Travis Campbell - Head of IR Steve Malcolm - CEO Don Chappel - CFO Ralph Hill - SVP, E&P Alan Armstrong - SVP, Midstream Gas

Carl Kirst - Credit Suisse Faisel Khan - Citigroup Craig Shere - Scott Wood Capital Sam Brothwell - Wachovia Securities Rick Gross - Lehman Brothers

Good day everyone and welcome to the Williams Companies Second Quarter 2007 Earnings Call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Travis Campbell, Head of Investor Relations, please go ahead, Sir.

2007 earnings call, and thanks for your continued interest in our company. As you all heard this morning, we had a great quarter and the story is very straight forward. So, for us the slide deck is pretty crisp. I know many of you have other calls to monitor this morning. So, we'll get right to it. This morning Steve Malcolm, our CEO will lead off followed by Don Chappel, the CFO. Also, Ralph Hill, who heads up the E&P Group and Alan Armstrong, who heads the Midstream business will cover few slides. Other leaders, including Bill Hobbs and Phil Wright are also available for questions after the prepared remarks. Before, I turn it over to Steve Malcolm, please note that all of the slides, both those view there to present today and those in appendix are available on our website, williams.com in a PDF format. The press release and all the accompanying schedules are also available on the website. Our second quarter 10Q will be filed early next week. Slide number two and three, titled Forward Looking Statements, detailed various risk factors and uncertainties related to future outcomes, please review the information on those slides. Also, slide number four, Oil and Gas Reserves Disclaimer is also very important and we urge you to read that slide as well. Also, included in the presentation today are various non-GAAP numbers that have been reconciled back to generally accepted accounting principles. Those schedules follow the presentation and are an integral part of the presentation. So with that, I'll turn it over to Steve Malcolm.

Thanks Travis. Good morning and welcome to our second quarter earnings call. We certainly appreciate your interest in our company and as Travis mentioned in keeping with our last few earnings calls we have a relatively short slide deck and so we should be able to mow this through our presentation pretty quickly this morning. By almost any measure we had an outstanding second quarter and our core natural gas businesses delivered very strong performances all across the board. The highlights of the quarter are shown on slide 6. At $0.43 our key performance measure that being adjusted recurring earnings per share is nearly 50% better than a year ago. We have updated our earnings outlook for 2007 to reflect the strong results to date and our confidence that our businesses will continue to deliver. Our results demonstrate the value of our integrated natural gas businesses. Higher NGL margins fuel record midstream segment profit and margins are at historic highs again and we are very well position to benefit. We enjoyed higher production volumes and higher prices in EMP which translated into a 75% increase in segment profit. Production is up 20%, and we are nearing the one BCF a day milestone. For those of you who thought we might suffer from basis differential in the Rockies and certainly many of you ask questions as I was out the early part of this year that seem to be a consistent concern and worry. It should be very good news to hear that our average net realized price in the U.S. last quarter was $5.39, net up 29% over a year ago. And as Ralph Hill will describe later in the presentation, although most of our production is from Rocky Mountain basins, specifically Piceance and Powder River only about 7% of our production is priced in the Rockies. And lastly, new rates showing affect on both Northwest and Transco pipelines and we have some wonderful news to talk about today Transco and its customers have reached an agreement in principle on all substantive issues on that rate case. And so the next step in that rate case will be to file a formal agreement and receive approval from the Federal Energy Regulatory Commission. As you recall Northwest filed its rate case agreeing with the FERC in January this year. Turning to slide 7 please, and while we are delivering robust earnings performance, we are also focused on executing on a number of other measures design to deliver value to our shareholders. On May 21st, we announced an agreement to sale our power assets to Bare Energy. We continue to expect that transaction to close before at the end of the year. Just two weeks ago, we announced plans to create a new publicly traded master limited partnership to own interstate natural gas pipeline assets and I have a couple of points about the plant MLP. First, you should note that the guidance numbers we are providing today don't assume an MLP is formed and so we would expect to update our guidance once we complete such transaction. The second point, I need to make about the plant MLP is that we are not allowed under SEC rules to say anything more than what we have already announced. We are in a quiet period. That being the case, we won't be taking any questions about the MLP, about the new MLP or respond any request for additional information at this time. We appreciate your understanding and patience on this matter. The planned gas pipeline MLP would be complimentary to our existing very successful midstream MLP. We have built a very strong track record with Williams partners drop down $1.6 billion worth of assets, last year. And we remained focused on our commitment to drive growth in Williams partners through a combination of drop downs, third party acquisitions and organic growth. Just two weeks ago, we also announced that our board authorized a program to buyback up to $1 billion of our stock. We are excited that, with our earnings news out to the public today will soon be in a position to begin executing on our repurchase program. However, this is another topic where our public announcement provided all the information we can share at this time. Clearly, we are excited about the stock repurchase program but we aren't in a position today to provide additional information or respond questions about our plans. Finally, I want to highlight the abundance of value creating growth opportunities within our businesses. In each of the next two year,s we plan to invest at least $1.3 billion to develop our low-risk high-return natural gas reserves. Couple that with the growth projects in midstream like Perdido Norte, Blind Faith, Willow Creek emerging Canadian opportunities and expansions on all of our interstate natural gas pipeline systems and you can appreciate just how bright our future is, we are truly opportunity rich. And so with that introduction I will turn it over to Don.

Thanks Steve and good morning. We are delighted to report these strong results and we are delighted with the performance of our business. I will be focusing my attention on recurring results from continuing operations, but before I dive into that I would like to note something regarding discontinued operations, if we could turn to the next slide page number 9. Again the results from discontinued operations largely are from our power segment. We have recorded a substantial gain this quarter as we reclassified previously deferred mark-to-market a fact under hedge accounting from OCI to income as we noted in our prior press release when we announced the transaction we indicated that we expected the gain and loss to be in significant that still our view. So, we would expect offsetting losses as the deal is closed. So, I'd just like to note that for you before we dive into the rest of this presentation. Let's now focus on our key earnings measure on that strips out non-recurring items as well as mark-to-market effects, and that's at the bottom of this schedule and that's the $0.43 versus $0.29 a year ago again up nearly 50% so around a year-to-date basis $0.74 versus $0.52 a year ago or up 42%. The next slide page number 10. This slide just details the non-recurring items which are fairly modest in size, I would note that there is also a tax effect, there was a tax provision was adjusted this quarter deemed to be non-recurring that's so for information. The next slide page number 11. This walks us through the mark-to-market adjustment again reversing forward unrealized mark-to-market losses totaling $61 million in the quarter. Adding back realized gains from mark-to-market previously recognized totaling 8 gets us to $69 million add back pre-tax. $26 million tax effect for $43 million second quarter adjustment and again we would expect that the mark-to-market effects would diminish sharply, as we close the power sale and we become relatively small by 2008. The next slide please, number 12, second quarter segment profit. I will focus my comments on the recurring to details of the non-recurring items were just reviewed as well as they are available in our appendix. First let me focus on the first subtotal, you can see the $617 million recurring segment profit as compared to the $442 for our three core businesses is improved by about 40% year-over-year. And the second major total segment profit after mark-to-market adjustments is $625 million is up a $167 million or 36% year-over-year. We'll dive into some of the details right now. E&P at $209 million is up75% from a year ago having increased its daily U.S. and international production to $945 million cubic feet per day an increase of 20% versus a second quarter of '06. Note that U.S. average daily production totaled $898 MCF a day an increased by nearly 22% over the same period last year. Net realized price average $5.39 up 29% from '06, and up slightly from the first quarter. Our transportation contracts to move gas out of Rockies and our financial hedges enabled us to once again achieve superior pricing for our gas and Ralph will talk about this and some detail during his presentation. On year-to-date basis, overall daily average production was up 22% and net realized price increased 21%. Our Midstream business have an extraordinary quarter with $250 million in segment profit up from $199 million last year. Midstream once again delivered these very, very strong results and results to our higher than our prior forecast. The principle driver was higher net liquid margins in the West or combination of high NGL prices and lower natural gas cost produced these extraordinary margins. Note that while low natural gas prices in the West had a minor effect on E& P results, as result of the transportation and financial hedges that were implies below natural gas prices in the West, who are very beneficial to Midstream. Other factors in our second quarter results included $9 million higher olefins margins and $12 million lower deepwater gathering and production handling, as production declined somewhat, until the next better suppliers attached and that is as expectant. Overall operating expenses were steady, on year-to-date basis Midstream was $396 million up 15%. Let's focus now on gas pipelines. Gas pipeline reported profits of $158 million, up 28% from the prior year. The higher level of profitability is a result of new rate cases, the one in effect earlier in the year, January 1st for Northwest pipeline and March 1st for Transco. Again, the Transco rates were subject to refund, and obviously we are delighted by the agreement in principle to settle this rate case as announced in our press release. These higher revenues were offset somewhat by somewhat higher expenses. Back to Gas Marketing Services, Gas Marketing Services includes certain contracts related to the former Power segment, as well as the activities related to marketing E&P gas and buying fuel and shrink for the Midstream business. We are reporting a GAAP loss, as well as a recurring loss. However, when the mark-to-market adjustments is noted lower on this schedule, are taken into account, you can see the bottom-line for this activity and at the bottom of the schedule it shows Gas Marketing Services after mark-to-market adjustments with profitability of $6 million this year, as compared to $21 million a year ago. Again, this business is principally focused on providing services to our E&P business and our Midstream business, as well as liquating or managing down some of the former power positions. Again, the total $625 million, up 36% from a year ago. I want to add, let's turn to the next slide, please, number 13. I won't comment in detail, but I will just focus on some totals. Again, the three core businesses reporting $1.1 billion of segment profit year-to-date, up 27%, and segment profit after mark-to-market adjustments at a $1.116 billion, up 29% from year ago. With that I will turn it over to Ralph Hill.

Thank you, Don. Slide 14, I am very pleased to share another very strong quarter of production and profit growth with the audience today. Our three main segments to my short view to slide today, first talking about few highlights of overall E&P, as well as our basins highlights. And I am going to discuss how we proactively manage our transport and basin level colors, which Steve and Don had mentioned briefly. Our attempt was to our minimize our E&P exposure to this year's basis widening, which I'll be able to show you on a slide, while simultaneously I believe you'll see that midstream has benefited very well from the basis widening at the same time, so its been a very good team effort to do that. Looking at to the slide 15, second quarter accomplishments. Our total production is 945 million a day, which is up 20%, compared to the second quarter '06. That's up 6% sequentially also, a very strong production growth for the year. Our segment profit up $209 million, which is a record quarter for E&P, was up 75% compared to the second quarter '06. And our year-to-year profit of $397 million is 49% above last year's this time. We have been able to continue to upgrade and high-grade our rig fleet and primarily in the Piceance Highlands and we are very pleased with that in addition to our activities in the Fort Worth basin. And during the quarter we have accomplished three, two larger and one smaller undeveloped acreage acquisitions, including drilling capital about $95 million for the quarter, which is why our capital guidance has gone up. One was in the Piceance Highlands in the Ryan Gulch area, and two in the Fort area near our Fort Worth activity in the Barnett. Combined these will total, again as I mentioned about $95 million of additional expenditures this year, which includes approximately $19 million for additional drilling and then the acquisition prices in the $77 million range and they are roughly spit between. We are very pleased with both of these, the Fort Worth acquisitions were in the core area of the Barnett and the Piceance Highlands is a direct bolt-on to the best acreage we have in our Ryan Gulch area, and we are very pleased to have gotten both these. Both bring substantial amount of undeveloped locations with and which we focus our efforts on. Slide 16, this is a repeat of what we had for the last call, except now we've updated for the first quarter '07. If you look at the slide, particularly on the right hand side, we remained the second largest, fastest growing and the 13th largest US producer in the first quarter. The only producer that grew faster than us had significant acquisitions last year that obviously impacted their production growth. So, including our growth, once again through organic growth we've been able to achieve substantial growth in our production. We believe that our 22% growth in the second quarter, which we don't have all the statistics in for all the companies listed here, will again be industry leading, we will share that statistic with you next quarter. Slide 17, some basin highlights. Piceance Valley is nearing $500 million at the time in the second quarter was up 25% over year ago. We have 18 rigs operating in the valley, but as you know, we have 25 total in the Piceance area when you include the Highlands, and our simultaneous operations, which we call SIMOPS, continues to improve our cycle times. In the Highlands, our production is up 56% over a year ago with 25 million a day of net production. We have done our seasonal drilling ramp up, which we do and we are up to 7 rigs already this year in the Highlands and our well performance continues to meet our expectations. In the Powder River, continued strong growth, up 21% over a year ago, a $166 million cubic feet a day. Our seasonal drilling window is just now underway August 1st is when really most of the stipulations and in the Powder and then we have about 90 day to 100 day significant drilling window and we're rapidly in that as we speak. And gathering expansions have continue to progress with the four union which will be done this fall late this year will significantly impact our ability to move gas from this area and help us quite a bit and also some other small gathering expansions have been accomplished. Slide 18, San Juan Basin. Steady production of $147 million and is a very matured basin was down slightly from the first quarter. That's primarily due to plant maintenance which affected volumes that should rise again in the third quarter. We continue to do many things to this mature field of optimization efforts and they continue to pay dividends as our production normally and continues to go up in the San Juan basin, where many have their production actually is declining. Fort Worth, which is our newest basin we're up to $32 million a day which is a 146% increase over a year ago. We have four rigs drilling. Deal flow is significant out there for the size, the type of deals that I mentioned we did earlier in the slides, so we have quite a bit to do for coming our way. Tighter well density also offer significant growth force and we are gaining efficiencies through size and scale on our operating cost and our ability to drill more efficiently. Slide 19, as the key question Steve, Don and I receive quite often and this in regard to the Rockies basis and this year base is widening which many of you are seeing. As I mentioned for several years now we've proactively managing for this problem and we believe we -- during the last couple of years by taking firm transportation out and there is a slide in the appendix that discusses there. And by putting on basin level collars and hedges to minimize our current Rockies basis, this current Rockies basis problem from our portfolio. And thus when I was for almost over the Rockies producers to the wide basis as this slide will detail. So, looking at the slide our total domestic production was $898 million a day in the second quarter on average. 29% was at Rockies prices which you look at the slide you had the 22% Rockies hedges and the 7% Rockies so that's makes to 29% So that is what we have, which would be at Rockies prices and 71% of our gas through our proactive ability to move our gas away is either produced or transported and lot of these transported as you know were primarily Rockies producers. Two other price points, so if you take the $260 million of the Rockies prices are exposed Rockies prices and you take out our hedges positions that we have in our collars and our fixed prices of $200 million a day, we had approximately $60 million a day or only about 7% of our entire portfolio exposed to the lowest Rockies prices, which you can see an example of Rockies prices is in the next mode, CIG was $3.86 for the second quarter '07 and Northwest pipe was $3.78. So, our entire portfolio a very, very small piece of that was exposed to those types of prices. And the above is apples to oranges if you look at the -- what our net realized prices versus just a pure index because of net realized price takes out fuel, shrinkage, and transportation but our net realized price for 2000 for the second quarter '07 was $5.39. So we feel, we have been a very proactive in working with the Power group and with our sister companies and making sure we can get our gas out of the basin as we talked about other Rockies for quite a while, and this slide depicts where the majority of our gas is either pricing and/or transported away from the Rockies. For 2008, we expect Rockies Express as many of you see the basis is narrowing when Rockies Express is expected to come on. As you know we have a couple hundred million today on that expansion through our marketing arrangements. We expect that will help and we also have an additional ability to move our gas. So, the exposure, if you will, to Rockies, which we don't know if that’s a bad exposure, because the basis has significantly declined, increases from the 7% to approximately about 15% or 17%, so still very, very manageable. And as you can see from our proactive ability to move our gas out of the basin we will be able to move to preferred pricing points. Finally, slide 20. What we have done is we've avoided Rockies basis boil out this year, while Williams is benefited from our Midstream business, as Alan will talk about that in a few minutes. Our production is increasing rapidly. Our costs are in line with our expectations, exactly where we thought they would be with the expectations. And our profit is up significantly to records levels. We are currently developing our detailed 2008 plan, and we hope to be able to demonstrate by the next call that we can increase our activity level, if possible, but via our speed development strategy, which is you're seeing we've been continue to execute on. And our workforce continues to be very dedicated, and I thank them for an outstanding quarter, for everything they did for us this year so far and for the future. Now, I'll turn it over to the Alan Armstrong.

Thanks, Ralph and good morning, and certainly a pleasure to be reporting on Midstream's record quarter today, but more importantly from my perspective to be able to demonstrate once again the strength of our Williams portfolio, and ability to continue to generate a lot of cash across the units in a multitude of pricing environments. Our segment profit for Midstream was $250 million this quarter, was a record as it exceeded our previous record of $228 million in the third quarter of '06. This performance, along with the current market fundamentals have allowed us to raise our guidance by $150 million at midpoint, and this marks the seventh time in the last nine quarters that we have been able to raise our segment profit guidance for Midstream. The NGL margin was certainly driven by the gas basis differential between Henry's and Rockies, as Ralph pointed out a while ago, and the basis in the second quarter exceeded $3 and we are realizing continued gas prices that fundamentals that in the third quarter that supports the guidance raise that I mentioned a moment ago. Just to kind of give you a feel for what that look like for us in terms of margin. Our Rockies margin, and so that would be Opal and Echo in particular, Rockies margin was $0.54 and then on a consolidated basis we saw $0.47 per gallon. And to put that in a dollar per MMBtu perspective, we basically took the way COG or cost of gas for Rockies was 447 for the quarter, and we basically converted that to a $11 per MMBtu sales on the liquid side, and that's after TNF, so we basically saw margin of about $6.50 per MMBtu on the gas that we processed. And so I think that helps demonstrate the kind of strength that we've got in the Rockies, certainly as new pipeline capacity comes on out there we would expect that margin, and particularly in the Rockies to fall back to more normal levels next year. Additionally, in terms of being able to raise our guidance, we did acquire the BASF's interest in Geismar, and we had a right of first refusal on that investment. We operate that facility today. We did own 40% 5/12s and we acquired another 5/12s through this ROFR. Just to give you an idea of the profitability of that, we spent about $62 million, and we expect that to generate on a full year basis about $26 million of EBITDA a year, and or of segment profit cost depreciation, and that business is supported by, or contract is about 300 million pounds a year, through 2009 and that’s so, that’s an off-take agreement with BASF that supports that investment. So, very excited about this addition, really, no distraction to our business, as that is something we already operate today and we found that to be at favorable price. Additionally, I want to comment on the progress, we are making on our Canadian Oil Sands we did make a press release I believe on Tuesday, talking about some of the letters of intent, that we've signed and we have signed two letters of intent that anchor the construction of a cryogenic plant expanding our Redwater fractionator and adding a de-ethanizer to our Redwater complex, as well. The first part of that project will be in service by 2010 and a new cryo by 2012 these projects, I think most importantly to mention here is not only do these projects extract additional value out of Canadian Oil Sands off-gas and provide value to our customers. They also are extremely impeccable to the missions reduction in Canada, in fact our current operations at Fort McMurray reduce carbon dioxide about buyback 219,000 tons per year and these other projects of course will expand then even further. Another important thing to note about this is the scale of this opportunity. We expect that by 2012 we will be successful in pursuing the opportunities we see before is up there, that we could be doubling or matching is another of way of saying matching our current US production of about 200,000 barrels a day with production out of Canada and a lot of this business particularly the business on the front-end and this is all fee-based production. So we will not be exposed to the pricing now in the front-end. These projects also have the benefit of being, very long-term in nature with the Canadian Oil Sands reserves standing behind them and they are not exposed to the typical field declines that we have in our Midstream business. And so, a lot of free cash flow generation for years to come without much capital reinjection into those businesses. So, exciting opportunity and we are thrilled to see that kind of getting-off the ground for us. Moving on to the next slide on 23 here. This again, we've talked, we have shown this slide in the past, this is a depiction of our growth opportunities in various stages and there on the left, you see projects and opportunities in their least mature state and then moving to the right, as we become more sure of them and we move them into guidance. And keynotes to make on this slide this time, is the amount that got moved over to our in guidance area, two things there to note, the additional interesting Geismar and a Deepwater Tieback that would be tied back to Devil's Tower and you can see the strength of those opportunities in terms of the kind of segment profit addition that those will bring to us. Additionally, you will see there a major expansion in our under negotiation's area as we bring in those Canadian Oil Sands projects that I just talked about. So, this continues to be a lot of growth opportunities for us and really we expect that to continue on in-development and proposal stage to come in from all three areas the Deepwater, the Western G&P and the Canadian Oil Sands Moving to summary slide here on 24, we certainly were able to post a dramatic increase in our segment profit guidance, primarily on the strength of our NGL margins as those set new record highs. I certainly should comment as well, that we are experiencing high margins in the current environment that we exist and we see fundamentals that support that relate throughout the remainder of 2007. We are well positioned in for growth in three areas that I mentioned just a while ago and probably most importantly and I think our biggest challenges is Midstream is with all this growth and primary as to continue to focus it has the most reliable operations in the midstream sector and that is certainly what brings the opportunities for us that we continue to be able to discuss with you, that’s all I’ve got and now I'll turn it back to Don.

Thanks Alan. Let's turn next to our slide number 26, the focus of my comments on the bottom line our key earnings measure diluted earnings per share on a recurring basis after market-to-market adjustment; we've updated our guidance list at the bottom end of the range to $1.30 to a top-end of the $1.50 from our previous range of $1.15 to $1.50. The primary driver of the increase is the strong Midstream results and view of continuing strong liquids margins. And that offset somewhat by the absence of powers results, the wide range is principally related to a range of assumptions for energy, commodity prices for the balance of the year and that summarized on slide number 69 in this slide presentation. Lets turn now to slide number 27, just a quick update on each of our businesses E&P has tightened it's 2007 guidance range somewhat on the strength of its continued production growth, midstream will significantly increase it's 2007 guidance as a result of very strong margins, note that the 2008 guidance range is steady and assumes a less favorable margin environment, perhaps for more conservative forecast. Gas pipelines has tightened it's 2007 guidance range and raised it's 2008 guidance. Gas marketing both on a reported and forecast results are effective somewhat by mark-to-market effects which we plan to take action to reduce gas marketing forecast inclusive of mark-to-market effects, exclusive of mark-to market effects is shown at the bottom of the schedule and again you can see a forecast of 0 to 25 million in 2007 and basically a break even plus or minus 20 million in 2008. Again, gas marketing is principally providing services to E&P and Midstream. In terms of the total, again, the increase in the Midstream results drive the total recurring after mark-to-market adjustments offset somewhat by the absence of powers contribution. Lets turn to the next slide. Capital spending, focus first on E&P. Again the increase in the E&P capital expenditure guidance relates the acquisition of undeveloped properties on the Piceance and Fort Worth Basin as Ralph spoke to the Midstream increase relates to the acquisition of the official interest in Geismar, as well as, additional planned projects and then finally gas pipeline relates to principally to new projects. I will also note that as Steve has indicated, we continue to be opportunity-rich, we will expect to see continued growth and investment in each of our businesses and will continue to update those forecast, as we walk through at future quarters. The next slide please number 29. Again, we’ve talked about segment profit, cash flow from operations 2007 is steady, 2008 is slightly lower, as the power contribution is now adolescent, capital spending, we just reviewed and again the caveat here is again we opportunity-rich, we expect to make additional investments, so we believe will create even more value for our investors. Operating free cash flow is currently forecast to be negative this year and again this is before dividend minority interest and other cash requirements by 2008 in this forecast it's positive, again, I would note that capital spending to grow somewhat as we seize additional opportunities. Also note that there are no MLP capital contributions included in this forecasted cash flow. With that, I’ll turn it back to Steve.

Thanks Don. I think we can sum things up by saying that our integrated natural business is clearly delivering value. Our portfolio is turning in very strong performance, even in a pretty volatile challenging commodity market. We achieved tremendous results in the second quarter, we think the rest of the year will be very strong, as well. You can see that confidence in our improved earnings outlook. We continue to increase production, there are few E&P companies that are generating 20 plus percent growth, through organic drilling opportunities. We are delivering record Midstream results on robust NGL margins in the processing margin environment economics continue to be very attractive in the third quarter. Our pipeline profitability is up on new higher rates. We are investing in high quality growth opportunities in our businesses and we are executing on significant value creating initiatives. The power sale is getting closer we are executing on an MLP strategy. We will be moving forward with our $1 billion stock repurchase program. And so we clearly have the franchise type assets. A very talented workforce, abundant growth opportunities and we continue to expand our growth platform. All of which will enable us to create significant shareholder value in the future. And with that we'll be happy to take your questions.

(Operator Instructions) We will take our first question from Carl Kirst with Credit Suisse. Carl Kirst - Credit Suisse: Good morning everybody and certainly congratulations on a great quarter here. Three questions if I could, just first Ralph looking at specifically the Piceance Valley. We seem to be getting to a place where the infrastructure is maxed out in that region. Are there any opportunities to invest in infrastructure that will allow you to put more, better rigs to work there rather than just high-grading?

Well, I think, I guess just my version of high-grad is we open planning better rigs to work. We've been able to lay down a number of rigs that we would being very inefficient and continue to, even as we speak today we will be bringing another rig and laying another one down this week, it's a much newer and efficient rig. So, we are getting much better equipment and I think the ability to do more is what we are working on and looking forward to doing in the Highlands. As you know our projections going forward have about four rigs operating in the Highlands on an annual basis, and as you know that's seasonal, it can drop as low as one or two and goes as high as seven or eight. But I hope that we will be able to tell you in the future that instead of four rigs operating around, we'll have more double to that or maybe eight to ten rigs operating Highlands. So that's where we see more opportunity and that's why we've been -- all of our infrastructure build out as we have done so far, the majority of those are done and we are rapidly, as fast as we can, testing all the areas of the fields we have so we know where to go hit, which part of the field hit first. Carl Kirst - Credit Suisse: Yeah, certainly I appreciate that but specifically with respect to the Piceance Valley as far as your absolute number of rig, I mean, once you kind of finish high-grading if you will, are we sort of now cap out at the amount of the number of rig you can put to work in the Valley but now all the future growth you are looking out is coming from Highlands, is that still the correct way of looking at it?

No, we should have substantial growth in the Valley still and way we will do that is -- we will have our fleet in place where we want the type of rigs we want both the high efficiency rigs and the conventional rigs. And after that it will be just be a matter of drilling, we have always done, decrease in our cycle times. And that's happening, as we do our simultaneous operations through our drill bit technology just to everything we are doing. So, what I think is the same amount of rigs is you see operating and since we get down with the high-grading and the themes in place which is essentially is, we'll be working to continuously drive down the spread time. And that will -- same amount of equipment can do more rigs or more wells, I am sorry. Carl Kirst - Credit Suisse: Great, and I appreciate that. Second question Alan just as we look at the -- obviously there is the blow and keep-whole margins particularly in the Rockies right now, just from maybe sort of a philosophical standpoint, are you looking to keep the amount of keep-whole exposure we have right now or sort of natural hedge enterprise wide, or do you try and take advantage of another record margins to perhaps get better than you might otherwise expect fee-based margins?

Yeah, it's a great question and generally this is exactly when we see opportunities to contract for fee-based margins and the two factors that you mentioned there, first of all looking at our corporate exposure to gas and then secondly opportunities to price our fee-based business long-term and exactly when we do that. And in fact in the Canadian projects that I mentioned those projects are while the value being generated is mission productions and substantial spread between gas and propane and propylene, both of those projects are fee based projects. Carl Kirst - Credit Suisse: Okay. Thank you. And then lastly Steve, Don, Alan, I'm trying to ask as the way, do not run a file here the MLP issue but maybe specifically looking on Williams Partners, WPZ, as you look into the future, do you find that we now have a more limited window of when we can access the capital market of WPZ or do you think WPZ's dynamics are really going to work independent of anything else that might be out there?

I don't see any change in our intentions and what we've talked about with respect to WPZ as a result of our intention to create a gas pipeline MLP. Carl Kirst - Credit Suisse: But as specifically being able to access the equity markets does that -- did you feel now more constrained of when you can put out WPZ equity because of perhaps other equity might be doing?

No, that was obviously an important part of our analysis and so the answer is no, we don't believe that we will be constrained in terms of being getting successful lead to the markets. Carl Kirst - Credit Suisse: Great, thanks. I will ask my other questions back in the queue. Thank you.

We're going to take our next question from Faisel Khan with Citi. Faisel Khan - Citigroup: Good morning. On the tighter basin volumes up 21% over the last year. Well, there is a lot of growth in that basin a result of a lot of deepwatering you had from last year and some of the number of wells you have drilled year-over-year obviously '06 or '05, or is that real organic growth that continue for the next couple of years?

Faisel, it's really erratic -- the water in some part from wells that we're drilling more in '06 and so that we're coming on now. But clearly, we are drilling this year and those were also deepwater and beyond in '08 and '09. So, we have a strong outlook on the ability for our Powder production to continue grow, as you know we were very proactive in managing in our water. Our previous partner was not, but now with our current partner and a dark one there, they are doing a great job of proactively managing their water. Hooking up well, it was stranded and that helps us also because in all the production growth until recently is been from Williams's side and now it's a pleasure to have our partner also participate in that. Faisel Khan - Citigroup: Okay. How much route do you have to run in the Fort Worth area, I mean, you talked about how your volumes are up tremendously over the year? How much more room do you guys have to run there?

We have at least 100 locations to drill and probably more as we look at some of our down space in opportunities there and we have actually done six, Bolt-on in the last year and a half, we have a tremendous amount of deal flow coming in still. We are specializing, as you can tell more in this $25 million to $50 million range, but they bring quite a bit of opportunities. So, we feel we have a lot of growth already in front of us just with the 100 or more locations that we have in our current inventory and probably more as we look at the rest of inventories as our deal flow is coming to us, assuming we can pick up some of that. Faisel Khan - Citigroup: Okay, great. And then on the pipelines, the rate that went into effect on March 1st is that similar to what you guys are looking at in terms of settlement with your shippers?

Actually, we have already made adjustments in our forecast to reflect where we have thought we would be and so we've got those baked in. It will not be the motion rates that were filed, if that responds to your question. Faisel Khan - Citigroup: Okay. And then in terms of Pacific Connector with your partners there, there has been some rummaging of some our position to that pipeline. Where do you guys stand with that project?

Well, as we announced previously, we had a very successful open season on that project and we are moving ahead. We actually have 97% of the right away. We have rights to survey, which is a very positive indication in our view as to how that project is proceeding and it's virtually impossible to have such a project in today’s world where they won't have some folks raising their voice in opposition. Although, I would say in contrast to other projects that, for example, might congest the Columbia River. This project would not, in fact, do that and of all the places you could probably locate along the Western Coast, the local support has been very heartening for the project. Faisel Khan - Citigroup: Okay. And then in terms of your continued ability to dropdown assets into the partnership to WPZ. Have you noticed, has there been any constraint do you think at all with the increase in credit spreads in the market that might influence that sort of strategy?

Faisel, certainly what's happening in the market I think affects everyone in the market. But, nonetheless, we think that our MLP plans are largely unchanged. Faisel Khan - Citigroup: And then lastly, on your sale of their power. Are there any issues of their side given the issues they’ve been having with the sub-prime that might impede the sale of this asset to them?

We are not aware of any. They continue to be pleased with the progress that we are making in terms of getting assignments completed, and continued to be very optimistic about our availability to close before the end of the year. Faisel Khan - Citigroup: Great. Thanks for the time, guys. I appreciate it.

Moving on, we'll take our next question from [Craig Shere] with [Scott Wood Capital]. Craig Shere - Scott Wood Capital: Hi. Don, do you have the sense for how much second quarter earnings might have been a tad lower if mark-to-market adjusted power book results were still in continuing ops along with the new gas marketing segment?

Craig, we have not provided any guidance by quarter for power. But, you may recall that our power results for full year forecast were in the range of $50 million to $100 million more or less. So, obviously it somewhat varies by season, but full-year effect somewhere in the range of $50 million to $100 million. Craig Shere - Scott Wood Capital: Okay. And couple of questions for Alan. Alan, what are the assumptions for profit per gallon going out away beyond, is it like $0.20 or so?

You are saying what's embedded to get to the midpoint of our guidance? Craig Shere - Scott Wood Capital: Yes. I am sorry.

What we are using is a current market forecast and with that kind of number, which is in the mid 40s range, that would get us to the top of our range there right now. That answers your question. Craig Shere - Scott Wood Capital: Okay. So, you are using some kind of forward numbers even through all of '08?

Sorry. I thought you were talking about '07, I am sorry. In '07, that -- my answer was response with the '07, which is about $0.47. And on the '08 numbers we are using, I think we've posted our commodity price assumptions in some of the appendix information, and generally what we are using in a long range plan there is around $0.27 for our '08 numbers. Craig Shere - Scott Wood Capital: I know for the longer term guidance you all have kind of conservatively used like five year averages or something. Can you speak to the possibility of the margins falling whatever it is 40% or so next year may be with the new Rockies Express pipeline? Or is this just again being conservative and moving towards the five year average?

We are staying fairly consistent with the five year average. And I think that we will come very close this year as we look back post '07, if '07 completes the way we think it would be at $0.27, will be around the five year average. However, we certainly arrived at that number in a different manner. I would say that just happens to be somewhat coincidental. And most of that impact or negative impact to that number is the Rockies basis differential. Craig Shere - Scott Wood Capital: Okay. And last question Alan, do you have a rough estimate for what all the CapEx plans might be for the Olefins gas processing investments?

Well, the two projects that we have got in there are right at about $240 million. There is exactly two fairly large projects there and there is some smaller projects that enhance our existing facilities and those total about $240 million that are in that middle pie there, if you will, pie chart showing the under negotiation. Craig Shere - Scott Wood Capital: Great, good quarter. I appreciate it guys.

(Operator Instruction). Next will hear from Sam Brothwell with Wachovia. Sam Brothwell - Wachovia Securities: Hi, you guys answered my questions. Thanks.

Moving on, we will take follow-up question from Carl Kirst with Credit Suisse. Carl Kirst - Credit Suisse: Hey, two quick follow-ups please. First on the $1.7 billion of cash on hand we have at the end of the quarter not withstanding the $1 billion share buyback, but I know you can't talk about. How much cash should we think about you guys maintaining on hand, on sort of a go-forward basis as you kind of come up the credit curve?

Good question Carl, maybe just a couple of comments. So, the total cash balance is somewhere between $400 million to $500 million as international cash which is offshore and has not been taxed either from an income statement or from a cash tax standpoint. Our intention is to leave that offshore. At this point we do have some growing opportunities offshore, including the Canadian opportunities that Alan pointed out which will be a terrific use for that cash, so stripping out the international cash we get down to domestic cash balance more in the $2.3 billion range. I would say that post sale of power cash balance of a few $100 million would be logical excluding that international cash that I just outlined. Craig Shere - Scott Wood Capital: Excluding, okay. Great, thank you. And then just last question. Ralph, in the interest of time, I don't think much was said about any of the new areas markets turn-off you went to. Was there anything in particular maybe that's out there worth highlighting for the second quarter? Are we still kind of too early on to really get that type of feel?

It's still early, we are on our third well on the Paradox, so we continue to drill ahead on that but it is too early but we obviously intend to drill our fourth well here in the Paradox in the fall and then we'll have four to continue to do all of our technical analysis, but you could cumulate quite a bit of acreage down there and we've not been disappointed with what we are seeing so far. Craig Shere - Scott Wood Capital: Perfect. Thank you, good luck guys.

And we will go ahead and take our next question Rick Gross with Lehman Brothers. Rick Gross - Lehman Brothers: Good morning. Couple of E&P question. On the cost structure, it looked like you had improving unit costs for LOE in SG&A and my assumption was on the SG&A part it was just better volume absorption. On the LOE, you had a bunch of accruals and things running back and I assume that's kind of normalized, is that a reasonable assumption?

Last year particularly, there were a number of things that hit in the second quarter. So, yes, it's really more of a normalized basis now. Rick Gross - Lehman Brothers: Okay. And then, the area that did jump, if you continue to see a pretty good jump in D&A rate, is that just because you continue to drop out that we aren't see in the whole lot of migration of 2P-3P, just early in the year?

As, you know, we are continuing to expand, in particular our Piceance Valley drilling, also we do a number of -- in that rate there will be all the facilities we put into, so that is the correct statement. But I will say, it's exactly where we planned on it being at this point, so based on our plan our DD&A rate is hitting right where we thought it would be. Rick Gross - Lehman Brothers: Okay. And then, the volumes that we are seeing now to the Piceance Valley year-over-year -- excuse the Highlands jump very nicely but they've been roughly flat for about a year and I am just curious as to whether or not we've got an infrastructure issue or something else that's kind of delayed the nature of seeing production ramp continue to ramp up their?

They jumped from the third quarter to the fourth quarter, significantly and what that is? That's a result of the amount of drilling we are able to do in the window between June and October. And that's what you'll see again this year, is you'll see a jump as we move into the drilling window and we are into it now but obviously it wasn't in time to have a significant impact on the second quarter volumes. And what we are working for obviously is drilling in all the Highlands and you know we did that as our trial in the Trail Ridge area, we expect to continue to do that again this winter and also when the Alan point out so. Really, it’s a seasonal well, we will go from about seven rigs through about 5 months and we will drop down to one or two rigs and we hope to make that on a much more levelized basis. So, it's really just the seasonality of the rig season. Rick Gross - Lehman Brothers: Okay. And the results, so when we did the Piceance drill, wasn't there an expansion of the pipe that takes all that out of there going on as well?

The expansion of noticed pipe right off from the valley you mean or? Rick Gross - Lehman Brothers: Yeah.

Yes. That is there. The Rockies as you all probably know are very tight, it is very tight so. There is, on any given day, we will have gas that shut in either in the valley of the Highlands, just because a downstream area or may be a compressor of our own will be kicked-off so, it's so tight until Rockies Express gets on their own opportunities for gas unfortunately be can trailed from time-to-time and that does effect some of the volumes you see here. But I think that's all alleviated with all by next year with the infrastructure improvements, we are doing and all also with the new takeaway. But there is some, on any given day, with the amount of volumes we are moving, there can be gases, it's not getting the market just because of an infrastructure upset somewhere. Rick Gross - Lehman Brothers: Okay. And then in response to a question earlier on the Powder, you said something about a 100 location, I mean, my impression was you are drilling 900 wells a year and that should last the inventory that you've indicated is 1000's of wells, 10,000 or so and at current pace, you've got like a 10-15 year inventory?

So, 100 locations was for the Barnett? Rick Gross - Lehman Brothers: The Barnett, I am sorry

We currently have an inventory of 100 locations and we probably have more as we continue to down space our new tighter density drilling in the Barnett, so there wasn't response to Powder, Powder is still in that, I believe it's last slide, we have 7,500 to 8,000 locations. Rick Gross - Lehman Brothers: Yeah.

Okay. Thank you.

And we'll take a follow up question from Faisal Khan with Citi. Faisel Khan - Citigroup: Sorry, just a couple more questions. On your new gas marketing segment, is there fair for me take the pipeline capacity and the storage capacity used have a power and that's pretty much in your gas marketing business today?

This is Ralph. I think parts of that, that are for the E&P and mid, we are primarily moving in E&P business, there is also some historical part that was with the power group that will be with us until we, as we said in our press release, work to remove those contracts and then minimize our exposure to mark-to-market. So initially, yes, but I think you'll -- another way to answer is, as we expect to see a lot of that go away. Faisel Khan - Citigroup: Okay, got you. And in terms of how we should take a long-term view on the capital structure of the C-Corp over a long period of time. What kind of cash flow ratios or multiples should we be looking at in terms of like debt-to-EBITDA over a longer period of time or debt-to-total cap?

Faisal, we are not prepared to offer any specific guidance but I can tell you that again Williams will likely be the developer of projects that are not appropriate either not qualified or just in their development stage and as a result we need to have a solid financial foundation to be the developer of projects that are not yet cash flowing. So, that gives you some sense to where it will be. Faisel Khan - Citigroup: Okay.

Other considerations are the amount of cash will come up from the MLPs. Faisel Khan - Citigroup: Sure, understood. Thank you.

And with that we will conclude our question-and-answer session. I would like to hand the conference back to management for closing remarks.

Thank you. I appreciate your interest, we were delighted with the quarter and very exited about the future and we look forward to speaking with you next time.

And that does conclude our conference. Thank you all for your participation, we do hope you enjoy the rest of your day.