Fitch Affirms Williams Companies & Subsidiaries; Outlook Stable

Fitch Ratings has affirmed the Issuer Default Ratings (IDRs) and outstanding debt ratings for The Williams Companies, Inc. (WMB) and its two debt issuing pipeline company subsidiaries Transcontinental Gas Pipe Line Corp. (TGPL) and Northwest Pipeline GP (NWP), as listed below. The Rating Outlook is Stable. Approximately $7.28 billion of outstanding long-term debt is affected.

The Williams Companies, Inc. (WMB)

--IDR at ‘BBB-’;

--Senior unsecured at ‘BBB-’;

--Junior subordinated convertible debentures at ‘BB’.

Transcontinental Gas Pipe Line Corp. (TGPL)

--IDR at ‘BBB’;

--Senior unsecured at ‘BBB’.

Northwest Pipeline GP (NWP)

--IDR at ‘BBB’;

--Senior unsecured at ‘BBB’.

WMB’s rating considers the stable and predictable cash flow generated from its interstate pipeline and fee-based midstream operations, which limits the financial downside under adverse economic and commodity price conditions. In addition, a flexible capital spending strategy, particularly how it relates to exploration and production (E&P) investments, enables the company to respond to market conditions. Absent a material acquisition, current growth plans are not dependent on capital markets as consolidated debt levels are expected to remain level for the next several years.

WMB’s consolidated credit measures, including leverage ratios, are consistent with its rating category. Debt/Operating EBITDA was 2.7 times (x) for the twelve 12 months ended June 30, 2009 and is expected to end the year at 3.0x or below. WMB’s liquidity, including unrestricted cash and available revolver capacity of approximately $3.0 billion, is adequate given near-term spending plans. WMB’s liquidity position benefits from an unsecured marginless hedge credit facility that serves to reduce its use of cash and other credit facilities for margin requirements related to hedging activities for E&P. In addition, WMB has no material debt refinancing until 2011.

Ongoing credit concerns include the effect of volatile commodity prices and a slow domestic economic recovery will have on WMB’s E&P and midstream operations. Throughout 2009 WMB has been operating during a period of relatively low natural gas prices and natural gas liquids (NGL) margins that are well below 2008 average levels. These conditions have put downward pressure on drilling activity, reduced profits and weakened credit measures. However, NGL prices and margins have strengthened since the first quarter of the year when they were at distressed levels. As a result, midstream segment profits have improved materially. Discretionary capital expenditures have been pared back in 2009 and, including acquisitions, should approximate $2.6 billion for the year, well below the $3.5 billion spent in 2008. However, capital spending for 2009 will exceed operating cash flow and is sustainable at current levels over the longer term only under improving operating conditions and higher profits. In addition, while debt and equity capital markets are better than in late 2008 and early 2009, they still limit the company’s financial flexibility and make the near-term dropdown of midstream and pipeline assets to its two master limited partnerships (MLPs) unlikely.

TGPL’s and NWP’s ratings reflect their strong individual operating and financial profiles, offset by the structural and functional ties between these entities and their ultimate parent WMB. Both TGPL and NWP participate in WMB’s daily cash management program under which each subsidiary makes and/or receives advances from WMB and each has access to $400 million under WMB’s $1.5 billion revolving credit facility. Operationally, TGPL and NWP are considered as two of the premier pipeline systems in the U.S. In particular, both systems boast competitive rate structures, operate in relatively secure markets, a high percentage of their capacity is subscribed under medium-term and long-term contracts and expansion spending is manageable. In addition neither TGPL nor NWP have any material outstanding regulatory issues with FERC.

Credit measures for TGPL and NWP on both and a historical and prospective basis are strong for their current ratings. Debt/EBITDA for the next several years is expected to approximate 2.0x and 2.5x for NWP and TGPL, respectively. Their ratings also consider WMB’s pipeline MLP Williams Pipeline Partners L.P. (WMZ), currently a 35% owner of NWP. While there are no announced plans by WMB to drop down additional interests of NWP or TGPL into WMZ, future dropdowns are likely to begin with a stabilizing of MLP debt and equity markets. Should future dropdowns occur, WMZ’s credit profile would have greater influence over the pipelines ratings than it now has. Currently, WMZ has no external debt and no credit rating.

Additional information is available at ‘ www.fitchratings.com’.

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