Debt profile

Williams Companies’ (WMB) flattish leverage trend—particularly in the last few quarters—implies that its earnings have grown mostly in proportion with its debt. The leverage trend suggests sound financials. On December 31, Williams Companies had a net debt of $22.2 billion.

What Williams Companies’ Leverage Trends Indicate

What leverage suggests

The debt-to-EBITDA ratio tells us how many years a company would take to repay its debt if its debt and EBITDA were kept constant. William Companies’ net debt-to-EBITDA ratio was ~6.0x at the end of the fourth quarter, while its historical average ratio is close to 7.0x. The debt-to-EBITDA ratio is one of the most important metrics to consider for midstream companies due to their massive debt burdens.

Williams Companies’ current leverage seems better placed compared to its historical average. The company’s management expects its leverage position to improve this year.

In comparison, Energy Transfer (ET) had a net debt of $45.6 billion at the end of fourth quarter, and its net debt-to-EBITDA ratio was 5.4x, while Kinder Morgan (KMI) had a net debt-to-EBITDA ratio of ~5.8x, lower than WMB’s.

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