................................................................................... $ Trade accounts and other receivables ....................................................................... .............................................................................. Allowance for doubtful accounts Trade accounts and other receivables – net .......................................................... Inventories................................................................................................................. Derivative assets ....................................................................................................... Other current assets and deferred charges................................................................. Total current assets ............................................................................................... Investments .................................................................................................................. Property, plant, and equipment – net ........................................................................... Intangible assets – net of accumulated amortization ................................................... Regulatory assets, deferred charges, and other............................................................ Total assets ........................................................................................................... $ LIABILITIES AND EQUITY Current liabilities: r Accounts payable ...................................................................................................... Derivative liabilities.................................................................................................. Accrued and other current liabilities ......................................................................... Commercial paper ..................................................................................................... Long-term debt due within one year ......................................................................... Total current liabilities ......................................................................................... $ Long-term debt ............................................................................................................ Deferred income tax liabilities..................................................................................... Regulatory liabilities, deferred income, and other....................................................... Contingent liabilities and commitments (Note 17) Equity: Stockholders’ equity: $ $ $ 152 2,729 (6) 2,723 320 323 279 3,797 5,065 30,889 7,363 1,319 48,433 2,327 316 1,270 350 627 4,890 21,927 2,887 4,684 1,680 1,986 (8) 1,978 379 301 211 4,549 5,127 29,258 7,402 1,276 ,, 47,612 1,746 166 1,035 — 2,025 4,972 21,650 2,453 4,436 Preferff red stock ($1 par value; 30 million shares authorized at December 31, 2022 and December 31, 2021; 35,000 shares issued at December 31, 2022 and December 31, 2021) ................................................................................... Common stock ($1 par value; 1,470 million shares authorized at December 31, 2022 and December 31, 2021; 1,253 million shares issued at December 31, 2022 and 1,250 million shares issued at December 31, 2021).......................... Capital in excess of par value ............................................................................... Retained deficit..................................................................................................... Accumulated other comprehensive income (loss)................................................ .............................. Treasury stock, at cost (35 million shares of common stock) Total stockholders’ equity................................................................................ Noncontrolling interests in consolidated subsidiaries............................................... Total equity........................................................................................................... Total liabilities and equity................................................................................ rr 35 35 1,253 24,542 (13,271) (24) (1,050) 11,485 2,560 14,045 48,433 $ 1,250 24,449 (13,237) (33) (1,041) 11,423 2,678 14,101 47,612 $ See accompanying notes. 77 The Williams Companies, Inc. Consolidated Statement of Changes in Equity The Williams Companies, Inc. Stockholders Preferred Stock Common Stock Capital in Excess of Par Value Retained Deficit AOCI* Treasury Stock (Millions) Total Stockholders’ Equity Noncontrolling Interests Total Equity Balance at December 31, 2019.......................... $ Net income (loss) .............................................. Other comprehensive income (loss).................. Cash dividends – common stock ($1.60 per share) .............................................................. Dividends and distributions to noncontrolling interests........................................................... Stock-based compensation and related common stock issuances, net of tax ............... Contributions from noncontrolling interests..... Other ................................................................. Net increase (decrease) in equity ................. Balance at December 31, 2020.......................... Net income (loss) .............................................. Other comprehensive income (loss).................. Cash dividends – common stock ($1.64 per share) .............................................................. Dividends and distributions to noncontrolling interests........................................................... Stock-based compensation and related common stock issuances, net of tax ............... Purchase of partial interest in consolidated subsidiary (Note 8) ......................................... Contributions from noncontrolling interests..... Other ................................................................. Net increase (decrease) in equity ................. Balance at December 31, 2021.......................... Net income (loss) .............................................. Other comprehensive income (loss).................. Cash dividends – common stock ($1.70 per share) .............................................................. Dividends and distributions to noncontrolling interests........................................................... Stock-based compensation and related common stock issuances, net of tax ............... Contributions from noncontrolling interests..... Purchase of treasury stock ................................ Other ................................................................. Net increase (decrease) in equity ................. Balance at December 31, 2022.......................... $ * Accumulated Other Comprehensive Income (Loss) 35 — — — — — — — — 35 — — — — — — — — — 35 — — — — — — — — — 35 $ 1,247 $ 24,323 $ (11,002) $ (199) $ (1,041) $ 13,363 $ 3,001 $ 16,364 — — — — 1 — — 1 — — — — 50 — (2) 48 211 — (1,941) — — — (16) (1,746) 1,248 24,371 (12,748) — — — — 2 — — — 2 — — — — 78 — — — 78 1,517 — (1,992) — — — — (14) (489) — 103 — — — — — 103 (96) — 63 — — — — — — 63 — — — — — — — — (1,041) — — — — — — — — — 1,250 24,449 (13,237) (33) (1,041) — — — — 3 — — — 3 — — — — 93 — — — 93 2,049 — (2,071) — — — — (12) (34) — 9 — — — — — — 9 — — — — — — (9) — (9) 211 103 (1,941) — 51 — (18) (1,594) 11,769 1,517 63 (1,992) — 80 — — (14) (346) 11,423 2,049 9 (2,071) — 96 — (9) (12) 62 (13) — — 198 103 (1,941) (185) (185) — 7 4 (187) 2,814 45 — — 51 7 (14) (1,781) 14,583 1,562 63 (1,992) (187) (187) — (3) 9 — (136) 2,678 68 — — 80 (3) 9 (14) (482) 14,101 2,117 9 (2,071) (204) (204) — 18 — — (118) 96 18 (9) (12) (56) $ 1,253 $ 24,542 $ (13,271) $ (24) $ (1,050) $ 11,485 $ 2,560 $ 14,045 See accompanying notes. 78 The Williams Companies, Inc. Consolidated Statement of Cash Flows OPERATING ACTIVITIES: Net income (loss) ............................................................................................................... Adjustments to reconcile to net cash provided (used) by operating activities: $ 2,117 $ 1,562 $ 198 Year Ended December 31, 2020 2021 (Millions) 2022 Depreciation and amortization...................................................................................... Provision (benefit) for deferred income taxes .............................................................. Equity (earnings) losses ................................................................................................ Distributions from equity-method investees (Note 8) .................................................. 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................................................ Inventory write-downs .................................................................................................. Amortization of stock-based awards............................................................................. Cash provided (used) by changes in current assets and liabilities: Accounts receivable ................................................................................................. Inventories................................................................................................................ Other current assets and deferred charges ............................................................... Accounts payable ..................................................................................................... Accrued and other current liabilities........................................................................ Changes in current and noncurrent derivative assets and liabilities ............................. Other, including changes in noncurrent assets and liabilities ....................................... Net cash provided (used) by operating activities..................................................... FINANCING ACTIVITIES: ff Proceeds from ( payments of) commercial paper – net ...................................................... Proceeds from long-term debt............................................................................................ Payments of long-term debt ............................................................................................... Proceeds from issuance of common stock ......................................................................... Common dividends paid .................................................................................................... Dividends and distributions paid to noncontrolling interests ............................................ Contributions from noncontrolling interests...................................................................... Payments for debt issuance costs....................................................................................... Other – net.......................................................................................................................... Net cash provided (used) by financing activities..................................................... INVESTING ACTIVITIES: Property, plant, and equipment: Capia tal expenditures (1)............................................................................................... Dispositions – net......................................................................................................... Contributions in aid of construction .................................................................................. Purchases of businesses, net of cash acquired (Note 3)..................................................... Purchases of and contributions to equity-method investments (Note 8) ........................... Other – net.......................................................................................................................... Net cash provided (used) by investing activities ..................................................... Increase (decrease) in cash and cash equivalents ................................................................. Cash and cash equivalents at beginning of year ................................................................... Cash and cash equivalents at end of year.............................................................................. _________ (1) Increases to property, plant, and equipment.................................................................... Changes in related accounts payable and accrued liabilities ........................................... Capital expenditures......................................................................................................... See accompanying notes. 79 2,009 431 (637) 865 — — — 249 161 73 (733) (110) (33) 410 209 94 (216) 4,889 345 1,755 (2,876) 54 (2,071) (204) 18 (17) (46) (3,042) (2,253) (30) 12 (933) (166) (5) (3,375) (1,528) 1,680 152 $ 1,842 509 (608) 757 — — 2 109 15 81 (545) (139) (63) 643 58 (277) (1) 3,945 — 2,155 (894) 9 (1,992) (187) 9 (26) (16) (942) (1,239) (8) 52 (151) (115) (4) (1,465) 1,538 142 1,680 $ 1,721 108 (328) 653 187 1,046 182 — 17 52 (2) (28) 11 (7) (309) (4) (1) 3,496 — 3,899 (3,841) 9 (1,941) (185) 7 (20) (13) (2,085) (1,239) (36) 37 — (325) 5 (1,558) (147) 289 142 $ $ (2,394) $ (1,305) $ (1,160) (79) $ (2,253) $ (1,239) $ (1,239) 141 66 The Williams Companies, Inc. Notes to Consolidated Financial Statements Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies GenG eral Unless the context clearly indicates otherwise, references in this report to “Williams,” “we,” “our,” “us,” or like terms refer to The Williams Companies, Inc. and its subsidiaries. Unless the context clearly indicates otherwise, references to “Williams,” “we,” “our,” and “us” include the operations in which we own interests accounted for as equity-method investments that are not consolidated in our financial statements. When we refer to our equity investees by name, we are referring exclusively to their businesses and operations. ff 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 frff om 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 shar e 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. ff Description of Business We are a Delaware corporation whose common stock is listed and traded on the New York Stock Exchange. Our operations are located in the United States and are presented within the following reportable segments: 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. (Gulfstream), and a 60 percent equity-method investment in Discovery Producer S ervices LLC . Transmission & Gulf of Mexico also includes natural gas storage facilities and pipelines providing (Discovery)rr services in north Texas. r rr Northeast G&P is comprised of our midstream gathering, processing, and fractionation businesses in the Marcellus Shale region primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio, as well as a 65 percent interest in Ohio Valley Midstream LLC (Northeast JV) (a consolidated VIE) which operates in West Virginia, Ohio, and Pennsylvania, a 66 percent interest in Cardinal Gas Services, L.L.C. (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). 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, and the Mid-Continent region which includes the Anadarko and Permian basins. This segment also includes our NGL storage facilities, an undivided 50 80 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 in Targa Train 7 LLC (Targa Train 7) (a Holdings LLC (RMM), a 20 percent equity-method investment 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. Basis of Presentation Discontinued operations Unless indicated otherwise, the information in the Notes to Consolidated Financial Statements relates to our continuing operations. Significant risks and uncertainties ff 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 Principles of consolidation The consolidated financial statements include the accounts of all entities that we control and our proportionate interest in the accounts of certain ventures in which we own an undivided interest. Our judgment is required to evaluate whether we control an entity. Key areas of that evaluation include: • • • • Determining whether an entity is a VIE (see Note 2 – Variable Interest Entities); Determining whether we are the primary beneficiary of a VIE, including evaluating which activities of the VIE most significantly impact its economic perf e and our related ff parties have over those activities through our variable interests; ormance and the degree of power that w ff ff Identifying events that require recons whether we are a VIE’s primary beneficiary; ideration of whether an entity is a VIE and continuously evaluating Evaluating whether other owners in entities that are not VIEs are able to effectively participate in significant decisions that would be expected to be made in the ordinary course of business such that we do not have the power to control such entities. ff We apply the equity method of accounting to investments over which we exercise significant influence but do not control. 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 81 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. UsUU e of estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes . Actual results could differ from those estimates. ff ff Significant estimates and assumptions include: ff • • • • • • Impairment assessments of investments, property, plant, and equipment, and intangible assets; Litigation-related contingencies; Environmental remediation obligations; Depreciation and/or amortization of long-lived assets, which are comprised of property, plant, and equipment, and intangible assets; Depreciation and/or amortization of equity-method investment basis differences; Asset retirement obligations (AROs); ff • Measurement of fair value of derivatives; • Pension and postretirement valuation variables; • Measurement of regulatory liabilities; • Measurement of deferred income tax assets and liabilities, including assumptions related to the realization of deferred income tax assets; • • Revenue recognition, including estimates utilized in recognition of deferred revenue; Purchase price accounting. These estimates are discussed further throughout these notes. Regulatory accounting r ff rr Transco and Northwest Pipeline 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 ts that would otherwise be Codification (ASC) Topic 980, “Regulated Operations,” (ASC 980) that certain cos charged to expense should be deferred as regulatory assets, based on the expected recovery from customers in future rates. Likewise, certain actual or anticipated credits that would otherwise reduce expense should be deferred as regulatory liabilities, based on the expected return to customers in future rates. Management’s expected r ecovery of deferff red costs and return of deferred credits generally results from specific decisions by regulators granting such ratemaking treatment. We record certain incurred costs and obligations as regulatory assets or liabilities if, based on regulatory orders or other available evidence, it is probable that the costs or obligations will be included in amounts allowable for recover ccounting for these operations that are regulated can differ from rr ff the accounting requirements for nonr egulated operations. For example, for regulated operations, allowance for funds AFUDC) represents the estimated cost of debt and equity funds applicable to utility plant rr used during construction ( in the process of construction and is capitalized as a cost of property, plant, and equipment because it constitutes an actual cost of construction under established regulatory practices; nonregulated operations are only allowed to capitalize the cost of debt funds related to construction activities, while a component for equity is prohibited. The ff efunded in future rates. A y or r ff 82 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) r components of our regulatory assets and liabilities relate to the effects of deferred taxes on equity f ff unds 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. ff Our current and noncurrent regulatory asset and liability balances at December 31, 2022 and 2021 are as ff follow s: Current assets reported within Other current assets and deferred charges ........................... Noncurrent assets reported within Regulatory assets, deferred charges, and other .............. $ Total regulated assets ...................................................................................................... $ Current liabilities reported within Accrued and other current liabilities............................... $ Noncurrent liabilities reported within Regulatory liabilities, deferred income, and other .... Total regulated liabilities................................................................................................. $ Revenue recognition December 31, 2022 2021 (Millions) 138 459 597 201 1,233 1,434 $ $ $ $ 111 415 526 56 1,324 1,380 Customers in our gas pipeline businesses are comprised of public utilities, municipalities, gas marketers and producers, intrastate pipelines, direct industrial users, and electrical power generators. Customers in our midstream businesses are comprised of oil and natural gas producer counterparties. Customers for our product sales are comprised of public utilities, gas marketers, and direct industrial users. Service revenue contracts from our gas pipeline and midstream businesses contain a series of distinct services, with the majority of our contracts having a single performance obligation that is satisfied over time as the customer simultaneously receives and consumes the benefits provided by our performance. Most of our product sales contracts have a single performance obligation with revenue recognized at a point in time when the products have been sold and delivered to the customer. Certain customers reimburse us for costs we incur associated with construction of property, plant, and equipment utilized in our operations. For our rate-regulated gas pipeline businesses that apply ASC 980, we follow FERC guidelines with respect to reimbursement of construction costs. FERC tariffs only allow for cost reimbursement and are non-negotiable in nature; 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. 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. Accordingly, we generally recognize reimbursements of construction costs from customers on a gross basis as a contract liability separate from the associated costs included within property, plant, and equipment. The contract liability is recognized into service revenues as the underlying performance obligations are satisfied. r Service Revenues p p Gas pipeline businesses: 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 ff 83 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. 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 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: ff • • Firm transportation or storage under firm transportation and storage contracts—an integrated package of services typically constituting a single performance obligation, which includes standing ready to provide such services and receiving, transporting or storing (as applicable), and redelivering commodities; ff r Interruptible transportation or storage under interruptible transportation and storage contracts—an integrated package of services typically constituting a single performance obligation once scheduled, which includes receiving, transporting or storing (as applicable), and redelivering commodities. In situations where, in our judgment, we consider the integrated package of services as a single performance obligation, which represents a majority of our interstate natural gas pipeline contracts with customers, we do not consider there to be multiple performance obligations because the nature of the overall promise in the contract is to stand ready (with regard to firm transportation and storage contracts), receive, transport or store, and redeliver natural gas to the customer; therefore, revenue is recognized over time upon satisfaction of our daily stand ready per forff mance obligation. ff We recognize revenues for reservation charges over the performance obligation period, which is the contract term, regardless of the volume of natural gas that is transported or stored. Revenues for commodity charges frff om both firm and interruptible transportation services and storage services are recognized when natural gas is delivered at the agreed upon delivery point or when natural gas is injected or withdrawn from the storage facility because they specifically relate to our efforts to provide these distinct services. Generally, reservation charges and commodity charges in our interstate natural gas pipeline businesses are recognized as revenue in the same period they are invoiced to our customers. As a result of the ratemaking process, certain amounts collected by us may be subject to refund upon the issuance of final orders by the FERC in pending r ate proceedings. We use judgment to record estimates of rate refund liabilities considering our and other third-party regulatory proceedings, advice of counsel, and other risks. ff ff Midstream businesses: Revenues frff om our non-regulated gathering, processing, transportation, and storage treating, compression, midstream businesses include contracts for natural gas gathering, processing, 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. In situations where, in our judgment, we provide an integrated package of services combined into a single performance obligation, which represents a majority of this class of contracts with customers, we do not consider there to be multiple performance obligations because the nature of the overall promise in the contract is to provide gathering, processing, transportation, storage, and related services resulting in the delivery, or redelivery in the context of storage services, of pipeline-quality natural gas and NGLs to the customer. As such, revenue is recognized at the daily completion of the integrated package of services as the integrated package represents a single performance obligation. Additionally, certain contracts in our midstream businesses contain fixed or upf ff rff ont payment terms that result in the deferral of revenues until such services have ff ff been performed or s uch capacity has been made available. We also earn revenues from offff sff hore crude oil and natural gas gathering and transportation and offshore production handling. These services represent an integrated package of services and are considered a single distinct perforff mance obligation for which we recognize revenues as the services are provided to the customer. 84 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. The rate is generally fixed; 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 forff mulaic 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. For all of our contracts, we allocate the transaction price to each performance obligation based on the judgmentally determined relative standalone selling price. The excess of consideration received over revenue recognized results in the deferral of those amounts until future periods based on a units of production or straight-line methodology as these methods appropriately match the consumption of services provided to the customer. The units of production methodology requires the use of production estimates that are uncertain and the use of judgment when developing estimates of future production volumes, thus impacting the rate of revenue recognition. Production estimates are monitored as circumstances and events warrant. Certain of our gas gathering and processing agreements have minimum volume commitments (MVC). If a customer under such an agreement fails to meet its MVC for a specified period (thus not exercising all the contractual rights to gathering and processing services within the specified period, herein referred to as “breakage”), it is obligated to pay a contractually determined fee based upon the shortfall between the actual gathered or processed volumes and the MVC for the period contained in the contract. When we conclude, based on management’s judgment, it is probable that the customer will not exercise all or a portion of its remaining rights, we recognize revenue associated with such breakage amount in proportion to the pattern of exercised rights within the respective MVC period. ff Under keep-whole and percent-of-liquids processing contracts, we receive commodity consideration in the forff m of NGLs and take title to the NGLs at the tailgate of the plant. We recognize such commodity consideration as service revenue based on the market value of the NGLs retained at the time the processing is provided. The current market value, as opposed to the market value at the contract inception date, is used due to a combination of factors, including the fact that the volume, mix, and market price of NGL consideration to be received is unknown at the time of contract execution and is not specified in our contracts with customers. Additionally, product sales revenue (discussed below) is recognized upon the sale of the NGLs to a third party based on the sales price at the time of sale. As a result, revenue is recognized in our Consolidated Statement of Income both at the time the processing service is provided in Service revenues – commodity consideration and at the time the NGLs retained as part of the processing service are sold in Product sales. The recognition of revenue related to commodity consideration has the impact of increasing the book value of NGL inventory, resulting in higher cost of goods sold at the time of sale. ff ff Product Sales In the course of providing transportation services to customers of our gas pipeline businesses and gathering and processing services to customers of our midstream businesses, we may receive different quantities of natural gas from customers than the quantities delivered on behalf of those customers. The resulting imbalances are primarily settled through the purchase or sale of natural gas with each customer under terms provided for in our FERC tariffs or gathering and processing agreements, respectively. Revenue is recognized from the sale of natural gas upon settlement of imbalances. ff In certain instances, we purchase NGLs, crude oil, and natural gas from our oil and natural gas producer customers which we remarket. In addition, we retain NGLs as consideration in certain processing arrangements, as discussed above in the Service Revenues - Midstream businesses section. We also market natural gas and NGLs frff om the production at our upstream properties. We recognize revenue from the sale of these commodities when the products have been sold and delivered. Our product sales contracts are primarily short- term contracts based on prevailing market rates at the time of the transaction. r 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 les s than an estimated, forward market price that can be ff received in the future, resulting in positive net product sales. Commodity-based exchange-traded futures 85 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. r The physical purchase, transportation, storage, and sale of natural gas are accounted for on a w eighted- 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. 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. ff 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. Contract Assets Our contract assets primarily consist of revenue recognized under contracts containing MVC features whereby management has concluded it is probable there will be a short-fall payment at the end of the current MVC period, which typically follows the calendar year, and that a significant reversal of revenue recognized currently for the future MVC payment will not occur. As a result, our contract assets related to our future MVC payments are generally expected to be collected within the next 12 months and are included within Other current assets and deferred charges in our Consolidated Balance Sheet until such time as the MVC short-fall payments are invoiced to the customer. ff Contract Liabilities rr Our contract liabilities consist of advance payments primarily from midstream business customers which include construction reimbursements, prepayments, and other billings and transactions for which future services are to be provided under the contract. These amounts are deferred until recognized in revenue when the associated performance obligation has been satisfied, which is primarily based on a units of production methodology over the remaining contractual service periods, and are classified as current or noncurrent according to when such amounts are expected to be recognized. Current and noncurrent contract liabilities are included within Accrued and other current liabilities and Regulatory liabilities, deferred income, and other, respectively, in our Consolidated Balance Sheet. ff Contracts requiring advance payments and the recognition of contract liabilities are evaluated to determine whether the advance payments provide us with a significant financing benefit. This determination is based on the combined effect of the expected length of time between when we transfer the promis ed good or service to the customer, when the customer pays for those goods or services, and the prevailing interest rates. We have assessed our contracts for significant financing components and determined, in our judgment, that one group of contracts entered into in contemplation of one another for certain capital reimbursements contains a significant financing component. As a result, w e recognize noncash interest expense based on the effective interest method ff 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. ff Derivative instruments and hedging activities We are exposed to commodity price risk. We utilize derivatives to manage a portion of our commodity price risk. These instruments consist primarily of swaps, futures, and forward contracts involving short- and long-term ket price paid purchases and sales of energy commodities. We purchase natural gas for storage when the current mar ff 86 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) ff 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 futur es 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 natur al gas between receipt and delivery points occurs. Some commodity-related derivative ff 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 (los(( s) 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. We experience significant earnings volatility from the fair value accounting required for the derivatives used to ff 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.) ff r We report the fair value of derivatives, except those for which the normal purchases and normal sales exception has been elected, in Derivative assets; Regulatory assets, deferred charges, and other; Derivative liabilities; or Regulatory liabilities, deferred income, and other in our Consolidated Balance Sheet. These amounts are presented on a net basis and reflect the netting of asset and liability positions permitted under the terms of master netting arrangements and cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions. We determine the current and noncurrent classification based on the timing of expected future cash flows of individual trades. ff The accounting for the changes in f ff air value of a commodity derivative can be summarized as follows : Derivative Treatment Accounting Method Normal purchases and normal sales exception Designated in a qualifying hedging relationship Accrual accounting r Hedge accounting All other derivatives Mark-to-market accounting We may elect the normal purchases and normal sales exception for certain short- and long-term purchases and sales of physical energy commodities. Under accrual accounting, any change in the fair value of these derivatives is ff not reflected in our Consolidated Balance Sheet af ter the initial election of the exception. ff We may also designate a hedging relationship for certain commodity derivatives. For a derivative to qualify for designation in a hedging relationship, it must meet specific criteria and we must maintain appropriate documentation. We establish hedging relationships pursuant to our risk management policies. We evaluate the hedging relationships at the inception of the hedge and on an ongoing basis to determine whether the hedging relationship is, and is expected to remain, highly effective in achieving offsetting changes in fair value or cash flows attributable to the underlying risk being hedged. 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 ff ff 87 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 (los(( modity derivatives in our Consolidated Statement of Income. s s) on com 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 es deferred in AOCI reclassified into earnings in the period in which the hedged item affects earnings. Gains or loss associated with terminated derivatives, derivatives that cease to be highly effective hedges, derivatives for which the forff ecasted 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 forff ecasted 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. The change in likelihood of a forecasted transaction is a judgmental decision that includes qualitative assessments made by us. As of December 31, 2022 and 2021, we are not applying hedge accounting to any commodity derivative instruments. ff ff II Inter est capitalized We capitalize interest during construction on major projects with construction periods of at least 3 months and a total project cost in excess of $1 million. 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 OpeO rating income (loss) in our Consolidated Statement of Income. The rates used by regulated companies are calculated in accordance with FERC rules. Rates used by nonregulated companies are based on our average interest rate on debt. ee II Income taxes We include the operations of our domestic corporate subsidiaries and income from our subsidiary partnerships in our consolidated federal income tax return and also file tax returns in various foreign and state jurisdictions as required. Deferred income taxes are computed using the liability method and are provided on all temporary differences between the financial basis and the tax basis of our assets and liabilities. Our judgment and income tax assumptions are used to determine the levels, if any, of valuation allowances associated with deferred tax assets. Earnings (loss) per common share (( Basic earnings (loss) per common share in our Consolidated Statement of Income is based on the sum of the weighted-average number of common shares outstanding and vested restricted stock units. 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 is calculated using the treasury-rr (( stock method. (( ff Cash and cash equivalents Cash and cash equivalents in our Consolidated Balance Sheet consist of highly liquid investments with original maturities of three months or less when acquired. Accounts receivable Accounts receivable are carried on a gross basis, with no discounting, less an allowance for doubtful accounts. We estimate the allowance for doubtf ff ul accounts, considering current expected credit losses using a forward-looking “expected loss” model, the financial condition of our customers, and the age of past due accounts. The majority of our trade receivable balances are due within 30 days. 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 ff 88 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) ff ff 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 incorpor ating an aging method. In estimating our expected credit losses, we utilize historical loss rates over many rr years, which include periods of both high and low commodity prices. Commodity prices could have a significant impact on a portion of our gathering and processing and upstream counterparties’ financial health and ability to satisfy current obligations. Our expected credit loss estimate considers both internal and external forward-looking commodity price expectations, as well as counterparty credit ratings, and factors impacting their near-term liquidity. In addition, our expected credit loss estimate considers potential contractual, physical, and commercial protections and outcomes in the case of a counterparty bankruptcy. The physical location and nature of our services help to mitigate collectability concerns of our gathering and processing producer customers. Our gathering lines in many cases are physically connected to the customers’ wellheads and pads, and there may not be alternative gathering lines nearby. The construction of gathering systems is capital intensive and it would be costly for others to replicate, especially considering the depletion to date of the associated reserves. As a result, we play a critical role in getting customers’ production from the wellhead to a marketable condition and location. This tends to reduce collectability risk as our services enable producers to generate operating cash flows. Commodity price movements generally do not impact the majority of our natural gas transmission businesses customers’ financial condition. We also provide marketing and risk management services to retail and wholesale gas marketers, utility companies, upstream producers, and industrial customers. These counterparties utilize netting agreements that enable us to net receivables and payables by counterparty upon settlement. We also net across product lines and against cash collateral received to collateralize receivable positions, provided the netting and cash collateral agreements include such provisions. While the amounts due from, or owed to, our counterparties are settled net, they are recorded on a gross basis in our Consolidated Balance Sheet as accounts receivable and accounts payable. ff ff We do not offer extended payment ter ms and typically receive payment within one month. We consider receivables past due if full payment is not received by the contractual due date. Interest income related to past due accounts receivable is generally recognized at the time full payment is received or collectability is assured. Past due accounts are generally written off against the allowance for doubtful accounts only after all collection attempts have been exhausted. We do not have a material amount of significantly aged receivables at December 31, 2022 and 2021. II Inventories II 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. 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 Nff GL inventory. Property, plant, and equipment Property, plant, and equipment is initially recorded at cost. 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 imarily on the straight-line method over FERC-prescribed rates. Depreciation for nonregulated entities is provided pr ff estimated useful lives, except for certain of fff sff hore facilities that apply an accelerated depreciation method. ff We follow the succes ff ff sful ef fff orff ts method of accounting for our undivided interest in upstream properties. Our oil and gas producing property costs are depreciated using a units of production method. Gains or losses from the ordinary sale or retirement of property, plant, and equipment for regulated pipelines are credited or charged to accumulated depreciation. Gains or losses from the ordinary sale or retirement of property, 89 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) plant, and equipment for nonregulated assets are primarily recorded in Other (income) ex x in our Consolidated Statement of Income. OperO ating income (loss) e (( pense – net included in Ordinary maintenance and repair cos rr ts are generally expensed as incurred. Costs of major renewals and replacements are capitalized as property, plant, and equipment. We record a liability and increase the basis in the underlying asset for the present value of each expected future ARO at the time the liability is initially incurred, typically when the asset is acquired or constructed. 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. We meas ure changes in the liability due to passage of time by applying an interest rate to the liability balance. This amount is recognized as an increase in the carrying amount of the liability and as a corr esponding accretion expense included in OperO ating and maintenance expenses in our Consolidated Statement of Income, except for regulated entities, forff which the increase in the liability results in a corresponding increase to a regulatory asset. The regulatory asset is amortized commensurate with our collection of those costs in rates. rr rr ff 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. II Intangible assets Our intangible assets included within Intangible ass ets – 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. We evaluate these assets for changes in the expected remaining useful lives and would r eflect any changes prospectively through amortization over the revised remaining useful life. ff II ImII pairm ment of property, plant, and equipment, intangible assets, and investments We evaluate our property, plant, and equipment and intangible assets for impairment when, in our judgment, events or circumstances, including probable abandonment, indicate that the carrying value of such assets may not be recoverable. When an indicator of impairment has occurred, we compare our estimate of undiscounted future cash flowff s attributable to the assets to the carrying value of the assets to determine whether an impairment has occurred and we may apply a probability-weighted approach to consider the likelihood of different cash flow assumptions and eful possible outcomes, including selling the assets in the near term or holding them for their remaining estimated us rying value has occurred, we determine the amount of the impairment to be life. If an impairment of the car rr recognized in our consolidated financial statements by estimating the f ff air value of the assets and recording a loss for the amount that the carrying value exceeds the estimated fair value. This evaluation is performed at the lowest level for which separately identifiable cash flows exist. ff ff ff ff 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. Until the assets are disposed of, the estimated fair value, which includes estimated cash flows from operations until the assumed date of sale, is recalculated when related events or circumstances change. rr We evaluate our investments for impairment when, in our judgment, events or circumstances indicate that the carrying value of such investments may have experienced an other-than-temporary decline in value. When evidence of loss in value has occurred, we compare our estimate of fair value of the investment to the carrying value of the investment to determine whether an impairment has occurred. 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. ff 90 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. Additionally, judgment is used to determine the probability of sale with respect to assets ff considered for disposal. Equity-method investment basis differences Diffff erff ences between the carrying value of our equity-method investments and our underlying equity in the net assets of investees are accounted for as if the investees were consolidated subsidiaries. Equity earnings (losses) in our Consolidated Statement of Income includes our allocable share of net income (loss) of investees adjusted for any depreciation and amortization, as applicable, associated with basis differences. Leases We recognize a lease liability with an offsetting right-of-use asset in our Consolidated Balance Sheet for operating leases based on the present value of the future lease payments. We have elected to combine lease and nonlease components for all classes of leased assets in our calculation of the lease liability and the offsetting right- of-ff use asset. ff Our lease agreements require both fixed and variable periodic payments, with initial terms typically ranging frff om one year to 20 years. Payment provisions in certain of our lease agreements contain escalation factors which may be based on stated rates or a change in a published index at a future time. The amount by which a lease escalates based on the change in a published index, which is not known at lease commencement, is considered a variable payment and is not included in the present value of the future lease payments, which only includes those that are stated or can be calculated based on the lease agreement at lease commencement. In addition to the noncancellable periods, many of our lease agreements provide for one or more extensions of the lease agreement for periods ranging from one year in length to an indefinite number of times following the specified contract term. Other lease agreements provide for extension terms that allow us to utilize the identified leased asset for an indefinite period of time so long as the asset continues to be utilized in our operations. In consideration of these renewal es, we assess the term of the lease agreements, which includes using judgment in the determination of which ff featur renewal periods and termination provisions, when at our sole election, will be reasonably certain of being exercised. Periods after the initial term or extension terms that allow for either party to the lease to cancel the lease are not considered in the assessment of the lease term. Additionally, we have elected to exclude leases with an original term of one year or less, including renewal periods, from the calculation of the lease liability and the offsetting right-of- use asset. ff We use judgment in determining the discount rate upon which the present value of the future lease payments is determined. This rate is based on a collateralized interest rate corresponding to the term of the lease agreement using company, industry, and market information available. rr When permitted under our lease agreements, we may sublease certain unused office space for fixed periods that ff could extend up to the length of the original lease agreement. Pension and other postretirement benefits ff The funded s tatus of each of the pension and other postretirement benefit plans is recognized separately in our Consolidated Balance Sheet as either an asset or liability. The plans’ benefit obligations and net periodic benefit costs (credits) are actuarially determined and impacted by various assumptions and estimates. The discount rates are determined separately for each of our pension and other postretirement benefit plans based on an approach specific to our plans. 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 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 ff 91 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) market projections for the as class. ff set classes in which the portfolio is invested, as well as the weighting of each asset 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). The unrecognized net actuarial losses deferred in AOCI at December 31, 2022 and 2021 were $18 million and $30 million, respectively. Unrecognized actuarial gains and losses in excess of 10 percent of the greater of the ff benefit obligation or the market-related value of plan ass ets are amortized over the participants’ average remaining futur e years of service, which is approximately 10 years for our pension plans and approximately 5 years for our ff other postretirement benefit plan. ff The expected return on plan assets component of net periodic benefit cost (credit) is calculated using the market-related value of plan assets. For our pension plans, the market-related value of plan assets is equal to the fair value of plan assets adjusted to reflect the amortization of gains or losses associated with the difference between the expected and actual return on plan assets over a 5-year period. Additionally, the market-related value of assets may be no more than 110 percent or less than 90 percent of the fair value of plan assets at the beginning of the year. The market-related value of plan assets for our other postretirement benefit plan is equal to the unadjusted fair value of plan assets at the beginning of the year. Contingent liabilities We record liabilities for estimated loss contingencies, including environmental matters, when we assess that a loss is probable, and the amount of the loss can be reasonably estimated. These liabilities are calculated based upon our assumptions and estimates with respect to the likelihood or amount of loss and upon advice of legal counsel, engineers, or other third parties regarding the probable outcomes of the matters. These calculations are made without consideration of any potential recovery from third parties. We recognize insurance recoveries or reimbursements from others when realizable. Revisions to these liabilities are generally reflected in income when new or different facts or information become known or circumstances change that affect the previous assumptions or es ff timates. ff Treasury stock Treasury srr tock purchases are accounted for under the cost method whereby the entire cost of the acquired stock is recorded as TrTT easury stock, at cost in our Consolidated Balance Sheet. Gains and losses on the subsequent reissuance of shares are credited or charged to Capital in excess of par value in our Consolidated Balance Sheet using the average-cost method. Cash flows from revolving credit facility and commercial paper program 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 frff om the date of issuance. (See Note 12 – Debt and Banking Arrangements.) Note 2 – Variable Interest Entities Consolidated VIEs As of December 31, 2022, we consolidate the following VIEs: ff Northeast JV 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 92 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) ff 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. The Northeast JV provides midstream s ervices for producers in the Marcellus Shale and Utica Shale regions. Future expansion activity is expected to be funded with capital contributions from us and the other equity partner on a proportional basis. Gulfstar One 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. Gulfstar One includes a proprietary floating-production system, Gulfstar FPS, and associated pipelines that provide production handling and gathering services in the eastern deepwater Gulf of Mexico. We are the primary beneficiary because we have the power to dir ect the activities that most significantly impact Gulfstar One’s economic performance. rr ff ff Cardinal We own a 66 percent interest in Cardinal, a subsidiary that provides gathering services for the Utica Shale region and is a VIE due to certain risks shared with customers. 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. rr The following table pres obligation of our consolidated VIEs: ff ents amounts included in the Consolidated Balance Sheet that are only for the use or Assets (liabilities): CasCC h and cash equivalents ............................................................................................. $ Trade accounts and other receivables – net .................................................................. Inventories ...................................................................................................................... Other current assets and deferred charges .................................................................... Property, plant, and equipment – net ............................................................................. Intangible assets – net of accumulated amortization ..................................................... Regulatory assets, deferred charges, and other ............................................................. Accounts payable............................................................................................................ Accrued and other current liabilities............................................................................. Regulatory liabilities, deferred income, and other......................................................... NonNN consolidated VIEsII r TarTT ga T rTT ain 7 December 31, 2022 2021 (Millions) $ 49 136 4 7 5,154 2,158 29 (76) (34) (275) 78 132 3 7 5,295 2,267 20 (61) (29) (287) We own a 20 percent interest in Targa Train 7, which provides fractionation services at Mont Belvieu, Texas, and is a VIE due primarily to our limited participating rights as the minority equity holder. At December 31, 2022, the carrying value of our investment in Targa Train 7 was $46 million. Our maximum exposure to loss is limited to the carrying value of our investment. rr 93 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Brazos Permian II We own a 15 percent interest in Brazos Permian II, which provides gathering and processing services in the Delaware basin and is a VIE due primarily to our limited participating rights as the minority equity holder. At December 31, 2022, the carrying value of our investment in Br azos Permian II was $16 million. Our maximum exposure to loss is limited to the carrying value of our investment. rr Note 3 – Acquisitions 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 iss uance 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. ff ff 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. ff Acquisition-related costs for the Trace Acquisition for the period f rom 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. ff ff We accounted for the Tr ace 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. ff The following table pres ents 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. The fair value of accounts receivable acquired equals contractual amounts receivable. Cash and cash equivalents............................................................................................................. $ Trade accounts and other receivables – net .................................................................................. Property, plant, and equipment – net ............................................................................................ Intangible assets – net of accumulated amortization .................................................................... Other noncurrent assets.................................................................................................................. Total assets acquired .................................................................................................................. $ Accounts payable ........................................................................................................................... $ Accrued and other current liabilities............................................................................................. Other noncurrent liabilities ............................................................................................................ Total liabilities assumed............................................................................................................. $ Net assets acquired..................................................................................................................... $ (Millions) 39 18 448 472 20 997 12 5 8 25 972 II 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 e net cash flows to be derived frff om acquired contractual customer relationships discounted using a risk-adjusted ff futur ff 94 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) s. Approximately 2 percent of the expected future r 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 evenues from these contractual customer relationships are flowff 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 19 years. See Note 10 – Intangible Assets. ff SS Sequent Acquisition On July 1, 2021, we closed on the acquisition of 100 percent of Sequent Energy Management, L.P. and Sequent Energy Canada, Corp (Sequent Acquisition). Total consideration for this acquisition was $159 million, which included $109 million related to working capital. Operations acquired in the Sequent Acquisition focus on risk management and the marketing, trading, storage, and transportation of natural gas for a diverse set of natural gas and electric utilities, municipalities, power generators, and producers, as well as moving gas to markets through transportation and storage agreements on strategically positioned assets, including our Transco system. 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 frff om 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 of $(43) million, and unfavorable Modified EBITDATT frff om affiliates), of s s) on commodity derivatives ff $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. Net gain (los(( MM ff ff Acquisition-related costs for the S equent 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. ff 95 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) 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 fair value of accounts receivable acquired equals contractual amounts receivable. The fair value of the intangible assets was measured using an income approach. 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. ff ff Cash and cash equivalents............................................................................................................. $ Trade accounts and other receivables – net .................................................................................. Inventories ..................................................................................................................................... Derivative assets............................................................................................................................ Other current assets and deferred charges ................................................................................... Property, plant, and equipment – net ............................................................................................ Intangible assets – net of accumulated amortization .................................................................... Other noncurrent assets.................................................................................................................. Commodity derivatives included in other noncurrent assets ......................................................... Total assets acquired .................................................................................................................. $ Accounts payable ........................................................................................................................... $ Derivative liabilities ...................................................................................................................... Accrued and other current liabilities............................................................................................. Other noncurrent liabilities ............................................................................................................ Commodity derivatives included in other noncurrent liabilities ................................................... Total liabilities assumed............................................................................................................. $ Net assets acquired..................................................................................................................... $ lions) 8 498 121 57 4 5 306 3 49 1,051 514 116 46 1 215 892 159 Accounts receivable and accounts payable The operations acquired in the Sequent Acquisition provide services to retail and wholesale gas marketers, utility companies, upstream producers, and industrial customers. See Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies for our policy r egarding netting receivables and payables. ff II Intangible assets 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 wrr eighted-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. ff Commodity derivatives We are exposed to commodity price risk. 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 ; see Note 1 – General, Description of market, be material and can adversely affff ect our results of operations ff 96 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 ff s The following pro for ma Revenues and Net income (loss) attr s Companies, Inc. in 2022, 2021, and 2020, are presented as if the Trace Acquisition had been completed on January 1, 2021, and the Sequent arily indicative of what Acquisition had been completed on January 1, 2020. These pro forma amounts are not necess 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 ibutable to The WilliamWW iods 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. ff s Companies, Inc. for any future per Revenues or Net income (loss) attr TT ibutable to The William s ff ff Revenues........................................................................................ $ 10,965 2,049 Net income (loss) attributable to The Williams Companies, Inc. . $ (Millions) 45 18 Year Ended December 31, 2022 As Reported Pro Forma Trace (1) Pro Forma Combined $ 11,010 2,067 Revenues........................................................................................ $ 10,627 1,517 Net income (loss) attributable to The Williams Companies, Inc. . $ (Millions) $ 118 42 188 4 $ 10,933 1,563 Year Ended December 31, 2021 As Reported Pro Forma Trace Pro Forma Sequent (2) Pro Forma Combined Revenues........................................................................................ $ Net income (loss) attributable to The Williams Companies, Inc. . 7,719 211 (Millions) $ $ 74 (13) 7,793 198 Year Ended December 31, 2020 As Reported Pro Forma Sequent Pro Forma Combined (1) Excludes results from operations acquired in the Trace Acquisition for the period beginning on the acquis ff ition 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 ff date of July 1, 2021, as these results are included in the amounts as reported. NorNN Tex Asset Purchase On August 31, 2022, we purchased a group of assets in north Texas, primarily natural gas storage facilities and pipelines, frff om NorTex Midstream Holdings, LLC (NorTex Asset Purchase) for approximately $424 million. These assets are included in the Transmission & Gulf of Mexico segment. 97 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) 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. Substantially all of these expenses are included in Product costs. We also have revenue from our equity-method investees of $76 million, $46 million, and $26 million for 2022, 2021, and 2020, respectively. In addition, we 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. We have operating agreements with certain equity-method investees. These operating agreements typically provide for reimbursement or payment to us for certain direct operational payroll and employee benefit costs, materials, supplies, and other charges and also for management services. The total charges to equity-method investees for these fees ar e $65 million, $70 million, and $79 million for 2022, 2021, and 2020, respectively. ff Board of Directorsrr 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. ff 98 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Note 5 – Revenue Recognition Revenue by Category The following table presents our revenue disaggregated by major service line: ff Transco Northwest Pipeline Gulf of Mexico Midstream and Storage Northeast Midstream West Midstream (Millions) Gas & NGL Marketing Services Other Eliminations Total 2022 Revenues from contracts with customers: Service revenues: Regulated interstate natural gas transportation and storage................................ $ 2,696 Gathering, processing, transportation, fractionation, and storage: Monetary consideration ..... Commodity consideration . Other..................................... Total service revenues ....... Product sales ............................ — — 10 2,706 179 Total revenues from contracts with customers......................... 2,885 Other revenues (1)....................... Other adjustments (2).................. 24 — $ 443 $ — $ — $ — $ — $ — $ (72) $ 3,067 — — — 443 — 443 4 — 365 64 27 456 251 707 10 — 1,395 14 233 1,642 134 1,776 26 — 1,476 182 54 1,712 841 2,553 8 — — — 3 3 — — — — 10,768 706 10,771 7,929 (15,467) 706 (55) — (164) 3,072 — (19) 260 308 (255) 6,707 (1,813) 11,066 (2,068) 17,773 (11) 7,935 724 (14,743) TotTT al revenues ........................ $ 2,909 $ 447 $ 717 $ 1,802 $ 2,561 $ 3,233 $ 651 $ (1,355) $10,965 2021 Revenues from contracts with customers: Service revenues: Regulated interstate natural gas transportation and storage................................ $ 2,547 Gathering, processing, transportation, fractionation, and storage: Monetary consideration ..... Commodity consideration . Other..................................... — — 10 Total service revenues ....... 2,557 Product sales ............................ 88 Total revenues from contracts with customers......................... 2,645 Other revenues (1)....................... Other adjustments (2).................. 10 — $ 441 $ — $ — $ — $ — $ — $ (33) $ 2,955 — — — 441 — 441 3 — 344 52 22 418 269 687 8 — 1,308 7 195 1,510 99 1,609 25 — 1,184 179 52 1,415 643 2,058 (32) — — — 3 3 6,404 6,407 2,632 (4,828) — — 1 1 333 334 11 — (130) 2,706 — (19) (182) (1,215) 238 264 6,163 6,621 (1,397) 12,784 (13) 27 2,644 (4,801) Total revenues ........................ $ 2,655 $ 444 $ 695 $ 1,634 $ 2,026 $ 4,211 $ 345 $ (1,383) $10,627 99 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Transco Northwest Pipeline Gulf of Mexico Midstream and Storage Northeast Midstream West Midstream (Millions) Gas & NGL Marketing Services Other Eliminations Total 2020 Revenues from contracts with customers: Service revenues: Regulated interstate natural gas transportation and storage................................ $ 2,404 Gathering, processing, transportation, fractionation, and storage: Monetary consideration ..... Commodity consideration . Other..................................... — — 10 Total service revenues ....... 2,414 Product sales ............................ 80 Total revenues from contracts with customers......................... 2,494 Other revenues (1)....................... 10 $ 449 $ — $ — $ — $ — $ — $ (7) $ 2,846 — — — 449 — 449 — 348 21 27 396 114 510 9 1,279 7 164 1,450 57 1,507 22 1,226 101 35 1,362 152 1,514 9 — — 32 32 1,602 1,634 (3) — — 1 1 — 1 33 34 (97) — (16) (120) (336) 2,756 129 253 5,984 1,669 (456) 7,653 (14) 66 $ (470) $ 7,719 Total revenues ........................ $ 2,504 $ 449 $ 519 $ 1,529 $ 1,523 $ 1,631 $ ______________________________ (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 w ervices we provide to operated equity-method investments, and leasing ff revenues associated with our headquarters building. ff e receive for certain s ff (2) Other adjustments reflect certain costs of Gas & NGL Marketing Ser vices’ 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). Contract Assets The following table presents a reconciliation of our contract assets: ff Balance at beginning of year ....................................................................................... $ Revenue recognized in excess of amounts invoiced.............................................. Minimum volume commitments invoiced ............................................................. Balance at end of year ................................................................................................. $ Year Ended December 31, 2022 2021 (Millions) 22 $ 208 (201) 29 $ 12 184 (174) 22 100 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Contract Liabilities The following table presents a reconciliation of our contract liabilities: ff Balance at beginning of year ....................................................................................... $ Payments received and deferred ............................................................................ Significant financing componen t ........................................................................... Contract liability acquired...................................................................................... Recognized in revenue ........................................................................................... Balance at end of year ................................................................................................. $ ff rr Remaining Perfr orff mance Obligations Year Ended December 31, 2022 2021 (Millions) 1,126 180 9 2 (274) 1,043 $ $ 1,209 116 10 1 (210) 1,126 ff Remaining performance obligations primarily include reservation charges on contracted capacity for our gas pipeline firm transportation contracts with customers, storage capacity contr acts, long-term contracts containing minimum volume commitments associated with our midstream businesses, and fixed payments associated with offff sff hore 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; however, these rates may change based on future tariffff s approved by the FERC and the amount and timing of thes e changes are not currently known. ff ff ff ff Our remaining performance obligations exclude variable consideration, including contracts with variable consideration for which we have elected the practical expedient for consideration recognized in revenue as billed. Certain of our contracts contain evergreen and other renewal provisions for periods beyond the initial term of the contract. The remaining performance obligation amounts as of December 31, 2022, do not consider potential future performance obligations for which the renewal has not been exercised and exclude contracts with customers for which the underlying facilities have not received FERC authorization to be placed into service. Consideration received prior to December 31, 2022, that will be recognized in future periods is also excluded from our remaining perforff mance obligations and is instead reflected in contract liabilities. ff The following table presents the amount of the contract liabilities balance expected to be recognized as revenue when performance obligations are satisfied and the transaction price allocated to the remaining performance obligations under certain contracts as of December 31, 2022. Contract Liabilities Remaining Perforff mance Obligations 2023 (one year)................................................................................................................ $ 2024 (one year)................................................................................................................ 2025 (one year)................................................................................................................ 2026 (one year)................................................................................................................ 2027 (one year)................................................................................................................ ...................................................................................................................... Thereafter ff Total ............................................................................................................................. $ 101 $ (Millions) 142 122 117 112 101 449 1,043 $ 3,643 3,388 3,149 2,520 2,415 14,675 29,790 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Note 6 – Provision (Benefitff ) for Income Taxes ff The Provision (be(( nefit) for inc e ome taxes includes: Current: Federal ........................................................................................................ $ State ............................................................................................................ Deferred: Federal ........................................................................................................ State ............................................................................................................ Provision (benefit) for income taxes ................................................................... $ Year Ended December 31, 2022 2021 (Millions) 2020 (25) $ 19 (6) 424 7 431 425 $ (1) $ 3 2 421 88 509 511 $ (29) — (29) 98 10 108 79 Reconciliations from the Provision (benefit) at statutory rate to recorded Provision (benefit) for income taxes are as follow ff s: Provision (benefit) at statutory rate....................................................... $ Increases (decreases) in taxes resulting from: State income taxes (net of federal benefit)........................................ State deferred income tax rate change............................................... Federal valuation allowance.............................................................. Federal settlements ............................................................................ Impact of nontaxable noncontrolling interests .................................. Other – net......................................................................................... Provision (benefit) for income taxes ..................................................... $ Year Ended December 31, 2022 2021 (Millions) 2020 534 $ 435 $ 113 (92) (70) (45) (14) (1) 425 $ 71 — 3 — (9) 11 511 $ 58 6 — 1 — 3 11 79 II 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 decr red state income tax rate (net of federal effect) driven primar ease in our estimate of the ily by the enacted decline in the Pennsylvania state ff deferff income tax rate over the next several years. ff During the course of audits of our business by domestic and foreign tax authorities, we frequently face challenges regarding the amount of taxes due. These challenges include questions regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. In evaluating the liability associated with our various filing positions, we apply the two-step process of recognition and measurement. In association with this liability, we record an estimate of related interest and tax exposure as a component of our tax provision. The Other – net in our reconciliation of the Provision (benefit) at statutory rate impact of this accrual is included within to recorded Provision (benefit) for income taxes. r ff 102 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Significant components of ff Deferred income tax liabilities are as follows: Gross deferred income tax liabilities: Property, plant and equipment........................................................................................... $ Investments ........................................................................................................................ Other .................................................................................................................................. Total gross deferred income tax liabilities .................................................................. Gross deferred income tax assets: Accrued liabilities.............................................................................................................. Foreign tax credits ............................................................................................................. Federal loss carryovers ...................................................................................................... State losses and credits ...................................................................................................... Other .................................................................................................................................. Total gross deferred income tax assets........................................................................ Less valuation allowance................................................................................................... Net deferred income tax assets .................................................................................... Deferred income tax liabilities .............................................................................................. $ December 31, 2022 2021 (Millions) 3,171 1,784 138 5,093 1,108 91 730 356 121 2,406 200 2,206 2,887 $ $ 2,777 1,669 154 4,600 872 140 879 421 132 2,444 297 2,147 2,453 The valuation allowance at December 31, 2022 and 2021 serves to reduce the available deferred income tax assets to an amount that will, more likely than not, be realized. We considered all available positive and negative evidence, which incorporates available tax planning strategies, and management’s estimate of future reversals of existing taxable temporary differences, and have determined that a portion of our deferred income tax assets related to the Foreign tax credits and State losses and credits may not be realized. In 2022, we released $70 million of valuation allowance upon determining we expect to utilize additional foreign tax credits prior to expiration between 2024 and 2025. The amounts presented in the table above are, with respect to state items, before any federal benefit. The change from prior year for the State losses and credits reflects increas es in losses and credits generated in the current and prior years less losses and/or credits utilized in the current year. We have loss and credit carryovers in multiple state taxing jurisdictions. These attributes generally expire between 2023 and 2041 with some carryovers having indefinite carryforward per iods. ff ff Federal loss carryover ed 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. srr at the end of 2022 include deferr r ff 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. 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. ff Consolidated U.S. Federal income tax returns are open to IRS examination for years after 2017. 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 ff limitations for most states expires one year after expiration of the IRS statute. ff 103 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Note 7 – Employee Benefit Plans Pension Plans We have noncontributory defined benefit pension plans for eligible employees hired prior to January 1, 2019. Eligible employees earn compensation credits based on a cash balance formula. As of January 1, 2020, certain active employees are no longer eligible to receive compensation credits. Other Postretirement Benefits We provide subsidized retiree medical benefits to a closed group of participants as well as retiree life insurance ff benefits to eligible participants. Medical benefits for Medicare eligible participants are paid through contributions to health reimbursement accounts. Benefits for all other participants are provided through a self-insured medical plan, which includes participant contributions and contains other cost-sharing features such as deductibles, co-payments, and co-insurance. ff Defined Contribution Plan ff lan participants may ff We have a defined contribution plan for the benef contribute a portion of their compensation on a pre-tax or after-tax basis. Generally, we match employee contributions up to 6 percent of eligible compensation. Additionally, eligible active employees that do not receive compensation credits under the defined benefit pension plan are eligible for an additional annual fixed-percentage contribution made by us to the defined contribution plan. Our contributions charged to expense were $53 million in 2022, $45 million in 2021, and $42 million in 2020. it of substantially all employees. P ff 104 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Funded Status ff The following table presents the changes in benefit obligations and plan assets for pension benef ff its and other postretirement benefits for the years indicated: Change in benefit obligation: ff Pension Benefits Other Postretirement Benefits 2022 2021 2022 2021 (Millions) .................................. $ ff Benefit obligation at beginning of year Service cost............................................................................. Interest cost............................................................................. Plan participants’ contributions .............................................. Benefits paid........................................................................... Net actuarial loss (gain) (1) .................................................... Settlements ............................................................................. Net increase (decrease) in benefit obligation...................... Benefit obligation at end of year ............................................ Change in plan assets: Fair value of plan assets at beginning of year ........................ Actual return on plan assets.................................................... Employer contributions .......................................................... Plan participants’ contributions .............................................. Benefits paid........................................................................... Settlements ............................................................................. Net increase (decrease) in fair value of plan assets ............ Fair value of plan assets at end of year................................... Funded status — overfunded (underfunded).............................. Amounts recognized in the Consolidated Balance Sheet: ......... Noncurrent assets.................................................................... Current liabilities .................................................................... Noncurrent liabilities .............................................................. Funded status — overfunded (underfunded).............................. $ $ $ 1,133 28 31 — (78) (162) (12) (193) 940 1,336 (132) 3 — (78) (12) (219) 1,117 177 201 (2) (22) 177 Accumulated benefit obligation ................................................. $ 930 $ $ $ $ $ $ $ $ $ 1,183 30 28 — (83) (21) (4) (50) 1,133 1,357 62 4 — (83) (4) (21) 1,336 203 229 (3) (23) 203 1,118 200 1 6 2 (12) (45) — (48) 152 287 (27) 3 2 (12) — (34) 253 101 105 (4) — 101 $ $ $ $ 220 1 5 2 (14) (14) — (20) 200 278 16 5 2 (14) — 9 287 87 91 (4) — 87 ____________ (1) 2022 amounts are due primarily to the following factors: Pension benefits - discount rate assumptions, partially offff sff et by change in 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 offff sff et by experience-related items; Other Postretirement Benefits - discount rate assumption and experience- related items. ff ff ff 105 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) The following table s ff ummarizes inforff mation for pension plans with obligations in excess of plan assets at December 31. Projected benefit obligation................................................................................................... $ Accumulated benefit obligation ............................................................................................ Fair value of plan assets ........................................................................................................ 2022 2021 (Millions) $ 24 22 — 26 22 — Pre-tax amounts recognized in Accumulated other comprehensive income (loss) at December 31 are as follows: ff Pension Benefits Other Postretirement Benefits 2022 2021 2022 2021 Net actuarial gain (loss) ............................................................. $ (45) $ (Millions) (46) $ 18 $ 4 Additionally, as of December 31, 2022 and 2021, we have $130 million and $150 million, respectively, of pension and other postretirement plan amounts included in regulatory liabilities associated with our gas pipeline companies. NN Net Per iodic Benefit Cost (Credit) Net periodic benefit cost (credit) for the years ended December 31 consist of the follow ff ing: Pension Benefits Other Postretirement Benefits 2022 2021 2020 2022 2021 2020 (Millions) Components of net periodic benefit cost (credit): ff Service cost................................................................. $ Interest cost................................................................. Expected return on plan assets ................................... Amortization of net actuarial loss............................... Net actuarial loss from settlements ............................. ff Reclassification to regulatory liability........................ Net periodic benefit cost (credit) (1).............................. $ 28 31 (44) 12 3 — 30 $ $ 30 28 (43) 14 1 — 30 $ $ 31 36 (53) 21 9 — 44 $ $ $ 1 6 (10) — — 1 (2) $ $ 1 5 (10) — — 2 (2) $ 1 7 (11) — — 2 (1) ____________ (1) Components other than Service cost are included in Other income (expense) – net ee below Operating income (loss) in the Consolidated Statement of Income. 106 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) II Items Recognized in O ther Comprehensive Income (Loss) Other changes in plan assets and benefit obligations recognized in Other comprehensive income (loss) before taxes for the years ended December 31 consist of the following: ff Pension Benefits Other Postretirement Benefits 2022 2021 2020 2022 2021 2020 Net actuarial gain (loss) arising during the year.................... $ (14) $ Amortization of net actuarial loss ......................................... ....................................... ff Net actuarial loss from settlements Total recognized in Other comprm ehensive income (loss).... $ Key Assumptions (Millions) 40 14 1 55 $ 112 21 9 $ 142 $ $ 14 — — 14 $ $ 29 — — 29 $ $ (4) — — (4) 12 3 1 $ The weighted-average assumptions utilized to determine benefit obligations and Net periodic benefit cost (cr(( edit) as of December 31 are as follows: Pension Benefits Other Postretirement Benefits 2022 2021 2020 2022 2021 2020 Benefit obligations: Discount rate ................................... Rate of compensation increase........ Cash balance interest crediting rate 5.16 % 3.58 3.50 2.82 % 3.67 3.00 2.45 % 3.76 3.00 5.20 % N/A N/A 2.93 % N/A N/A 2.59 % N/A N/A Net periodic benefit cost (credit): Discount rate ................................... 2.84 % 2.45 % 3.08 % 2.93 % 2.59 % 3.27 % Expected long-term rate of return on plan assets............................... Rate of compensation increase........ Cash balance interest crediting rate 3.81 3.67 3.00 3.69 3.76 3.00 4.67 3.68 3.50 3.67 3.61 4.39 N/A N/A N/A N/A N/A N/A We use mortality tables issued by the Society of Actuaries to measure the benefit obligations. The assumed health care cost trend rate for 2023 is 6.8 percent. This rate decreases to 4.5 percent by 2032. Plan Assets The plans’ investment objectives include a framework to manage the volatility of the plans’ funded status and ollow a policy of diversifying the investments across various asset minimize future cash contributions. The plans f ff classes, strategies, and investment managers. ff The investment policy for the pension plans includes target asset allocation percentages as well as permitted and prohibited investments designed to mitigate risks associated with investing. The December 31, 2022, target asset allocation was 25 percent equity securities and 75 percent fixed income securities, including investments in equity , commingled investment funds, and separate accounts. ff and fixed income mutual f unds ff 107 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) The fair values of our pension and other postretirement benefits plan assets by asset class at December 31 are as ff follow s: 2022 Pension Benefits Other Postretirement Benefiff ts Level 1 (1) Level 2 (2) Total Level 1 (1) Level 2 (2) Total ff ................................ $ Cash management funds Government debt securities ........................... Corporate debt securities ............................... Other.............................................................. $ Commingled investment funds (3): Equities ..................................................... Fixed income ............................................ Total assets at fair value......................... (Millions) $ 45 $ 58 — 1 104 $ — $ 18 284 4 306 45 76 284 5 410 273 434 $ 1,117 $ 2021 105 8 — — 113 $ — $ 3 39 — 42 $ $ 105 11 39 — 155 38 60 253 Pension Benefits Other Postretirement Benefiff ts Level 1 (1) Level 2 (2) Total Level 1 (1) Level 2 (2) Total ff ................................ $ Cash management funds Equity securities............................................. Government debt securities............................ Corporate debt securities................................ Mutual fund - Municipal bonds ..................... Other .............................................................. $ Commingled investment funds (3): Equities....................................................... Fixed income .............................................. Total assets at fair value ......................... 37 42 99 — — (3) 175 $ $ — $ 19 28 350 — 2 399 (Millions) 37 $ 61 127 350 — (1) 574 $ 14 39 13 — 59 (1) 124 $ $ 288 474 $ 1,336 — $ 10 4 47 — — 61 $ 14 49 17 47 59 (1) 185 39 63 287 ____________ (1) Level 1 includes assets with fair values based on quoted pr ff ices 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. (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. Treasury s ecurities, that are valued primarily using pricing models which incorporate observable inputs such as benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. rr r (3) The commingled investment funds are measured at fair value using net asset value per share. Certain standard withdrawal restrictions generally apply, which may include redemption notification period restrictions ranging frff om 1 day to 15 days. 108 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Plan Benefit Payments and Employer Contributions Following are the expected benefit payments, which reflect the same assumptions previously discussed and e service as appropriate. ff futur 2023........................................................................................................................... $ 2024........................................................................................................................... 2025........................................................................................................................... 2026........................................................................................................................... 2027........................................................................................................................... 2028-2032.................................................................................................................. Pension Benefiff ts Other Postretirement Benefiff ts $ (Millions) 84 83 84 81 80 389 13 13 12 12 11 52 In 2023, we expect to contribute approximately $1 million to our pension plans and approximately $4 million to our other postretirement benefit plan. Note 8 – Investing Activities InII vestments Ownership Interest at December 31, 2022 Equity method: Appalachia Midstream Investments ................................................................. RMM ................................................................................................................ OPPL ................................................................................................................ Blue Racer ........................................................................................................ Discovery.......................................................................................................... Gulfstream ........................................................................................................ Laurel Mountain ............................................................................................... Other ................................................................................................................. (1) 50% 50% 50% 60% 50% 69% Various Other ...................................................................................................................... December 31, 2022 2021 (Millions) $ $ 2,975 395 386 383 345 220 205 139 5,048 17 5,065 $ $ 3,056 401 388 377 328 215 226 130 5,121 6 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 rr 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. 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 $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 ff 109 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. ff 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: Appalachia Midstream Investments ................................................................ $ Discovery......................................................................................................... Cardinal Pipeline Company, LLC ................................................................... Gulfstream ....................................................................................................... Blue Racer (1).................................................................................................. Other ................................................................................................................ $ 2022 $ $ Year Ended December 31, 2021 (Millions) 84 — — 26 3 2 115 83 41 16 14 — 12 166 $ $ 2020 116 — — 3 157 49 325 ___________ (1) See follow ff ing 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: Appalachia Midstream Investments ................................................................ $ Laurel Mountain .............................................................................................. Gulfstream ....................................................................................................... RMM................................................................................................................ Blue Racer (1).................................................................................................. Discovery......................................................................................................... OPPL................................................................................................................ Other ................................................................................................................ $ Year Ended December 31, 2022 2021 2020 (Millions) 433 33 90 45 47 44 26 39 757 $ $ $ $ 415 112 89 52 49 49 34 65 865 357 31 93 39 47 21 50 15 653 ___________ (1)(( See previous discussion in the section Acquisition of additional interests in BRMHMM above. 110 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Equity Earnings (Losses)s Equity earnings (losses)s 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. rr Impair II ments of Equ ity-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 December 31, 2022 2021 (Millions) Assets (liabilities): Current assets..................................................................................................................... $ Noncurrent assets............................................................................................................... Current liabilities ............................................................................................................... Noncurrent liabilities ......................................................................................................... $ 964 12,701 (632) (3,789) 743 13,211 (435) (3,774) Year Ended December 31, 2022 2021 2020 Gross revenue .................................................................................................. $ Operating income............................................................................................. Net income....................................................................................................... 5,520 1,268 1,102 $ (Millions) 4,688 1,191 1,006 $ 2,625 508 459 Note 9 – Property, Plant, and Equipment ff The follow ing table presents nonregulated and regulated Property, plant, and equipment – net as presented on the Consolidated Balance Sheet for the years ended: Nonregulated: Estimated ff ife ( Useful Lff 1) (Years) Depreciation Rates (1) (%) December 31, 2022 2021 (Millions) Natural gas gathering and processing facilities Construction in progress......................................... Not applicable 5 - 40 ...... ff Oil and gas properties ............................................. Other ....................................................................... Regulated: Units of production 0 - 45 Natural gas transmission facilities......................... Construction in progress........................................ Not applicable Not applicable Other...................................................................... Total property, plant, and equipment, at cost ......... Accumulated depreciation and amortization.............. Property, plant, and equipment — net.................... 0.00 - 33.33 1.25 - 7.13 5 - 45 $ 19,163 997 $ 18,203 331 874 2,998 19,521 708 2,796 47,057 (16,168) 30,889 $ 572 2,649 19,201 475 2,753 44,184 (14,926) 29,258 $ __________ (1) Estimated useful life and depreciation rates are presented as of December 31, 2022. Depreciation rates and sets are prescribed by the FERC. ff estimated useful lives for regulated as ff 111 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Depreciation and amortization expense forff Property, plant, and equipment – net was $1.498 billion, $1.496 billion, and $1.393 billion in 2022, 2021, and 2020, respectively. Regulated Property, plant, and equipment – net includes approximately $428 million and $468 million at December 31, 2022 and 2021, respectively, related to amounts in excess of the original cost of the regulated facilities w ithin our gas pipeline businesses as a result of our prior acquisitions. This amount is being amortized over ff 40 years using the straight-line amortization method. Current FERC policy does not permit recovery through rates ff for amounts in excess of original cos t of construction. Asset Retirement Obligations ff r elate to offshor Our accrued obligations primarily r e platforms and pipelines, oil and gas properties, gas transmission pipelines and facilities, underground storage caverns, gas processing, fractionation, and compression facilities , and gas gathering well connections and pipelines. At the end of the useful life of each respective asset, we ff are legally obligated to dismantle offshore platforms and appropriately abandon offsff hore 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, 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. to cap certain gathering pipelines at ff ff ff 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. Balance at beginning of year ......................................................................................... $ Liabilities incurred (1)................................................................................................ Liabilities settled ........................................................................................................ Accretion .................................................................................................................... Revisions (2) .............................................................................................................. Balance at end of year.................................................................................................... $ ___________ (1) Includes $307 million of ARO in 2021 related to acquired upstream properties. Year Ended December 31, 2022 2021 (Millions) 1,665 77 (22) 85 109 1,914 $ $ 1,222 336 (25) 73 59 1,665 (2) Several factor ff s are considered in the annual review process, including inflation rates, current estimates forff 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. ff The funds Tr ansco 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). (See Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk.) Under funding obligation is approximately $16 million, with installments to be deposited monthly. rate settlement, Transco’s annual its current 112 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: Customer relationships............................................................ $ Transportation and storage capacity contracts ........................ Other intangible assets ............................................................ $ Customer Relationships 2022 2021 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization 10,065 267 6 10,338 $ $ (Millions) (2,801) $ (172) (2) (2,975) $ 9,593 267 6 9,866 $ $ (2,448) (14) (2) (2,464) 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. ff We expense costs incurred to renew or extend the terms of our gas gathering, processing, and fractionation contracts with customers. Although a significant portion of the expected future cash flows associated with these contractual customer relationships are dependent on our ability to renew or extend the arrangements beyond the initial contract periods, these expected future cash flows are significantly influenced by the scope and pace of our producer customers’ drilling programs. Once producer customers’ wells are connected to our gathering infrff astructure, their likelihood of switching to another provider before the wells are abandoned is reduced due to the significant capital investment required. ff The amortization expense related to customer relationships was $353 million, $332 million, and $328 million in 2022, 2021, and 2020, respectively. The estimated amortization expense for each of the next five succeeding fiscal years is approximately $357 million. ff 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. The estimated amortization expense for each of the next five succeeding fiscal years is $51 million, $21 million, $10 million, $7 million, and $4 million. 113 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Note 11 – Accrued and Other Current Liabilities December 31, 2022 2021 $ (Millions) 274 218 201 141 87 25 324 1,270 $ 277 214 56 134 75 23 256 1,035 Interest on debt .............................................................................................................. $ Employee costs.............................................................................................................. Regulatory liabilities (Note 1) ....................................................................................... Contract liabilities ......................................................................................................... Asset retirement obligations (Note 9)............................................................................ Operating lease liabilities (Note 13).............................................................................. Other, including accrued loss contingencies ................................................................. $ 114 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Note 12 – Debt and Banking Arrangements Long-Term Debt Transco: 7.08% Debentures due 2026 ................................................................................. $ 7.25% Debentures due 2026 ................................................................................. 7.85% Notes due 2026.......................................................................................... 4% Notes due 2028............................................................................................... 3.25% Notes due 2030.......................................................................................... 5.4% Notes due 2041............................................................................................ 4.45% Notes due 2042.......................................................................................... 4.6% Notes due 2048............................................................................................ 3.95% Notes due 2050.......................................................................................... Other financing obligation — Atlantic Sunrise .................................................... Other financing obligation — Leidy South .......................................................... Other financing obligation — Dalton ................................................................... Northwest Pipeline: 7.125% Debentures due 2025 ............................................................................... 4% Notes due 2027............................................................................................... Williams: 3.35% Notes due 2022.......................................................................................... 3.6% Notes due 2022............................................................................................ 3.7% Notes due 2023............................................................................................ 4.5% Notes due 2023............................................................................................ 4.3% Notes due 2024............................................................................................ 4.55% Notes due 2024.......................................................................................... 3.9% Notes due 2025............................................................................................ 4% Notes due 2025............................................................................................... 3.75% Notes due 2027.......................................................................................... 3.5% Notes due 2030............................................................................................ 2.6% Notes due 2031............................................................................................ 7.5% Debentures due 2031 ................................................................................... 7.75% Notes due 2031.......................................................................................... 8.75% Notes due 2032.......................................................................................... 4.65% Notes due 2032.......................................................................................... 6.3% Notes due 2040............................................................................................ 5.8% Notes due 2043............................................................................................ 5.4% Notes due 2044............................................................................................ 5.75% Notes due 2044.......................................................................................... 4.9% Notes due 2045............................................................................................ 5.1% Notes due 2045............................................................................................ 4.85% Notes due 2048.......................................................................................... 3.5% Notes due 2051............................................................................................ 5.3% Notes due 2052............................................................................................ Various — 7.7% to 8.72% Notes due 2022 to 2027............................................. Unamortized debt issuance costs.................................................................................. Net unamortized debt premium (discount)................................................................... Total long-term debt, including current portion ....................................................... ithin one year ............................................................................ Long-term debt due wd Long-term debt ......................................................................................................... $ 115 December 31, 2022 2021 (Millions) 8 200 1,000 400 700 375 400 600 500 809 77 252 85 500 — — — 600 1,000 1,250 750 750 1,450 1,000 1,500 339 252 445 1,000 1,250 400 500 650 500 1,000 800 650 750 2 (135) (55) 22,554 (627) 21,927 $ $ 8 200 1,000 400 700 375 400 600 500 830 72 254 85 500 750 1,250 850 600 1,000 1,250 750 750 1,450 1,000 1,500 339 252 445 — 1,250 400 500 650 500 1,000 800 650 — 2 (131) (56) 23,675 (2,025) 21,650 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 matur ff ities 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: December 31, 2022 (Millions) 2023..................................................................................................................................................... $ 2024..................................................................................................................................................... 2025..................................................................................................................................................... 2026..................................................................................................................................................... 2027..................................................................................................................................................... 629 2,281 1,619 1,245 1,993 IsII suances 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, w rr e 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 s enior unsecured notes due 2051. ff ff 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 per ff cent 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 Sunris e, Leidy South, and Dalton projects, Transco received funding frff om co-owners for their proportionate share of construction costs. Amounts received were recorded within r 116 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. 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. The obligations, which mature in 2038, 2041, and 2052, respectively, require monthly interest and principal payments and bear interest rates of approximately 9 percent, 13 percent, and 9 percent, respectively. ff Credit Facility Long-term credit facility (1)............................................................................................. $ Letters of credit under certain bilateral bank agreements ................................................ (Millions) 3,750 $ — 30 ________________ (1) In managing our available liquidity, we do not expect a maximum outstanding amount in excess of the capacity of our credit facility inclusive of any outstanding amounts under our commercial paper program. December 31, 2022 Stated Capacity Outstanding Revolving credit facility In October 2021, we along with Transco and Northwest Pipeline, the lenders named therein, and an administrative agent entered into an amended and restated credit agreement (Credit Agreement) that reduced aggregate commitments available from $4.5 billion to $3.75 billion, with up to an additional $500 million increase in aggregate commitments available under certain circumstances. 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. The Credit Agreement allows for swing line loans up to an aggregate of to available capacity under the credit facility, and letters of credit commitments of $200 million, subject $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. ff The Credit Agreement contains the following terms and conditions: • • • Various covenants may limit, among other things, a borrower’s and its material subsidiaries’ ability to grant certain liens supporting indebtedness, merge or consolidate, sell all or substantially all of its assets in certain circumstances, make certain distributions during an event of default, and each borrower and each borrower’s respective material subsidiaries’ ability to enter into certain restrictive agreements. ff If an event of default with respect to a borrower occurs under the credit facility, the lenders will be able to terminate the commitments for the respective borrowers and accelerate the maturity of the loans of the ff defaulting borrower under the credit f acility and exercise other rights and remedies. ff 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. 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 ovisions to provide for replacement of LIBOR with an alternative Agreement also includes customary pr benchmark rate when LIBOR ceases to be available. rr 117 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) ff inancial covenants under the Credit Agreement require the ratio of debt to EBI TDA (earnings ff Significant f ff est, taxes, depreciation, and amortization), each as defined in the Credit Agreement, to be no greater than before inter cal quarter in which the funding of the purchase price for an acquisition (whether 5.0 to 1.0, except that for any fis effectuated as one or a series of related transactions) with an aggregate purchase price of $25 million or more has ff 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. ff ff The ratio of debt to capitalization (defined as net worth plus debt), each as defined in the Credit Agreement, ff must be no greater than 65 percent for each of Transco and Northwest Pipeline. At December 31, 2022, we are in compliance with these covenants. 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. The maturities of the commercial paper notes vary but may not exceed 397 days frff om the date of issuance. The commercial paper notes are sold under customary terms in the commercial paper market and are issued at a discount from par, or, alternatively, are sold at par and bear varying interest rates on a fixed or floating bas is. The net proceeds of issuances of the commercial paper notes are expected ff to be used to fund planned capital expenditures and for other general corporate purposes. At December 31, 2022, $350 million of commercial paper was outstanding at a weighted-average interest rate of 4.8 percent. We had no commercial paper outstanding at December 31, 2021. Cash Payments for I nII terest (Net of Amounts Capitalized) ff Cash payments for interest (net of amounts capitalized) were $1.117 billion in 2022, $1.137 billion in 2021, and $1.149 billion in 2020. 118 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Note 13 – Leases We are a lessee through noncancellable lease agreements for property and equipment consisting primarily of buildings, land, vehicles, and equipment used in both our operations and administrative functions. Year Ended December 31, 2022 2021 (Millions) 2020 Lease Cost: Operating lease cost.......................................................................... $ Variable lease cost ............................................................................ Sublease income ............................................................................... Total lease cost.............................................................................. $ Cash paid for operating lease liabilities ............................................... $ 34 26 — 60 33 $ $ $ 35 15 (1) 49 35 $ $ $ Other Information: Right-of-use asset (included in Regulatory assets, deferred charges, and other) ......... $ Operating lease liabilities: Current (included in Accrued and other current liabilities) ...................................... $ )............ $ Noncurrent (included in Regulatory liabilities, deferred income, and other r 162 25 148 $ $ $ December 31, 2022 2021 (Millions) 37 19 (1) 55 30 159 23 141 Weighted-average remaining lease term – operating leases (years) .............................. Weighted-average discount rate – operating leases ....................................................... 13 4.62% 13 4.56% At December 31, 2022, the following table represents our operating lease maturities, including renewal provisions that we have assessed as being reasonably certain of exercise, for each of the years ended December 31: 2023 ................................................................................................................................................... $ 2024 ................................................................................................................................................... 2025 ................................................................................................................................................... 2026 ................................................................................................................................................... 2027 ................................................................................................................................................... Thereafter........................................................................................................................................... Total future lease payments............................................................................................................ Less: Amount representing interest ............................................................................................ Total obligations under operating leases ........................................................................................ $ (Millions) 31 26 20 20 19 122 238 65 173 We are the lessor to certain lease agreements for office space in our headquarters building, which are insignificant to our financial statements. Note 14 – Equity-Based Compensation WW Williams ’ Plan Information The Williams Companies, Inc. 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 119 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 futur e grants. ff 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. Employees purchased 242 thousand shares at a weighted-average price of $24.57 per share during 2022. Approximately 1.2 million shares were available for purchase under the ESPP at December 31, 2022. O We recognize compensation expense on employee stock-based awards on a straight-line basis; forfeitures are recognized when they occur. Operating and maintenance expenses and Selling, general, and administrative expenses in our Consolidated Statement of Income include equity-based compensation expense in 2022, 2021, and 2020 of $73 million, $81 million, and $52 million, respectively. Income tax benefit recognized related to the stock- based compensation expense in 2022, 2021, and 2020 was $18 million, $20 million, and $13 million, respectively. Measured but unrecognized stock-based compensation expense at December 31, 2022, was $63 million, all of which related to restricted stock units. These amounts are expected to be recognized over a weighted-average period of 1.7 years. NonNN vested Restricted Stock Units At December 31, 2022 and 2021, we had restricted stock units outstanding, including performance-based shares, of 6.9 million shares and 7.3 million shares, respectively, with a weighted-average fair value of $23.63 and $22.35, respectively. Restricted stock units generally vest after three years. Performance-based grants may vest at a range from zero percent to 200 percent of the original shares granted based on performance against a target. At December 31, 2022, there were 2.6 million performance-based shares outstanding. ff s Stock Option OO There were no stock options granted in 2022, 2021, or 2020. At December 31, 2022, we had 2.8 million stock options that were both outstanding and exercisable, with a weighted-average exercise price of $34.32. The weighted- average remaining contractual life for stock options that were both outstanding and exercisable at December 31, 2022, was 2.8 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. 120 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Note 15 – Fair Value Measurements, Guarantees, and Concentration of Credit Risk ff The follow ing table presents, by level within the fair value hierarchy, certain of our significant financial assets and liabilities. The carrying values of cash and cash equivalents, accounts receivable, accounts payable, and commercial paper approximate fair value because of the short-term nature of these instruments. Therefore, these assets and liabilities are not presented in the following table. ff ff Fair Value Measurements Using Quoted Prices In Active Markets forff Identical Assets (Level 1) (Millions) Signififf cant Other Observable Inputs (Level 2) Signififf cant Unobservable Inputs (Level 3) Carrying Amount Fair Value Assets (liabilities a ) at December 31, 2022: Measured on a recurring basis: ARO Trust investments ............................................ $ Commodity derivative assets (1).............................. Commodity derivative liabilities (1) ........................ Other financial assets (liabilities) - net..................... $ 230 166 (810) (5) 230 166 (810) (5) Additional disclosures: Long-term debt, including current portion ............... (22,554) (21,569) Guarantees ................................................................ (38) (25) $ 230 $ — $ 20 (22) — — — 132 (718) (5) (21,569) (9) Assets (liabilities) at December 31, 2021: Measured on a recurring basis: ARO Trust investments ............................................ $ 260 $ 260 $ 260 $ — $ Commodity derivative assets (2).............................. Commodity derivative liabilities (2) ........................ Other financial assets (liabilities) - net..................... 84 (488) (7) 84 (488) (7) Additional disclosures: Long-term debt, including current portion ............... (23,675) (27,768) Guarantees ................................................................ (39) (26) 2 (69) — — — 81 (403) (7) (27,768) (10) — 14 (70) — — (16) — 1 (16) — — (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. Fair Value Methods We use the follow ff ing methods and assumptions in estimating the fair value of our financial instruments: Assets measured at fair value on a recurring basis ARO Trust investments: Transco deposits a portion of its collected rates, pursuant to its rate case settlement, into an external trust that is specifically designated to fund futur e ARO’s. 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. Both realized and unrealized gains and losses are ultimately recorded as regulatory assets or liabilities. ff 121 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) rr y Commodity derivatives : Commodity derivatives include exchange-traded contracts and OTC contracts, which consist of physical forwards, futures, and swaps that are measured at fair value on a recurring basis. We also have other derivatives related to asset management agreements and other contracts that require physical delivery. Derivatives classified as Level 1 are valued using New York Mercantile Exchange (NYMEX) futures prices. Derivatives classified as Level 2 are valued using basis transactions that represent the cost to transport natural gas frff om a NYMEX delivery point to the contract delivery point. These transactions are based on quotes obtained either through electronic trading platforms or directly from brokers. Derivatives classified as Level 3 are valued using a combination of observable and unobservable inputs. The fair value amounts are presented on a net basis and reflect the netting of asset and liability positions permitted under the terms of our master netting arrangements and cash held on deposit in margin accounts that we have received or remitted to collateralize certain derivative positions. Commodity derivative assets are reported in Derivative assets and Regulatory assets, deferred charges, and other in our Consolidated Balance Sheet. Commodity derivative liabilities are reported in Derivative liabilities and Regulatory liabilities, deferred incom e, 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. r ff The following table pres ff ents a reconciliation of changes in fair value of our net commodity derivatives classified as Level 3 in the fair value hierarchy. Balance at beginning of period......................................................... $ Gains (losses) included in our Consolidated Statement of Income.. Purchases, issuances, and settlements......................................... Acquired derivatives (Note 3)..................................................... Transfers into Level 3 ................................................................. Transfers out of Level 3 .............................................................. Balance at end of period ................................................................... $ Year Ended December 31, 2022 2021 (Millions) (15) $ (31) (5) — (24) 19 (56) $ (2) (62) 13 24 — 12 (15) A substantial portion of the carrying value of our Level 3 derivatives at December 31, 2022, relates to a long- term physical natural gas purchase contract associated with an ongoing pipeline expansion project. 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. Additional fair value disclosures , g g Long-term debt, including current portion : The disclosed fair value of our long-term debt is determined primarily by a market approach using broker quoted indicative period-end bond prices. The quoted prices are based on observable transactions in less active markets for our debt or similar instruments. 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). p ff Guarantees: 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. Guarantees also include an indemnification related to a disposed operation. ff 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 default rate is published by Moody’s Investors Service. The carrying 122 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. Our exposure declines systematically through the remaining term of WilTel’s obligation. ff ff The fair value of the guarantee associated with the indemnif as estimated using an income approach that considered probability-weighted scenarios of potential levels of future performance. The terms of the indemnification do not limit the maximum potential future payments associated with the guarantee. The carrying value of this guarantee is reported in Regulatory liabilities, deferred income, and other in our Consolidated Balance Sheet. ication related to a disposed operation w We are required by our revolving credit agreement to indemnify lenders for certain taxes required to be withheld frff om payments due to the lenders and for certain tax payments made by the lenders. The maximum potential amount of futur e payments under these indemnifications is based on the related borrowings and such future payments cannot currently be determined. These indemnifications generally continue indefinitely unless limited by the underlying tax regulations and have no carrying value. We have never been called upon to perform under these indemnifications and have no current expectation of a future claim. ff ff Nonrecurring fair value measurements ff 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 s upply 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. ff 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 r ates. The eporting unit was further reconciled to our estimated total enterprise value as of March 31, 2020, ff fair value of the r 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. rr 123 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) The following table pr ff esents 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. Segment Date of Measurement Fair Value Impairments Year Ended December 31, 2022 2021 2020 (Millions) ImII paim rment of certain assets: Certain capitalized project costs (1)....................... Certain capitalized project costs (1)....................... Transmission & Gulf of Mexico June 30, 2021 $ Transmission & Gulf of Mexico December 31, 2020 Certain gathering assets (2).................................... Northeast G&P December 31, 2020 1 42 5 Impairment of certain assets ............................. $ 2 $ 170 $ — $ 2 $ 12 182 Impairment of equity-method investments: RMM (3) ................................................................ RMM (4) ................................................................ Brazos Permian II (4)............................................. West West West BRMH (5) .............................................................. Northeast G&P March 31, 2020 Appalachia Midstream Investments (5) ................. Northeast G&P March 31, 2020 2,700 Aux Sable (5) ......................................................... Northeast G&P March 31, 2020 Laurel Mountain (5)............................................... Northeast G&P March 31, 2020 Discovery (5) ......................................................... Impairment of equity-method investments ....... Transmission & Gulf of Mexico March 31, 2020 7 236 367 December 31, 2020 $ 421 $ 108 March 31, 2020 March 31, 2020 557 — 191 243 193 229 127 39 10 97 $ — $ — $ 1,046 ff ______________ (1) Relates to capitalized project development costs for the Northeast Supply Enhancement project. Approvals required for the project f rff om 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 incorpor ated an indication of interest by a third-party. r ff (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. ff 124 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. ff rr (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 5.0x to 6.2x EBITDA (weighted-average 6.0x). 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. ff ff Concentration of Credit Risk Accounts receivable The following table summarizes concentration of receivables, net of allow ff ances: NGLs, natural gas, and related products and services............................................... $ Regulated interstate natural gas transportation and storage ...................................... Marketing of natural gas and NGLs .......................................................................... Upstream activities .................................................................................................... ............. Receivables from derivatives .................................................................................... Other accounts receivable ......................................................................................... Accounts Receivable related to revenues from contracts with customers ff Trade accounts and other receivables - net........................................................... $ December 31, 2022 2021 $ (Millions) 505 311 858 97 1,771 889 63 2,723 $ 486 274 609 82 1,451 462 65 1,978 Customers include producers, distribution companies, industrial users, gas marketers, and pipelines primarily located in the continental United States. As a general policy, collateral is not required for receivables with the exception of the marketing receivables discussed below. Customers’ financial condition and credit worthiness are evaluated regularly and, based upon this evaluation, we may obtain collateral to support receivables. We use established credit policies to determine and monitor the creditworthiness of gas marketing and trading counterpar ties, 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 r 125 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) financial ins titution, but may also include U.S. government securities. We also utilize netting agreements whenever ff possible to mitigate exposure to gas marketing and trading counterparty credit risk. When more than one derivative transaction with the same counterparty is outstanding and a legally enforceable netting agreement exists with that ty, the “net” mark-to-market exposure represents a reasonable measure of our credit risk with that counterpar ty. counterpar r r Note 16 – Derivatives Commodity-Related Derivatives - We are exposed to commodity price risk. To manage this volatility, we use various contracts in our marketing and trading activities that generally meet the definition of derivatives. Derivative positions are monitored using techniques including, but not limited to, value at risk. Derivative instruments are recognized at fair value in our Consolidated Balance Sheet as either assets or liabilities and are presented on a net basis by counterparty, net of margin deposits. 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: Commodity Unit of Measure Net Long (Short) Position Index Risk Central Hub Risk - Henry Hub Basis Risk Central Hub Risk - Mont Belvieu Basis Risk Central Hub Risk - WTI Natural Gas Natural Gas Natural Gas Natural Gas Liquids Natural Gas Liquids Crude Oil r MMBtu MMBtu MMBtu Barrels Barrels Barrels 745,415,032 (46,154,200) (50,737,802) 35,548 (3,880,364) (123,250) Derivative Financial Statement Pres SS entation The fair value of commodity-related derivatives, which are not designated as hedging instruments for accounting purposes, was reflected as follows: Derivative Category Assets (Liabilities) Assets (Liabilities) (Millions) December 31, 2022 December 31, 2021 Current ............................................................................................ Noncurrent ...................................................................................... Total derivatives.......................................................................... Counterparty and collateral netting offsff et....................................... Amounts recognized in our Consolidated Balance Sheet ........... $ $ $ 1,099 269 1,368 (1,034) 334 $ $ $ (1,278) (734) (2,012) 1,236 (776) $ 619 166 $ 785 (476) $ 309 126 $ (760) (429) $ (1,189) 772 (417) $ The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) The pre-tax effects of commodity-related derivative instruments in s) on commodity derivatives evenues and Net processing commodity expenses in our Consolidated Statement of Income Net gain (los(( ff reflected within Total r were as follows: TT Realized commodity-related derivatives designated as hedging instruments............................................................................................. Realized commodity-related derivatives not designated as hedging instruments............................................................................................. Unrealized commodity-related derivatives not designated as hedging instruments............................................................................................. Net gain (loss) on commodity derivatives.......................................... Realized commodity-related derivatives not designated as hedging instruments in NeNN t processing commodity exee penses x .............................. Unrealized commodity-related derivatives not designated as hedging instruments in NeNN t processing commodity exee penses x .............................. $ $ $ $ Contingent Features Gain (Loss) Year Ended December 31, 2022 2021 (Millions) 2020 — $ (55) $ (91) (296) (387) 16 47 $ $ $ 16 (109) (148) 2 $ $ — $ (2) (3) — (5) 1 — Generally, collateral may be provided by 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. ff ff We have specific trade and cr edit contracts that contain minimum credit rating requirements. These credit rating requirements typically give counterparties the right if our credit ratings are downgraded to non-investment grade status. Under such circumstances, we would need to post collateral to continue transacting business with these counterparties. At December 31, 2022, the contractually required collateral in the event of a credit rating downgrade to non-investment grade status was $13 million. to suspend or terminate credit r We maintain accounts with brokers or the clearing houses of certain exchanges to facilitate financial derivative transactions. Based on the value of the positions in these accounts and the associated margin requirements, we may be required to deposit cash into these accounts. At December 31, 2022, and 2021, net cash collateral held on deposit in broker margin accounts was $202 million and $296 million, respectively. Note 17 – Contingent Liabilities and Commitments Alaska Refinery Contamination Litigation ff We are involved in litigation arising from our ownership and operation of the North Pole Refinery in North Pole, Alaska, from 1980 until 2004, through our wholly owned subsidiaries Williams Alaska Petroleum Inc. (WAPI) and MAPCO Inc. We sold the refinery to Flint Hills Resources Alaska, LLC (FHRA), a subsidiary of Koch Industries, Inc., in 2004. The litigation involves three cases, with filing dates ranging from 2010 to 2014. The actions primarily arise from sulfolane contamination allegedly emanating from the refinery. A putative class action lawsuit was filed by James West in 2010 naming us, WAPI, and FHRA as defendants. We and FHRA filed claims against each other seeking, among other things, contractual indemnification alleging that the other party caused the sulfolane contamination. In 2011, we and FHRA settled the claim with James West. 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 ff ff ff 127 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Court. The State of Alaska filed its action in March 2014, seeking damages. The City of North Pole (North Pole) filed its lawsuit in November 2014, seeking past and future damages, as well as punitive damages. Both we and ff WAPI asserted counterclaims against the State of Alaska and North Pole, and cross-claims against FHRA. FHRA has also filed cross-claims against us. rr ff y 2017, the three cases wer The underlying factual basis and claims in the cases are similar and may duplicate exposure. As such, in e consolidated into one action in state court containing the remaining claims fromff rr Februar r the James West case and those of the State of Alaska and North Pole. The State of Alaska later announced the discovery of additional contaminants per- and polyfluoralkyl (PFOS and PFOA) offsite of the refinery, and the court permitted the State of Alaska to amend its complaint to add a claim for offsite PFOS/PFOA contamination. The court subsequently remanded the offff sff ite PFOS/PFOA claims to the Alaska Department of Environmental Conservation for inves tigation and stayed the claims pending their potential resolution at the administrative agency. Several trial dates encompassing all three cases have been scheduled and stricken. In the summer of 2019, the court deconsolidated the cases for purposes of trial. A bench trial on all claims except North Pole’s claims began in October 2019. ff rr In January 2020, the A laska 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 ere stayed until contamination. On March 23, 2020, the court entered final judgment in the case. Filing deadlines w May 1, 2020. However, on April 21, 2020, we filed a Notice of Appeal. We also filed post-judgment motions ff including a Motion for Nff ew 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. Our Statement of Points on Appeal was filed on July 13, 2020. On June 22, 2020, the court stayed the North Pole’s case pending resolution of the appeal in the State of Alaska and FHRA case. On December 23, 2020, we filed our opening brief on appeal. 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. ff Royalty Matters r Certain of our customers, including Chesapeake Energy Corporation (Chesapeake), have been named in various lawsuits alleging underpayment of r oyalties and claiming, among other things, violations of anti-trust laws and the Racketeer Influenced and Corrupt Organizations Act. 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 ow ed 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. r Litigation Against Energy Transfs er and Related Parties ff On April 6, 2016, we filed suit in Delaware Chancery Court against Energy Transfer Equity, L.P. (Energy Transfer) and LE GP, LLC (the general partner for Energy Transfer) alleging willful and material breaches of the Agreement and Plan of Merger (ETE Merger Agreement) with Energy Transfer resulting from the private offering by Energy Transfer on March 8, 2016, of Series A Convertible Preferred Units (Special Offering) to certain Energy Transfer insiders and other accredited investors. The suit seeks, among other things, an injunction ordering the defendants to unwind the Special Offering and to specifically perform their obligations under the ETE Merger Agreement. On April 19, 2016, we filed an amended complaint seeking the same relief. On May 3, 2016, Energy Transfer and LE GP, LLC filed an answer and counterclaims ff ff ff . 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 128 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) ff breaches of the ETE Merger Agreement for f ff ailing 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 forff med 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 ff Merger Agreement due to any failure to obtain the Tax Opinion. r The Court of Chancery coordinated the Special Offering and Tax Opinion suits. On May 20, 2016, the Energy Transfer defendants filed amended affirmative defenses and verified counterclaims in the Special Of ff fering and Tax ff Opinion suits, alleging certain breaches of the ETE Merger Agreement by us and seeking, among other things, a declaration that we were not entitled to specific performance, that Energy Transfer could terminate the ETC Merger, and that Energy Transfer is entitled to a $1.48 billion termination fee. On June 24, 2016, following a two-day trial, the court issued a Memorandum Opinion and Order denying our requested relief in the Tax Opinion suit. The court did not rule on the substance of our claims related to the Special Offering or on the substance of Energy Transfer’s counterclaims. On June 27, 2016, we filed an appeal of the court’s decision with the Supreme Court of Delaware, seeking reversal and remand to pursue damages. On March 23, 2017, the Supreme Court of Delaware affirmed the Court of Chancery’s ruling. On March 30, 2017, we filed a motion for reargument with the Supreme Court of Delaware, which was denied on April 5, 2017. ff On September 16, 2016, we filed an amended complaint with the Court of Chancery seeking damages for breaches of the ETE Merger Agreement by defendants. On September 23, 2016, Ener gy Transfer filed a second amended and supplemental affirmative defenses and verified counterclaim with the Court of Chancery seeking, among other things, payment of the $1.48 billion termination fee due to our alleged breaches of the ETE Merger the court granted our motion to dismiss certain of Energy Transfer’s Agreement. On December 1, 2017, counterclaims, including its claim seeking payment of the $1.48 billion termination fee. On December 8, 2017, Energy Transfer filed a motion for reargument, which the Court of Chancery denied on April 16, 2018. Trial was held May 10 through May 17, 2021. On December 29, 2021, the court entered judgment in our favor in the amount the contractual rate, and our reasonable attorneys’ fees and expenses. On of $410 million, plus interest at 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. ff Environmental Matters MM ff We are a participant in certain environmental activities in various stages including assessment studies, cleanup operations, and/or remedial processes at certain sites, some of which we currently do not own. We are monitoring otection these sites in a coordinated effort with other potentially responsible parties, the U.S. Environmental Pr Agency (EPA), or other governmental authorities. We are jointly and severally liable along with unrelated third parties in some of these activities and solely responsible in others. Certain of our subsidiaries have been identified as potentially responsible parties at various Superfund and state waste disposal sites. In addition, these subsidiaries have incurred, or are alleged to have incurred, various other hazardous materials removal or remediation obligations under environmental laws. As of December 31, 2022, we have accrued liabilities totaling $40 million for these matters, as discussed below. Estimates of the most likely costs of cleanup are generally based on completed assessment studies, preliminary results of studies, or our experience with other similar cleanup operations. At December 31, 2022, certain assessment studies were still in process for which the ultimate outcome may yield diffff erff ent estimates of most likely costs. Therefore, the actual costs incurred will depend on the final amount, type, and extent of contamination discovered at these sites, the final cleanup standards mandated by the EPA or other governmental authorities, and other factors. ff The EPA and various state regulatory agencies routinely propose and promulgate new rules and is sue 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 ting source performance standards for volatile National Ambient Air Quality Standards, and rules for new and exis rr rr r 129 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) organic compound and methane. We continuously monitor these regulatory changes and how they may impact our operations. Implementation of new or modified regulations may result in impacts to our operations and increase the cost of additions to Property, plant, and equipment – net in our Consolidated Balance Sheet for both new and existing facilities in aff ever, due to regulatory uncertainty on final rule content and applicability ff timefrff ames, we are unable to reasonably estimate the cost of these regulatory impacts at this time. ected areas; how ff Continuing operations ff Our interstate gas pipelines are involved in remediation and monitoring activities related to certain facilities and locations for polychlor inated biphenyls, mercury, and other hazardous substances. These activities have involved the EPA and various state environmental authorities, resulting in our identification as a potentially responsible party at various Superfund waste sites. At December 31, 2022, we have accrued liabilities of $13 million for these costs and expect to recover approximately $4 million through rates. ff We also accrue environmental remediation costs for natural gas underground storage facilities, primarily related to soil and groundwater contamination. At December 31, 2022, we have accrued liabilities totaling $10 million for these costs. Former operations We have potential obligations in connection with assets and businesses we no longer operate. These potential obligations include remediation activities at the direction of federal and state environmental authorities and the indemnification of the purchasers of certain of these assets and businesses for environmental and other liabilities existing at the time the sale was consummated. Our responsibilities relate to the operations of the assets and businesses described below. ff • • • • • Former agricultural fertilizer and chemical operations and former retail petroleum and refining operations; Former petroleum products and natural gas pipelines; Former petroleum refining facilities; Former exploration and production and mining operations; Former electricity and natural gas marketing and trading operations. At December 31, 2022, we have accrued environmental liabilities of $17 million related to these matters. r Other Divestiture InII demnifications Pursuant to various purchase and sale agreements relating to divested businesses and assets, we have indemnified certain purchasers against liabilities that they may incur with respect to the businesses and assets acquired from us. The indemnities provided to the purchasers are customary in sale transactions and are contingent upon the purchasers incurring liabilities that are not otherwise recoverable from third parties. The indemnities generally relate to breach of warranties, tax, historic litigation, personal injury, property damage, environmental matters, right of way, and other representations that we have provided. At December 31, 2022, other than as previously disclosed, we are not aware of any material claims against us involving the above-described indemnities; thus, we do not expect any of the indemnities provided pursuant to the sales agreements to have a material impact on our future financial position. Any claim for indemnity brought against iod in which the claim is us in the future may have a mater made. ial adverse effect on our results of operations in the per ff ff 130 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) In addition to the foregoing, various other proceedings are pending against us that are incidental to our operations, none of which are expected to be material to our expected future annual results of operations, liquidity, and financial position. ff Summary We have disclosed our estimated range of reasonably possible losses for certain matters above, as well as all significant matters for which we are unable to reas onably estimate a range of possible loss. We estimate that for all ff other matters for which we are able to reasonably estimate a range of loss, our aggregate reasonably possible losses beyond amounts accrued are immaterial to our expected future annual results of operations, liquidity, and financial position. These calculations have been made without consideration of any potential recovery from third parties. Commitments Commitments for construction and acquisition of property, plant, and equipment are approximately $439 million at December 31, 2022. Commitments for Gas & NGL Marketing Services pipeline transportation capacity and storage capacity are approximately $546 million at December 31, 2022. Note 18 – Segment Disclosures Our reportable segments are Transmission & Gulf of Mexico, Northeast G&P, West, and Gas & NGL Marketing Services. All remaining business activities are included in Other. (See Note 1 – General, Description of Business, Basis of Presentation, and Summary of Significant Accounting Policies.) Performance Measurement We evaluate segment operating performance based upon Modified EBITDA. This measure represents the basis of our internal financial reporting and is the primary performance measure used by our chief operating decision maker in measuring performance and allocating resources among our reportable segments. Intersegment Service revenues primarily represent transportation services provided to our marketing business and gathering services provided to our oil and gas properties. Intersegment Product sales primarily represent the sale of natural gas and NGLs from our natural gas processing plants and our oil and gas properties to our marketing business. We define Modified EBITDA MM as follows: • Net income (loss) before: ◦ ◦ ◦ ◦ ◦ ◦ ◦ ◦ Provision (benefit) for income taxes; ff Interest incurred, net of interest capitalized; Equity earnings (losses); Impairment of equity-method investments; Other investing income (loss) – net; Impairment of goodwill; Depreciation and amortization expenses; Accretion expense associated with asset retirement obligations for nonregulated operations. • This measure is further adjusted to include our proportionate share (based on ownership interest) of Modified EBITDA frff om our equity-method investments calculated consistently with the definition described above. 131 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) ff The follow ing table reflects the reconciliation of Modified EBITDA to Net income (loss) as reported in our Consolidated Statement of Income: Year Ended December 31, 2022 2021 (Millions) 2020 Modified EBITDA by segment: Transmission & Gulf of Mexico ................................................................................... $ 2,674 $ 2,621 $ Northeast G&P.............................................................................................................. West .............................................................................................................................. Gas & NGL Marketing Services (1) ............................................................................. Other ............................................................................................................................. 1,796 1,211 (40) 434 1,712 961 22 178 2,379 1,489 947 51 (15) 6,075 5,494 4,851 Accretion expense associated with asset retirement obligations for nonregulated operations....................................................................................................................... (51) (45) (35) Depreciation and amortization expenses........................................................................... (2,009) (1,842) (1,721) Impairment of goodwill...................................................................................................... Equity earnings (losses)..................................................................................................... Impairment of equity-method investments ......................................................................... Other investing income (loss) – net ................................................................................... — 637 — 16 Proportional Modified EBITDA of equity-method investments ....................................... (979) Interest expense.................................................................................................................. (1,147) (Provision) benefit for income taxes .................................................................................. (425) — 608 — 7 (970) (1,179) (511) Net income (loss)........................................................................................................... $ 2,117 $ 1,562 $ (187) 328 (1,046) 8 (749) (1,172) (79) 198 ff for 2022, 2021, and 2020, includes charges of $161 million ____________ MM , $15 million, and $17 million (1) Modified EBITDA 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. 132 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) The following table reflects the r ff econciliation of Segment revenues to Total r TT evenues as reported in the Consolidated Statement of Income and Other financial information: Transmission & Gulf of Mexico Northeast G&P West Gas & NGL Marketing Services (1) (Millions) Other Eliminations Total 2022 Segment revenues: Service revenues External ........................................................ $ Internal ......................................................... Total service revenues .............................. 3,461 118 3,579 $ 1,613 41 1,654 $ 1,443 99 1,542 $ Total service revenues – commodity consideration ................................................ Product sales External ........................................................ Internal ......................................................... Total product sales.................................... Net gain (loss) on commodity derivatives Realized........................................................ Unrealized .................................................... Total net gain (loss) on commodity derivatives (2) ....................................... Total revenues.................................... $ Other financial information: Additions to long-lived assets .......................... $ Proportional Modified EBITDA of equity- method investments...................................... 2021 Segment revenues: Service revenues Total service revenues – commodity consideration ................................................ Product sales External ........................................................ Internal ......................................................... Total product sales.................................... Net gain (loss) on commodity derivatives Realized........................................................ Unrealized .................................................... Total net gain (loss) on commodity derivatives (2) ....................................... Total revenues.................................... $ Other financial information: Additions to long-lived assets .......................... $ Proportional Modified EBITDA of equity- method investments...................................... $ 3 — 3 — 4,052 (518) 3,534 17 (321) 16 8 24 — 103 603 706 (104) 25 $ — $ 6,536 — 6,536 (266) (266) — 260 — (1,063) (1,063) — — 4,556 — 4,556 (91) (296) 64 228 176 404 — — 14 28 106 134 — — 182 145 696 841 (4) — — 4,047 — $ 1,802 (4) $ 2,561 $ (304) 3,233 $ (79) 651 $ — (387) (1,329) $ 10,965 1,420 $ 261 $ 1,507 $ 4 $ 406 $ — $ 3,598 193 654 132 — — — 979 $ 3 — 3 — 4,094 198 4,292 25 (109) 20 12 32 — 138 195 333 (20) — $ — $ 6,001 — 6,001 (195) (195) — 238 — (1,180) (1,180) — — 4,536 — 4,536 (39) (109) 52 231 118 349 — — 7 13 86 99 — — 179 60 583 643 (44) — — 3,786 — $ 1,634 (44) $ 2,026 $ (84) 4,211 $ (20) 345 $ — (148) (1,375) $ 10,627 861 $ 164 $ 209 $ 1 $ 620 $ — $ 1,855 183 682 105 — — — 970 133 External ........................................................ $ Internal ......................................................... Total service revenues .............................. 3,310 75 3,385 $ 1,490 38 1,528 $ 1,178 70 1,248 $ The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Transmission & Gulf of Mexico Northeast G&P West Gas & NGL Marketing Services (1) (Millions) Other Eliminations Total 2020 Segment revenues: Service revenues External ........................................................ $ Internal ......................................................... Total service revenues .............................. 3,207 50 3,257 $ 1,416 49 1,465 $ 1,248 24 1,272 $ Total service revenues – commodity consideration ................................................ Product sales External ........................................................ Internal ......................................................... Total product sales.................................... Net gain (loss) on commodity derivatives Realized........................................................ Unrealized .................................................... 21 144 47 191 — — 7 16 41 57 — — 101 20 132 152 (2) — $ 32 — 32 — 1,491 111 1,602 (3) — Total net gain (loss) on commodity derivatives (2) ....................................... Total revenues.................................... $ — 3,469 — $ 1,529 (2) $ 1,523 $ (3) 1,631 $ 21 13 34 — — — — — — — 34 $ — $ 5,924 — 5,924 (136) (136) — 129 — (331) (331) — — 1,671 — 1,671 (5) — — (5) (467) $ 7,719 $ Other financial information: Additions to long-lived assets .......................... $ Proportional Modified EBITDA of equity- method investments...................................... 706 $ 137 $ 318 $ — $ 122 $ — $ 1,283 166 473 110 — — — 749 ______________ (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 ff 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. Segment assets include Inves tments, Property, plant, and equipment – net, and Intangible assets – net of accumulated amortization. The following table reflects segment assets and equity-method investments by reportable segments: II Segment Assets December 31, 2022 December 31, 2021 Equity-Method Investments December 31, December 31, 2021 2022 Transmission & Gulf of Mexico................................ Northeast G&P........................................................... West ........................................................................... Gas & NGL Marketing Services................................ Other ......................................................................... Total ...................................................................... Total current assets .................................................... Regulatory assets, deferred charges, and other ..... Total assets............................................................. $ $ 17,795 13,539 10,710 130 1,143 43,317 3,797 1,319 48,433 $ $ (Millions) $ $ 17,142 13,861 9,698 294 792 41,787 4,549 1,276 47,612 629 3,566 843 — 10 5,048 $ $ 602 3,681 838 — — 5,121 134 The Williams Companies, Inc. Notes to Consolidated Financial Statements – (Continued) Note 19 – Subsequent Events Quarterly Dividends to Common Stockholders On January 31, 2023, our boar rr d of directors approved a regular quarterly dividend to common stockholders of $0.4475 per share payable on March 27, 2023. MouMM ntainWest Acquisition r rr On Februar y 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 infrff astructure 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. ff ff 135 The Williams Companies, Inc. Schedule II — Valuation and Qualifying Accounts Additions Charged (Credited) To Costs and Expenses Beginning Balance Other Deductions Ending Balance (Millions) 2022 Deferred tax ass ff et valuation allowance (1) ................. $ 297 $ (97) $ — $ — $ 200 2021 Deferred tax ass ff et valuation allowance (1) ................. 325 (28) 2020 Deferred tax ass ff et valuation allowance (1) ................. 319 6 — — — — 297 325 __________ (1) Deducted frff om related assets. 136 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures Disclosure Controls and Procedures Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures (as defined in Rules 13a - 15(e) and 15d - 15(e) of the Exchange Act) (Disclosure Controls) or our internal control over financial reporting (Internal Controls) will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and ther e can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effff ective control system, misstatements due to error or fraud may occur and not be detected. We monitor our Disclosure Controls and Internal Controls and make modifications as necessary; our intent in this regard is that the Disclosure Controls and Internal Controls will be modified as systems change and conditions warrant. ff ff Evaluation of Disclosure Controls and Procedures An evaluation of the effectiveness of the design and operation of our Disclosure Controls was performed as of the end of the period covered by this report. This evaluation was performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Off ff icer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that these Disclosure Controls are effff ective at a reasonable ass urance level. ff ff Changes in Internal Control Over Financial Reporting There have been no changes during the fourth quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our Internal Control over Financial Reporting. Management’s Annual Report on Internal Control over Financial Reporting ff ff hing and maintaining adequate internal control over financial reporting Management is responsible for establis (as defined in Rules 13a - 15(f) and 15d - 15( f) under the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance to our management and board of directors regarding the dance with accounting principles generally accepted preparation and fair presentation of financial statements in accor in the United States. Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorization of our management and board of directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements. ff ff All internal control systems, no matter how well designed, have inherent limitations including the possibility of human error and the circumvention or overriding of controls. Therefore, even those systems determined to be ff effective can provide only reasonable assurance with respect to financial s tatement preparation and presentation. 137 Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer , we assessed the effectiveness of our internal control over financial reporting at December 31, 2022, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — I ameworkrr (2013). Based on our assessment, we concluded II that, at December 31, 2022, our internal control over financial reporting was effective. ntegrated Fr II ff ff Ernst & Young LLP, our independent registered public accounting firm, has audited our internal control over ff financial reporting, as stated in their report which is included in this Annual Report on For m 10-K. 138 Report of Independent Registered Public Accounting Firm The Stockholders and the Board of Directors of The Williams Companies, Inc. Opinion on Internal Control Over Financial Reporting We have audited The Williams Companies, Inc.’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, The Williams Companies, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of 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) and our report dated February 27, 2023 expressed an unqualified opinion thereon. ff ff Basis for Op inion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its asses sment of the effectiveness of internal control over financial reporting included in the accompanying ff Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firff m registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. feder al securities laws and the applicable rules and regulations of the Securities and Exchange Commission ff and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial repor ting was maintained in all material respects. ff Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and perforff ming such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fair ly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effff ect on the financial statements. ff ff ff Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effff ectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ff /s/ Ernst & Young LLP Tulsa, Oklahoma rr y 27, 2023 r Februar 139 Item 9B. Other InII forn mation rr None. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Not applicable. PART III GG Item 10. Directors, Executive Officers and Corporate G rr overnance The inforff mation regarding our directors and nominees for director required by Item 401 of Regulation S-K will be presented under the heading “Corporate Governance and Board Matters” in our definitive proxy statement prepared for the solicitation of proxies in connection with our Annual Meeting of Stockholders to be held April 25, 2023, which shall be filed no later than March 16, 2023 (Proxy Statement), which information is incorporated by reference herein. ff Information regarding our executive officers required by Item 401 of Regulation S- ff Part I herein and captioned “Inforff mation About Our Executive Officers,” as permitted by General Ins r and the Instruction to I tem 401 of Regulation S-K. ff K is presented at the end of truction G(3) ff Information r equired by paragraphs (c)(3), (d)(4) and (d)(5) of Item 407 of Regulation S-K will be included under the heading “Questions and Answers About the Annual Meeting and Voting” and “Corporate Governance and Board Matters” in our Proxy Statement, which information is incorporated by reference herein. rr Our Corporate Gover nance Guidelines, the charters for each of our board committees, and our Code of Business Conduct applicable to all employees, including our Chief Executive Officer, Chief Financial Officer, and Chief Internet website at Accounting Officer, or persons performing similar www.williams.com. We will provide, free of charge, a copy of our Code of Business Conduct or any of our other corporate documents listed above upon written request to our Corporate Secretary at Williams, One Williams Center, Suite 4700, Tulsa, Oklahoma 74172. We intend to disclose any amendments to or waivers, in each case, of the Code of Business Conduct on behalf of our Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, and persons per net website at www.williams.com, promptly follow forff ming similar functions on the corporate governance section of our Inter ing the date of any such amendment or waiver. functions, are available on our ff ff ff ff ff Item 11. Executive Compensation The information required by Item 402 and paragraphs (e)(4) and (e)(5) of Item 407 of Regulation S-K regarding executive compensation will be presented under the headings “Compensation Discussion and Analysis,” “Executive Compensation Tables and Other Information,” “Director Compensation,” “Compensation and Management Development Committee Report on Executive Compensation,” and “Compensation and Management Development Committee Interlocks and Insider Participation” in our Proxy Statement, which information is incorporated by reference herein. Notwithstanding the foregoing, the information provided under the heading “Compensation and Management Development Committee Report on Executive Compensation” in our Proxy Statement is furnished and shall not be deemed to be filed for purposes of Section 18 of the Exchange Act, is not subject to the liabilities of that section and is not deemed incorporated by reference in any filing under the Securities Act. ff Item 12. Security Ownership of Certain Beneficial Owners and ManMM agement and Related Stockholder Matters MM The information regarding securities authorized for issuance under equity compensation plans required by Item 201(d) of Regulation S-K and the security ownership of certain beneficial owners and management required by Item 403 of Regulation S-K will be presented under the headings “Equity Compensation Stock Plans” and “Security ff 140 Ownership of Certain Beneficial Owners and Management” in our Proxy Statement, which information is rr incorpor ated by reference herein. Item 13. Certain Relationships and Related Transactions, and Director Independence The inforff mation regarding certain relationships and related transactions required by Item 404 and Item 407(a) of Regulation S-K will be presented under the heading “Corporate Governance and Board Matters” in our Proxy Statement, which information is incorporated by reference herein. Item 14. Principal Accountant Fees and Services SS The information regarding our principal accounting fees and services required by Item 9(e) of Schedule 14A will be presented under the heading “Principal Accountant Fees and Services” in our Proxy Statement, which inforff mation is incorporated by reference herein. 141 PART IV Item 15. Exhibits and Financial Statement Schedules (a) 1 and 2. Covered by report of independent auditors (PCAOB ID: 42): Consolidated statement of income for each year in the three-year period ended December 31, 2022........ Consolidated statement of comprehensive income (loss) for each year in the three-year period ended December 31, 2022 .................................................................................................................................. Consolidated balance sheet at December 31, 2022 and 2021...................................................................... Consolidated statement of changes in equity for each year in the three-year period ended December 31, 2022.......................................................................................................................................................... Consolidated statement of cash flows for each year in the three-year period ended December 31, 2022 .. Notes to consolidated financial statements...................................................................................................... Schedule for each year in the three-year period ended December 31, 2022: II — Valuation and qualifying accounts .................................................................................................. Page 75 76 77 78 79 80 136 All other schedules have been omitted since the required information is not present or is not present in amounts suffff icient to require submission of the schedule, or because the information required is included in the financial statements and notes thereto. ff (a) 3 and (b). The exhibits listed below are filed as part of this annual report. Exhibit No. 2.1 2.2 3.1 3.2 INDEX TO EXHIBITS Description — Agreement and Plan of Merger dated as of May 16, 2018, by and among The Williams Companies, Inc., SCMS LLC, Williams Partners L.P., and WPZ GP LLC (filed on May 17, 2018 as Exhibit 2.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Amendment No 1. to Agreement and Plan of Merger dated as of May 1, 2016, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC and Energy Transfer Equity GP, LLC (filed on May 3, 2016, as Exhibit 2.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). Agreement and Plan of Merger dated as of September 28, 2015, by and among The Williams Companies, Inc., Energy Transfer Corp LP, Energy Transfer Corp GP, LLC, Energy Transfer Equity, L.P., LE GP, LLC and Energy Transfer Equity GP, LLC (filed on October 1, 2015, as Exhibit 2.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Amended and Restated Certificate of Incorporation, (filed on May 26, 2010, as Exhibit 3.(i)1 to The Williams Companies Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Certificate of Designations of Series B Preferred Stock of the Williams Companies, Inc. (filed on July17, 2018, as Exhibit 3.1 to The Williams Companies, Inc. current report on Form 8-K (File No. 001-04174) and Incorporated herein by reference). 142 Exhibit No. Description 3.3 3.4 4.1 4.3 4.4 4.5 4.6 4.7 4.8 4.9 — Certificate of Amendment dated August 10, 2018 (filed on August 10, 2018, as Exhibit 3.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — By-laws of The Williams Companies, Inc., as last amended effective October 25, 2022 (filed on October 31, 2022, as Exhibit 3.4 to The Williams Companies Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). — Senior Indenture, dated February 25, 1997, between MAPCO Inc. and Bank One Trust Company, N.A. (formerly The First National Bank of Chicago), as Trustee (filed on February 25, 1997, as Exhibit 4.5.1 to MAPCO Inc.’s Amendment No. l to registration statement on Form S-3 (File No. 333-20837) and incorporated herein by reference). Supplemental Indenture No. 2, dated March 5, 1997, between MAPCO Inc. and Bank One Trust Company, N.A. (formerly The First National Bank of Chicago), as Trustee (filed on March 4, 1998, as Exhibit 4(p) to MAPCO Inc.’s annual report on Form 10-K for the fiscal year ended December 31, 1997 (File No. 001-05254) and incorporated herein by reference). — Supplemental Indenture No. 3, dated March 31, 1998, among MAPCO Inc., Williams Holdings of Delaware, Inc. and Bank One Trust Company, N.A. (formerly The First National Bank of Chicago), as Trustee (filed on March 30, 1999, as Exhibit 4(J) to Williams Holdings of Delaware, Inc.’s annual report on Form 10-K for the fiscal year ended December 31, 1998 (File No. 000-20555) and incorporated herein by reference). — Fourth Supplemental Indenture, dated as of July 31, 1999, among Williams Holdings of Delaware, Inc., The Williams Companies, Inc. and Bank One Trust Company, N.A. (formerly The First National Bank of Chicago), as Trustee (filed on March 28, 2000, as Exhibit 4(q) to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). — Fifth Supplemental Indenture, dated as of February 1, 2010, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A. (filed on February 2, 2010, as Exhibit 4.3 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Fifth Supplemental Indenture between The Williams Companies, Inc. and Bank One Trust Company, N.A., as Trustee, dated as of January 17, 2001 (filed on March 12, 2001, as Exhibit 4(k) to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). — Seventh Supplemental Indenture, dated March 19, 2002, between The Williams Companies, Inc. as Issuer and Bank One Trust Company, National Association, as Trustee (filed on May 9, 2002, as Exhibit 4.1 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). — Eleventh Supplemental Indenture, dated as of February 1, 2010, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A. (filed on February 2, 2010, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Indenture, dated December 18, 2012, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A. as trustee (filed on December 20, 2012, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). 143 Exhibit No. 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 Description — Second Supplemental Indenture, dated as of June 24, 2014, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on June 24, 2014, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Third Supplemental Indenture, dated as of May 14, 2020, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on May 14, 2020, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Fourth Supplemental Indenture, dated as of March 2, 2021, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on March 2, 2021, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Fifth Supplemental Indenture, dated as of October 8, 2021, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on October 8, 2021, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Sixth Supplemental Indenture, dated as of August 8, 2022, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on August 8, 2022, as Exhibit 4.1) to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Indenture, dated as of February 9, 2010, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A. (filed on February 10, 2010, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — First Supplemental Indenture, dated as of February 2, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.5 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference). — Second Supplemental Indenture, dated as of August 10, 2018, between The Williams Companies, Inc. and The Bank of New York Mellon Trust Company, N.A. (filed on August 10, 2018, as Exhibit 4.2 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Indenture, dated as of November 9, 2010, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on November 12, 2010, as Exhibit 4.1 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-32599) and incorporated herein by reference). — Fourth Supplemental Indenture, dated as of November 15, 2013, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on November 18, 2013, as Exhibit 4.1 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-32599) and incorporated herein by reference). — Fifth Supplemental Indenture, dated as of March 4, 2014, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on March 4, 2014, as Exhibit 4.1 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-32599) and incorporated herein by reference). 144 Exhibit No. 4.21 Description — Sixth Supplemental Indenture, dated as of June 27, 2014, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on June 27, 2014, as Exhibit 4.1 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-32599) and incorporated herein by reference). 4.22 — Seventh Supplemental Indenture, dated as of February 2, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A. (filed on February 3, 2015, as Exhibit 4.4 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference). Eighth Supplemental Indenture, dated as of March 3, 2015, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on March 3, 2015, as Exhibit 4.1 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference). 4.24 4.25 4.26 4.27 4.28 — Ninth Supplemental Indenture, dated as of June 5, 2017, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on June 5, 2017, as Exhibit 4.1 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference). — Tenth Supplemental Indenture, dated as of March 5, 2018, between Williams Partners L.P. and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on March 5, 2018, as Exhibit 4.1 to Williams Partners L.P.’s current report on Form 8-K (File No. 001-34831) and incorporated herein by reference). — Eleventh Supplemental Indenture, dated as of August 10, 2018, between The Williams Companies Inc. and The Bank of New York Mellon Trust Company, N.A. (filed on August 10, 2018, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). — Senior Indenture, dated as of November 30, 1995, between Northwest Pipeline Corporation and Chemical Bank, Trustee (filed September 14, 1995, as Exhibit 4.1 to Northwest Pipeline’s registration statement on Form S-3 (File No. 033-62639) and incorporated herein by reference). — Indenture, dated as of April 3, 2017, between Northwest Pipeline LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on April 3, 2017, as Exhibit 4.1 to Northwest Pipeline’s current report on Form 8-K (File No. 001-07414) and incorporated herein by reference). Senior Indenture, dated as of July 15, 1996, between Transcontinental Gas Pipe Line Corporation and Citibank, N.A., as Trustee (filed on April 2, 1996, as Exhibit 4.1 to Transcontinental Gas Pipe Line Corporation’s registration statement on Form S-3 (File No. 333-02155) and incorporated herein by reference). Indenture, dated as of August 12, 2011, between Transcontinental Gas Pipe Line Company, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on August 12, 2011, as Exhibit 4.1 to Transcontinental Gas Pipe Line Company, LLC’s current report on Form 8-K (File No. 001-07584) and incorporated herein by reference). 4.31 — Indenture, dated as of July 13, 2012, between Transcontinental Gas Pipe Line Company, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on July 16, 2012 as Exhibit 4.1 to Transcontinental Gas Pipe Line Company, LLC’s current report on Form 8-K (File No. 001-07584) and incorporated herein by reference). Indenture, dated as of January 22, 2016, between Transcontinental Gas Pipe Line Company, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on January 22, 2016, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). 145 Exhibit No. 4.33 Description — Indenture, dated as of March 15, 2018, between Transcontinental Gas Pipe Line Company, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on March 15, 2018, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). 4.34 — Indenture, dated as of May 8, 2020, between Transcontinental Gas Pipe Line Company, LLC and The Bank of New York Mellon Trust Company, N.A., as trustee (filed on May 8, 2020, as Exhibit 4.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). 4.35* — Description of Securities. 10.1§ — Form of Director and Officer Indemnification Agreement (filed on September 24, 2008, as Exhibit 10.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). 10.2§ — Form of 2013 Nonqualified Stock Option Agreement among Williams and certain employees and officers (filed on February 27, 2013, as Exhibit 10.6 to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.3§ — Form of 2013 Restricted Stock Unit Agreement among Williams and certain nonmanagement directors (filed on February 26, 2014, as Exhibit 10.11 to The Williams Companies, Inc. annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.4§ — Form of 2014 Nonqualified Stock Option Agreement among Williams and certain employees and officers (filed on February 26, 2014, as Exhibit 10.8 to The Williams Companies, Inc. annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.5§ — Form of 2014 Restricted Stock Unit Agreement among Williams and certain nonmanagement directors (filed on February 25, 2015, as Exhibit 10.12 to The Williams Companies, Inc. annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.6§ — Form of 2015 Time-Based Restricted Stock Unit Agreement among Williams and certain employees and officers (filed on February 25, 2015, as Exhibit 10.16 to The Williams Companies, Inc. annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.7§ — Form of 2015 Nonqualified Stock Option Agreement among Williams and certain employees and officers (filed on February 25, 2015, as Exhibit 10.17 to The Williams Companies, Inc. annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.8§ — Form of 2016 Time-Based Restricted Stock Unit Agreement among Williams and certain non- management directors (filed on February 22, 2017, as Exhibit 10.21 to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.9§ — Form of 2016 Nonqualified Stock Option Agreement among Williams and certain employees and officers (filed on February 22, 2017, as Exhibit 10.22 to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.10§ — Form of 2017 Time-Based Restricted Stock Unit Agreement among Williams and certain non- management directors (filed on February 22, 2017, as Exhibit 10.24 to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.11§ — Form of 2017 Nonqualified Stock Option Agreement among Williams and certain employees and officers (filed on February 22, 2017, as Exhibit 10.25 to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 146 Exhibit No. Description 10.12§ — Form of 2018 Nonqualified Stock Option Agreement among Williams and certain employees and officers (filed on May 3, 2018, as Exhibit 10.5 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.13 — Form of 2018 Time-Based Restricted Stock Unit Agreement among Williams and certain non- management directors (filed on August 2, 2018, as Exhibit 10.2 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.14§ — Form of Amended 2019 Executive Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers (filed on November 1, 2021, as Exhibit 10.4 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.15§ — Amended Form of 2019 Performance-Based Restricted Stock Unit Agreement among Williams and certain employees and officers (filed on May 4, 2020, as Exhibit 10.1 to The Williams Companies Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.16§ — Form of Amended 2019 Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers (filed on November 1, 2021, as Exhibit 10.3 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.17§ — Form of 2019 Time-Based Restricted Stock Unit Agreement among Williams and certain employees and officers (filed on May 2, 2019, as Exhibit 10.3 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.18§ — Form of Amended 2019 Time-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers (filed on November 1, 2021, as Exhibit 10.2 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.19§ — Form of 2019 Time-Based Restricted Stock Unit Agreement among Williams and certain non- management directors (filed on May 2, 2019, as Exhibit 10.4 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.20§ — Form of 2020 Performance-Based Restricted Stock Unit Agreement among The Williams Companies, Inc. and certain employees and officers (filed on May 4, 2020, as Exhibit 10.2 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.21§ — Form of Amended 2020 Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers (filed on November 1, 2021, as Exhibit 10.6 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.22§ — Form of 2020 Time-Based Restricted Stock Unit Agreement among The Williams Companies, Inc. and certain employees and officers (filed on May 4, 2020, as Exhibit 10.3 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.23§ — Form of Amended 2020 Time-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers (filed on November 1, 2021, as Exhibit 10.5 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 147 Exhibit No. Description 10.24§ — Form of 2020 Time-Based Restricted Stock Unit Agreement among The Williams Companies, Inc. and certain non-management directors (filed on May 4, 2020, as Exhibit 10.4 to The Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and Williams Companies, incorporated herein by reference). 10.25§ — Form of Amended 2021 Time-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers (filed on November 1, 2021, as Exhibit 10.7 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.26§ — Form of 2021 Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers (filed on May 3, 2021, as Exhibit 10.1 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.27§ — Form of Amended 2021 Performance-Based Restricted Stock Unit Agreement between The Williams Companies, Inc. and certain employees and officers (filed on November 1, 2021, as Exhibit 10.8 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.28§ — Form of 2021 Time-Based Restricted Stock Unit Agreement among The Williams Companies, Inc. and certain employees and officers (filed on February 24, 2021, as Exhibit 10.28 to The Williams Companies, Inc.’s Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.29§ — Form of Time-Based Restricted Stock Unit Agreement among The Williams Companies, Inc. and certain employees and officers (filed on February 28, 2022, as Exhibit 10.31 to The Williams Companies, Inc.’s Form 10-K (File No.001-04174) and incorporated herein by reference). 10.30§ — Form of Time-Based Restricted Stock Unit Agreement among The Williams Companies, Inc. and certain non-management directors (filed on February 24, 2021, as Exhibit 10.29 to The Williams Companies, Inc.’s Form 10-K (File No. 001-04174) and incorporated herein by reference). Form of Performance-Based Restricted Stock Unit Agreement among The Williams Companies, Inc. and certain employees and officers (filed on February 28, 2022, as Exhibit 10.33 to The Williams Companies, Inc.’s Form 10-K (File No.001-04174) and incorporated herein by reference. 10.32§ — Change in Control and Restrictive Covenant Agreement between certain executive officers (Tier One Executives) and The Williams Companies, Inc. (filed on February 24, 2020, as Exhibit 10.29 to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.33§ — Change in Control and Restrictive Covenant Agreement between certain executive officers (Tier Two Executives) and The Williams Companies, Inc. (filed on February 24, 2020, as Exhibit 10.30 to The Williams Companies, Inc.’s annual report on Form 10-K (File No. 001-04174) and incorporated herein by reference). 10.34§ — The Williams Companies, Inc. Executive Severance Pay Plan, as amended and restated, effective August 1, 2022 (filed October 31, 2022, as Exhibit 10.1 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 10.35§ — The Williams Companies, Inc. 2007 Incentive Plan as amended and restated effective October 26, 2021 (filed on November 1, 2021, as Exhibit 10.9 to The Williams Companies, Inc.’s quarterly report on Form 10-Q (File No. 001-04174) and incorporated herein by reference). 148 Exhibit No. Description 10.36 — Amended and Restated Credit Agreement dated as of October 8, 2021, between The Williams Companies, Inc., Northwest Pipeline LLC, and Transcontinental Gas Pipe Line Company, LLC, the lenders named therein, and Wells Fargo Bank, National Association, as as borrowers, Administrative Agent (filed on October 8, 2021, as Exhibit 10.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). 10.37 — Form of Commercial Paper Dealer Agreement, dated as of August 10, 2018, between The Williams Companies, Inc., as Issuer, and the Dealer party thereto (filed on August 10, 2018, as Exhibit 10.1 to The Williams Companies, Inc.’s current report on Form 8-K (File No. 001-04174) and incorporated herein by reference). 21* — Subsidiaries of the registrant. 23.1* — Consent of Independent Registered Public Accounting Firm, Ernst & Young LLP. 23.2* — Consent of Independent Registered Public Accounting Firm, PricewaterhouseCoopers LLP. 31.1* — Certification of to Rules 13a-l4(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(3l) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. the Chief Executive Officer pursuant 31.2* — Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and l5d-l4(a) promulgated under the Securities Exchange Act of 1934, as amended, and Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32** — Certification of the Chief Executive Officer and the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS* — XBRL Instance Document. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document. 101.SCH* — XBRL Taxonomy Extension Schema. 101.CAL* — XBRL Taxonomy Extension Calculation Linkbase. 101.DEF* — XBRL Taxonomy Extension Definition Linkbase. ff 101.LAB* — XBRL Taxonomy Extension Label Linkbase. 101.PRE* — XBRL Taxonomy Extension Presentation Linkbase. 104* — Cover Page Interactive Data File. The cover page interactive data file does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document (contained in Exhibit 101). ______________ * Filed herewith ** Furnished herewith § Management contract or compensatory plan or arrangement 149 Item 16. Form 10- rr K S- Not applicable. ummary 150 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE WILLIAMS COMPANAA IES, INC. (Registrant) By: /s/ MARY A. HAUSMAN Mary A. Hausman Vice President, Chief Accounting Officer and Controller Date: February 27, 2023 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the ff follow ing persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ ALAN S. ARMSTRONG President, Chief Executive Officer and Director February 27, 2023 Alan S. Armstrong (Principal Executive Officer) ff /s/ JOHN D. PORTER Senior Vice President and Chief Financial Officer February 27, 2023 John D. Porter (Principal Financial Officer) ff /s/ MARY A. HAUSMAN Vice President, Chief Accounting Officer and Controller ff February 27, 2023 Mary A. Hausman (Principal Accounting Officer) ff /s/ STEPHEN W. BERGSTROM Chairman of the Board February 27, 2023 Stephen W. Bergstrom /s/ MICHAEL A. CREEL Michael A. Creel /s/ STACEY H. DORÉ Stacey H. Doré /s/ CARRI LOCKHART Carri Lockhart /s/ RICHARD E. MUNUU CRIEF Richard E. Muncrief /s/ PETER A. RAGAUSS Peter A. Ragauss /s/ ROSE M. ROBESON Rose M. Robeson /s/ SCOTT D. SHEFFIELD Scott D. Sheffieldff Director Director Director Director Director Director Director 151 February 27, 2023 February 27, 2023 February 27, 2023 February 27, 2023 February 27, 2023 February 27, 2023 February 27, 2023 Signature /s/ MURRAY D. SMITH Murray D. Smith /s/ WILLIAM H. SPENCE William H. Spence /s/ JESSE J. TYSON Jesse J. Tyson Title Director Director Director Date February 27, 2023 February 27, 2023 February 27, 2023 152 CERTIFICATIONS Exhibit 31.1 I, Alan S. Armstrong, certify that: 1. I have reviewed this annual report on Form 10-K of The Williams Companies, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; ff 3. Based on my knowledge, the financial statements, and other financial infor mation included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as ff of, and for, the periods presented in this report; ff ff ff 4. The registrant’s other certifying of fff icer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over ff financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) f ff or the registrant and have: ff (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of eporting and the preparation of financial statements for external purposes in accordance with ff financial r generally accepted accounting principles; r (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an ff annual report) that has materially affected, or is reasonably likely to materially af fect, the registrant’s ff internal control over financial reporting; and ff 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons perforff ming the equivalent functions): (a) All significant deficiencies and mater ial weaknesses in the design or operation of internal control over ting which are reasonably likely to adversely affect the registrant’s ability to record, process, ff financial repor ff summarize and report financial inforff mation; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. ff Date: February 27, 2023 /s/ Alan S. Armstrong Alan S. Armstrong President and Chief Executive Officer (Principal Executive Officer) ff CERTIFICATIONS Exhibit 31.2 I, John D. Porter, certify that: 1. I have reviewed this annual report on Form 10-K of The Williams Companies, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; ff 3. Based on my knowledge, the financial statements, and other financial infor mation included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as ff of, and for, the periods presented in this report; ff ff ff 4. The registrant’s other certifying of fff icer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over ff financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) f ff or the registrant and have: ff (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of eporting and the preparation of financial statements for external purposes in accordance with ff financial r generally accepted accounting principles; r (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially af ff fect, the registrant’s ff internal control over financial reporting; and ff 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons perforff ming the equivalent functions): (a) All significant deficiencies and mater ial weaknesses in the design or operation of internal control over ting which are reasonably likely to adversely affect the registrant’s ability to record, process, ff financial repor ff summarize and report financial inforff mation; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. ff Date: February 27, 2023 /s/ John D. Porter John D. Porter Senior Vice President and Chief Financial Officer (Principal Financial Officer) ff ff Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of The Williams Companies, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2022, as filed with the S ecurities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies, in his capacity as an officer of the Company, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: ff (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The inforff mation contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Alan S. Armstrongg Alan S. Armstrong President and Chief Executive Officer February 27, 2023 ff /s/ John D. Porter John D. Porter Senior Vice President and Chief Financial Officer rr Februar rr y 27, 2023 A signed original of this written statement required by Section 906 has been provided to, and will be retained by, the Company and furnished to the Securities and Exchange Commission or its staff upon request. The forff egoing certification is being furff nished to the Securities and Exchange Commission as an exhibit to the Report and shall not be considered filed as part of the Report. ff Corporate Data ANNUAL MEETING AUDITORS Ernst & Young LLP 1700 One Williams Center Tulsa, OK 74172-0117 CERTIFICATIONS We submitted the certification of Alan S. Armstrong, President and Chief Executive Officer, to the New York Stock Exchange pursuant to NYSE Section 303A.12(a) on May 17, 2022. We also filed with the Securities and Exchange Commission on Feb. 27, 2023, as Exhibits 31.1 and 31.2 to our Annual Report on Form 10-K for the year ended Dec. 31, 2022, the certificates of our Chief Executive Officer and Chief Financial Officer as required by Section 302 of the Sarbanes-Oxley Act of 2002. EQUAL OPPORTUNITY The company is an Equal Employment Opportunity (EEO) employer and does not discriminate in any employer/employee relations based on race, color, religion, sex, sexual orientation, national origin, age, disability or veterans status. CORPORATE RESPONSIBILITY To learn about Williams corporate responsibility, go to www.williams.com. Stockholders are invited to our annual meeting, which will be webcast on Tuesday, April 25, 2023 at 2 p.m. CDT. The annual meeting will be conducted in a virtual-only format; information regarding attending the virtual annual meeting can be found in the proxy statement at www.edocumentview.com/wmb. INTERNET Company information is available at www.williams.com. INQUIRIES To contact Williams Investor Relations, please call 800-600-3782 or email Investorrelations@williams.com. For additional information, visit the Williams Investor Relations website at investor.williams.com. Please send written inquiries to Investor Relations at the below headquarters address. CORPORATE HEADQUARTERS One Williams Center Tulsa, OK 74172 Phone: 918-573-2000 or toll-free, 800-WILLIAMS TRANSFER AGENT AND REGISTRAR Routine stockholder correspondence: Computershare P.O. Box 43006 Providence, RI 02940-3006 Phone: 800-884-4225 Hearing impaired: 800-952-9245 Internet: www.computershare.com Courier Delivery: Computershare 150 Royall St., Suite 101 Canton, MA 02021 Contact our transfer agent for information on registered shareholder accounts, dividend payments or to receive information about our Direct Stock Purchase Plan. Stockholder Information WILLIAMS SECURITIES Williams common stock (WMB) is listed on the New York Stock Exchange. The market value on Feb. 24, 2023 was approximately $38 billion. On that date, there were 1,218,811,795 shares outstanding of Williams common stock. The company’s common stock traded at an average daily volume of 8.1 million shares in 2022. RECENT WMB DIVIDEND HISTORY (dividend/share) 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 2022 0.425 0.425 0.425 0.425 2021 0.41 0.41 0.41 0.41 WMB CUMULATIVE TOTAL SHAREHOLDER RETURN* $150 $140 $130 $120 $110 $100 $90 $80 $70 2017 2018 2019 2020 2021 2022 * Assuming reinvestment of dividends and an investment of $100 at the beginning of the period WMB AVERAGE DAILY TRADING VOLUME (millions of shares) 20 16 12 8 4 432143214321432143214321 2017 2018 2019 2020 2021 2022 WMB CLOSING STOCK PRICE RANGES BY QUARTER ($/share) 2022 2021 High Low High Low 1st Quarter 33.88 26.50 24.56 20.10 2nd Quarter 37.82 29.74 28.23 23.24 3rd Quarter 35.60 28.42 26.94 23.89 4th Quarter 34.96 29.35 29.55 25.35 www.williams.com | NYSE: WMB © 2023 The Williams Companies, Inc. 

Continue reading text version or see original annual report in PDF format above