Williams Companies: Analyzing the Leverage Trends




Williams Companies’ (WMB) flattish leverage trend—mainly in the last few quarters—suggests that its earnings have grown in proportion to its debt. On December 31, 2018, Williams Companies had a net debt of ~$22.0 billion.

WMB leverage

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The debt-to-EBITDA ratio implies how many years it would take a company to repay its debt if the debt and EBITDA are kept constant. The debt-to-EBITDA ratio is one of the most vital measures to consider for midstream companies due to their huge debt burdens. Williams Companies’ net debt-to-EBITDA ratio was ~6.0x at the end of the fourth quarter of 2018, while its five-year average multiple was close to 7.0x.

Williams Companies sold ~$4.6 billion worth of assets in the last three years, which it used largely to repay debt. Williams Companies’ current leverage looks better placed compared to its five-year historical average. The company’s management expects its leverage position to get better this year.

Kinder Morgan (KMI) had a net debt-to-EBITDA ratio of ~5.4x, which is lower than Williams Companies. Energy Transfer’s (ET) net debt-to-EBITDA ratio was 5.2x at the end of the fourth quarter of 2018.


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