Basis of Presentation

6 Months Ended

Jun. 30, 2011

Basis of Presentation [Abstract]

Basis of Presentation

Note 2. Basis of Presentation

     Our operations are located principally in the United States and are organized into the following reporting segments: Williams Partners, Exploration & Production and Midstream Canada & Olefins. All remaining business activities are included in Other.

     Williams Partners consists of our consolidated master limited partnership, Williams Partners L.P. (WPZ) and includes our gas pipeline and domestic midstream businesses. The gas pipeline businesses include 100 percent of Transcontinental Gas Pipe Line Company, LLC (Transco), 100 percent of Northwest Pipeline GP (Northwest Pipeline), and 49 percent of Gulfstream Natural Gas System, L.L.C. (Gulfstream). WPZ’s midstream operations are composed of significant, large-scale operations in the Rocky Mountain and Gulf Coast regions, operations in Pennsylvania’s Marcellus Shale region, and various equity investments in domestic processing, fractionation, and natural gas liquid (NGL) transportation assets. WPZ’s midstream assets also include substantial operations and investments in the Four Corners region, as well as an NGL fractionator and storage facilities near Conway, Kansas.

     Exploration & Production includes the natural gas development, production and gas management activities, with operations primarily in the Rocky Mountain and Mid-Continent regions of the United States, natural gas development activities in the northeastern portion of the United States, oil and natural gas interests in South America, and oil development activities in the northern United States. The gas management activities include procuring fuel and shrink gas for our midstream businesses and providing marketing to third parties, such as producers. Additionally, gas management activities include managing various natural gas related contracts such as transportation, storage, and related hedges.

     Our Midstream Canada & Olefins segment includes our oil sands off-gas processing plant near Fort McMurray, Alberta, our NGL/olefin fractionation facility and butylene/butane splitter facility at Redwater, Alberta, our NGL light-feed olefins cracker in Geismar, Louisiana, along with associated ethane and propane pipelines, and our refinery grade splitter in Louisiana.

     Other includes other business activities that are not operating segments and corporate operations.

     During second-quarter 2011, we contributed a 24.5 percent interest in Gulfstream to WPZ in exchange for aggregate consideration of $297 million of cash, 632,584 limited partner units, and an increase in the capital account of its general partner to allow us to maintain our 2 percent general partner interest. Williams Partners now holds a 49 percent interest in Gulfstream. We also own an additional one percent interest in Gulfstream, reported within Other. Prior period segment disclosures have not been adjusted for this transaction as the impact, which was less than 2.5 percent of Williams Partners’ segment profit for all periods affected, was not material. Equity earnings related to this interest in Gulfstream that have not been recast are $4 million and $7 million for the three months and $12 million and $15 million for the six months ended June 30, 2011 and 2010, respectively. Equity earnings related to this interest in Gulfstream for the years ended December 31, 2010, 2009 and 2008 are $32 million, $30 million, and $27 million, respectively.

     During fourth-quarter 2010, we contributed a business represented by certain gathering and processing assets in Colorado’s Piceance basin to WPZ. The operations of this business and the related assets and liabilities were previously reported through our Exploration & Production segment, however they are now reported in our Williams Partners segment. Prior period segment disclosures have been recast for this transaction.

Master Limited Partnership

     At June 30, 2011, we own approximately 75 percent of the interests in WPZ, including the interests of the general partner, which is wholly owned by us, and incentive distribution rights.

     WPZ is self funding and maintains separate lines of bank credit and cash management accounts. Cash distributions from WPZ to us, including any associated with our incentive distribution rights, occur through the normal partnership distributions from WPZ to all partners.

     The change in WPZ ownership between us and the noncontrolling interests as a result of our February 2010 strategic restructuring was accounted for as an equity transaction and resulted in a $454 million decrease to capital in excess of par value and a corresponding increase to noncontrolling interest in consolidated subsidiaries.

     For the first and second quarter of 2010, this amount related to the change between our ownership interest and the noncontrolling interests resulting from the restructuring was originally reported as $800 million. During the third quarter of 2010, we determined that this amount was incorrect. This error resulted in a $346 million overstatement of noncontrolling interests in consolidated subsidiaries and a $346 million understatement of capital in excess of par value in the first and second quarter. The error did not impact total equity, key financial covenants, any earnings or cash flow measures or any other key internal measures. The amounts for the six months ended June 30, 2010 have been adjusted for the correction in the Consolidated Statement of Changes in Equity.

Discontinued Operations

     The accompanying consolidated financial statements and notes reflect the results of operations and financial position of Exploration & Production’s Arkoma basin operations as discontinued operations for all periods. (See Note 3.)

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

Accounting Standards Issued But Not Yet Adopted

     In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2011-4, “Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS” (ASU 2011-4). ASU 2011-4 primarily eliminates the differences in fair value measurement principles between the FASB and International Accounting Standards Board. It clarifies existing guidance, changes certain fair value measurements and requires expanded disclosure primarily related to Level 3 measurements and transfers between Level 1 and Level 2 of the fair value hierarchy. ASU 2011-4 is effective on a prospective basis for interim and annual periods beginning after December 15, 2011. We are assessing the application of this Update to our Consolidated Financial Statements.

     In June 2011, the FASB issued Accounting Standards Update No. 2011-5, “Comprehensive Income (Topic 220) Presentation of Comprehensive Income” (ASU 2011-5). ASU 2011-5 requires presentation of net income and other comprehensive income either in a single continuous statement or in two separate, but consecutive, statements. The Update requires separate presentation in both net income and other comprehensive income of reclassification adjustments for items that are reclassified from other comprehensive income to net income. The new guidance does not change the items reported in other comprehensive income, nor affect how earnings per share is calculated and presented. We currently report net income in the Consolidated Statement of Operations and report other comprehensive income in the Consolidated Statement of Changes in Equity. The standard is effective beginning the first quarter of 2012, with a retrospective application to prior periods. We plan to apply the new presentation beginning in 2012.