Case-Williams

9-203-068

REV: FEBRUARY 7, 2006

JOSHUA COVAL ROBIN GREENWOOD PETER TUFANO

Williams, 2002

Tough times require tough decisions. — Steven J. Malcolm, Williams Companies1 Steven J. Malcolm, the recently appointed president, chairman, and chief executive officer of Williams (The Williams Companies, Inc.) found himself making a number of tough decisions since taking the helm of Williams in early 2002. The Tulsa, Oklahoma-based Williams engaged in energyrelated businesses, including exploration and production, pipelines, energy trading, and, for a while, telecommunications. The collapse of its telecommunications business, softness in the energy markets, and ongoing inquiries from regulators about its reporting and energy trading had put Williams under financial stress. Over the past six months, Williams had cut back on capital spending, planned more than a billion dollars worth of asset sales, slashed the firm’s dividend by 95%, and raised financing in a variety of forms. Williams’ priority was acknowledged to be “raising cash and access to cash.”2 In the summer of 2002, Malcolm was considering the latest in a series of decisions facing the beleaguered firm: whether to accept a secured credit agreement from Lehman Brothers and Berkshire Hathaway. Lehman Brothers was Williams’ longtime financial advisor, and Berkshire Hathaway, run by the fabled investor Warren Buffett, had earlier bought pipeline assets from Williams and purchased $275 million of Williams’ convertible preferred stock. The new agreement would provide Williams with funding of $900 million for one year. This one-year funding was backed by the assets of the former Barrett Resources Corporation, a company Williams had acquired in 2001, and was subject to a number of conditions. (Exhibit 1 summarizes the terms of the proposed financing.) Malcolm reflected on the proposed transaction and his first seven months as head of Williams.

Background on Williams

Williams had been a part of the Tulsa community...