UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ......... to ..........
Commission File Number 1-7584
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 74-1079400
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2800 Post Oak Boulevard
P. O. Box 1396
Houston, Texas 77251
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (713) 439-2000
None
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes /X/ No / /
The number of shares of Common Stock, par value $1.00 per share,
outstanding as of June 30, 1995 was 100.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
COMPANY OR GROUP OF COMPANIES FOR WHICH REPORT IS FILED:
TRANSCONTINENTAL GAS PIPE LINE CORPORATION (TGPL)
The condensed financial statements included herein have been prepared
by TGPL, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the
opinion of TGPL's management, however, all adjustments, consisting only of
the pushdown of the purchase price paid by Williams as described in Note
A, Organization and Control and Basis of Presentation, of the Notes to
Condensed Financial Statements, and normal and recurring adjustments,
necessary for a fair presentation of the financial position as of the
dates and results of operations for the periods included herein have been
made and the disclosures contained herein are adequate to make the
information presented not misleading. These condensed financial
statements should be read in conjunction with the financial statements,
notes thereto and management's discussion contained in Items 7 and 8 of
TGPL's 1994 Annual Report on Form 10-K and included in TGPL's 1995 First
Quarter Report on Form 10-Q.
<PAGE>
<TABLE>
<CAPTION>
The acquisition of Transco Energy Company and subsidiaries, including TGPL, by The Williams Companies was
accounted for using the purchase method of accounting. Accordingly, the purchase price was "pushed-down" and
recorded in the accompanying financial statements which affects the comparability of the post-acquisition and
pre-acquisition financial position, results of operations and cash flows.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
CONDENSED BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
Post-Acquisition | Pre-Acquisition
________________ | _______________
June 30, | December 31,
1995 | 1994
________________ | _______________
ASSETS |
|
<S> <C> | <C>
Current Assets: |
Cash $ 4,045 | $ 1,628
Deposits 7,222 | 7,218
Receivables 65,393 | 61,113
Advances to affiliates 76,868 | 115,974
Transportation and exchange gas receivables: |
Affiliates 38,628 | 19,328
Others 119,487 | 92,424
Inventories 60,445 | 63,098
Deferred income tax benefits 40,437 | 34,578
Other 15,871 | 20,628
______________ | _______________
Total current assets 428,396 | 415,989
______________ | _______________
|
|
Property, Plant and Equipment, at cost: |
Natural gas transmission plant 3,126,872 | 4,340,912
Less-Accumulated depreciation and amortization 99,648 | 2,578,069
______________ | _______________
|
Property, plant and equipment, net 3,027,224 | 1,762,843
______________ | _______________
|
|
Other Assets 171,260 | 91,796
______________ | _______________
|
$ 3,626,880 | $ 2,270,628
______________ | _______________
______________ | _______________
The accompanying condensed notes are an integral part of these condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The acquisition of Transco Energy Company and subsidiaries, including TGPL, by The Williams Companies was
accounted for using the purchase method of accounting. Accordingly, the purchase price was "pushed-down" and
recorded in the accompanying financial statements which affects the comparability of the post-acquisition and
pre-acquisition financial position, results of operations and cash flows.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
CONDENSED BALANCE SHEET
(Thousands of Dollars)
(Unaudited)
Post-Acquisition | Pre-Acquisition
________________ | _______________
June 30, | December 31,
1995 | 1994
________________ | _______________
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
<S> <C> | <C>
Current Liabilities: |
Payables $ 195,433 | $ 170,938
Transportation and exchange gas payables: |
Affiliates 730 | 2,687
Others 83,692 | 47,218
Accrued liabilities 109,058 | 84,535
Reserve for rate refunds 27,237 | 79,229
Other 887 | 3,186
______________ | _______________
Total current liabilities 417,037 | 387,793
______________ | _______________
|
Long-Term Debt, less current maturities 681,651 | 644,238
______________ | _______________
|
Other Liabilities and Deferred Credits: |
Income taxes 784,268 | 302,846
Income taxes refundable to customers 3,597 | 8,781
Other 163,404 | 62,768
______________ | _______________
Total other liabilities and deferred credits 951,269 | 374,395
______________ | _______________
|
|
Commitments and contingencies (Note C) |
|
|
Cumulative Redeemable Preferred Stock, without par value: |
Authorized 10,000,000 shares: |
Stated value $100 per share, issued and outstanding |
- 0 - and 497,444 shares in 1995 and 1994, respectively - | 49,744
Less - Issue expense - | 369
______________ | _______________
Total Preferred stock - | 49,375
______________ | _______________
|
|
Cumulative Redeemable Second Preferred Stock, |
without par value: |
Authorized 2,000,000 shares: none issued or outstanding - | -
______________ | _______________
|
|
Common Stockholder's Equity: |
Common stock $1.00 par value |
100 shares authorized, issued and outstanding - | -
Premium on capital stock and other paid-in capital 1,532,741 | 285,792
Retained earnings 44,182 | 529,035
______________ | _______________
Total common stockholder's equity 1,576,923 | 814,827
______________ | _______________
|
$ 3,626,880 | $ 2,270,628
______________ | _______________
______________ |_______________
The accompanying condensed notes are an integral part of these condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The acquisition of Transco Energy Company and subsidiaries, including TGPL, by The Williams Companies was accounted for using
the purchase method of accounting. Accordingly, the purchase price was "pushed-down" and recorded in the accompanying
financial statements which affects the comparability of the post-acquisition and pre-acquisition financial position, results
of operations and cash flows.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
CONDENSED STATEMENT OF INCOME
(Thousands of Dollars)
(Unaudited)
Post-Acquisition | Pre-Acquisition
__________________ | ________________
|
For the Three | For the Three
Months Ended | Months Ended
June 30, 1995 | June 30, 1994
__________________ | ________________
|
|
<S> <C> | <C>
Operating Revenues: |
Natural gas sales $ 141,881 | $ 195,374
Natural gas transportation 174,533 | 166,399
Natural gas storage 38,033 | 35,278
Other 1,795 | 1,610
_________________ | _______________
Total operating revenues 356,242 | 398,661
_________________ | _______________
|
Operating Costs and Expenses: |
Cost of natural gas sales 141,742 | 195,375
Cost of natural gas transportation 31,200 | 30,970
Operation and maintenance 50,629 | 42,901
Administrative and general 33,107 | 36,900
Depreciation and amortization 39,006 | 30,144
Taxes - other than income taxes 8,578 | 8,587
Other 155 | 205
_________________ | _______________
Total operating costs and expenses 304,417 | 345,082
_________________ | _______________
|
Operating Income 51,825 | 53,579
_________________ | _______________
|
Other (Income) and Other Deductions: |
Allocated corporate expense 1,488 | -
Interest expense - affiliates 177 | -
- other 14,067 | 14,524
Interest income - affiliates (359) | (881)
- other (450) | (206)
Allowance for equity and borrowed funds used |
during construction (AFUDC) (1,666) | (800)
Miscellaneous other deductions, net 500 | 1,219
_________________ | _______________
Total other (income) and other deductions 13,757 | 13,856
_________________ | _______________
|
Income Before Income Taxes 38,068 | 39,723
|
Provision for Income Taxes 14,171 | 13,874
_________________ | _______________
|
Net Income 23,897 | 25,849
|
Dividends on Preferred Stock - | 1,572
_________________ | _______________
|
Common Stock Equity in Net Income $ 23,897 | $ 24,277
_________________ | _______________
_________________ | _______________
The accompanying condensed notes are an integral part of these condensed financial statements.
</TABLE>
<TABLE>
<CAPTION>
The acquisition of Transco Energy Company and subsidiaries, including TGPL, by the Williams Companies was accounted for using
the purchase method of accounting. Accordingly, the purchase price was "pushed-down" and recorded in the accompanying
financial statements which affects the comparability of the post-acquisition and pre-acquisition financial position, results
of operations and cash flows.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
CONDENSED STATEMENT OF INCOME
(Thousands of Dollars)
(Unaudited)
Post-Acquisition | Pre-Acquisition
__________________ | __________________________________________
| For the Period
For the Period | January 1, 1995 For the Six
January 18, 1995 | to Months Ended
to June 30, 1995 | January 17, 1995 June 30, 1994
__________________ | __________________ ________________
|
|
<S> <C> | <C> <C>
Operating Revenues: |
Natural gas sales $ 260,841 | $ 31,701 $ 421,786
Natural gas transportation 317,360 | 32,775 332,522
Natural gas storage 70,884 | 7,452 73,006
Other 2,816 | 133 3,262
_________________ | _________________ _______________
Total operating revenues 651,901 | 72,061 830,576
_________________ | _________________ _______________
|
Operating Costs and Expenses: |
Cost of natural gas sales 260,694 | 31,691 421,936
Cost of natural gas transportation 57,272 | 6,279 59,154
Operation and maintenance 86,931 | 8,722 83,715
Administrative and general 63,271 | 7,063 73,957
Provision for executive severance benefits - | 16,048 -
Depreciation and amortization 69,655 | 5,560 60,287
Taxes - other than income taxes 15,556 | 1,558 17,303
Other 693 | 53 676
_________________ | _________________ _______________
Total operating costs and expenses 554,072 | 76,974 717,028
_________________ | _________________ _______________
|
Operating Income (Loss) 97,829 | (4,913) 113,548
_________________ | _________________ _______________
|
Other (Income) and Other Deductions: |
Allocated corporate expense 1,488 | - -
Interest expense - affiliates 305 | 2 -
- other 26,561 | 2,595 30,329
Interest income - affiliates (663) | (207) (2,671)
- other (529) | (12) (331)
Allowance for equity and borrowed funds used |
during construction (AFUDC) (2,612) | (234) (1,635)
Miscellaneous other deductions, net 968 | 296 2,862
_________________ | _________________ _______________
Total other (income) and other deductions 25,518 | 2,440 28,554
_________________ | _________________ _______________
|
Income (Loss) Before Income Taxes 72,311 | (7,353) 84,994
|
Provision for Income Taxes 27,407 | 2,309 29,897
_________________ | _________________ _______________
|
Net Income (Loss) 44,904 | (9,662) 55,097
|
Dividends on Preferred Stock 722 | 194 3,171
_________________ | _________________ _______________
|
Common Stock Equity in Net Income (Loss) $ 44,182 | $ (9,856) $ 51,926
_________________ | _________________ _______________
_________________ | _________________ _______________
The accompanying condensed notes are an integral part of these condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The acquisition of Transco Energy Company and subsidiaries, including TGPL, by The Williams Companies was accounted for using
the purchase method of accounting. Accordingly, the purchase price was "pushed-down" and recorded in the accompanying financial
statements which affects the comparability of the post-acquisition and pre-acquisition financial position, results of operations
and cash flows.
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
CONDENSED STATEMENT OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
Post-Acquisition | Pre-Acquisition
_________________ | _____________________________________
| For the Period
For the Period | January 1, 1995 For the Six
January 18, 1995 | to Months Ended
to June 30, 1995 | January 17, 1995 June 30, 1994
__________________ | __________________ ________________
|
|
<S> <C> | <C> <C>
Cash flows from operating activities: |
Net income (loss) $ 44,904 | $ (9,662) $ 55,097
Adjustments to reconcile net income to net cash |
provided by (used in) operating activities: |
Depreciation and amortization 76,188 | 6,165 67,789
Deferred income taxes (9,032) | 5,348 (12,884)
Provision for (payment of) executive severance |
benefits (13,396) | 16,048 -
Tran$tock compensation expense - | - 1,590
Allowance for equity funds used during |
construction (AFUDC) (2,182) | (190) (1,257)
Changes in operating assets and liabilities: |
Deposits (516) | 511 (220)
Receivables 2,834 | (7,114) 18,524
Transportation and exchange gas receivable (40,662) | (5,701) 13,744
Inventories 5,300 | (2,647) 20,567
Payables 36,829 | (8,059) (41,578)
Transportation and exchange gas payable 29,583 | 4,934 (11,442)
Accrued liabilities 10,164 | (4,755) 7,966
Reserve for rate refunds (14,780) | (26,846) (66,915)
Other, net (21,978) | (439) (19,301)
_____________ | ____________ ____________
Net cash provided by (used in) operating activities 103,256 | (32,407) 31,680
_____________ | ____________ ____________
|
Cash flows from financing activities: |
Capital contribution by parent 5,539 | - -
Additions to long-term debt 80,000 | - -
Retirement of long-term debt (50,000) | - -
Retirement of preferred stock (49,744) | - (2,250)
Advances from affiliates, net (8,195) | 8,195 -
Dividends on preferred stock (1,647) | - (3,198)
_____________ | _____________ _____________
Net cash provided by (used in) financing activities (24,047) | 8,195 (5,448)
_____________ | _____________ _____________
|
Cash flows from investing activities: |
Property, plant and equipment, net of equity AFUDC (103,567) | (4,896) (33,599)
Sale of assets 15,829 | - -
Advances to affiliates, net (24,494) | 63,599 8,243
Other, net 973 | (24) (349)
_____________ | _____________ _____________
Net cash provided by (used in) investing activities (111,259) | 58,679 (25,705)
_____________ | _____________ _____________
|
Net increase (decrease) in cash and cash equivalents (32,050) | 34,467 527
Cash and cash equivalents at beginning of period 36,095 | 1,628 1,094
_____________ | _____________ _____________
Cash and cash equivalents at end of period $ 4,045 | $ 36,095 $ 1,621
_____________ | _____________ _____________
_____________ | _____________ _____________
|
Supplemental disclosures of cash flow information: |
Cash paid (refunded) during the year for: |
Interest (net of amount capitalized) $ 24,029 | $ 5,552 $ 32,837
Income taxes, net 20,126 | 12,286 (2,170)
The accompanying condensed notes are an integral part of these condensed financial statements.
</TABLE>
<PAGE>
TRANSCONTINENTAL GAS PIPE LINE CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
A. ORGANIZATION AND CONTROL AND BASIS OF PRESENTATION
Organization and Control
________________________
Prior to May 1, 1995, Transcontinental Gas Pipe Line Corporation (TGPL)
was a wholly-owned subsidiary of Transco Gas Company (TGC). TGC is a
wholly-owned subsidiary of Transco Energy Company (Transco).
As discussed in TGPL's 1994 Annual Report on Form 10-K, Transco and The
Williams Companies, Inc. (Williams) entered into a merger agreement
(Merger) pursuant to which Williams acquired Transco and its wholly-owned
subsidiaries. On the May 1, 1995 effective date of the Merger, Transco
declared and paid as dividends to Williams all of Transco's interests in
TGPL.
Basis of Presentation
_____________________
The condensed financial statements have been prepared from the books and
records of TGPL without audit. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. These condensed financial statements should be read
in conjunction with the financial statements and the notes thereto
included in TGPL's 1994 Annual Report on Form 10-K and included in TGPL's
First Quarter Report on Form 10-Q.
Through an agency agreement, Transco Gas Marketing Company (TGMC), an
affiliate of TGPL, manages all jurisdictional merchant gas sales of TGPL.
Under this agency agreement, TGMC bills TGPL for the cost of managing
TGPL's merchant gas sales service and receives all margins associated with
such business. Consequently, TGPL's merchant gas sales service has had no
impact on its results of operations.
Pursuant to a settlement that TGPL has with all its sales customers, TGPL
has in place a gas inventory charge (GIC) designed to allow TGPL to
recover its above-spot-market gas cost through March 31, 2001. TGPL
believes that the GIC agreed to with its customers will be adequate to
enable full recovery of its above-spot-market gas costs. Through an
agency agreement with TGPL, TGMC has assumed management of TGPL's
jurisdictional merchant gas sales service and, as TGPL's agent, is at risk
for any above-spot-market gas costs it may incur in excess of the amounts
recovered under the GIC.
Prior to May 1, 1995 and as a subsidiary of Transco, TGPL engaged in
transactions with Transco and other Transco subsidiaries, characteristic
of group operations. For consolidated cash management purposes, TGPL made
interest-bearing advances to Transco and received interest-bearing
advances and capital contributions from Transco. These advances were
represented by demand notes and TGPL recorded such advances as current in
the accompanying Pre-Acquisition Balance Sheet. As general Transco
corporate policy, the interest rate on intercompany demand notes was 1-
1/2% below the prime rate of Citibank, N.A.
Effective May 1, 1995, TGPL began participation in Williams' cash
management program. On that date, the balance of the advances due to
Transco were transferred by Transco to Williams. Subsequent to May 1,
1995, TGPL repaid advances due Williams and made advances to Williams.
These advances are represented by demand notes. TGPL currently expects to
receive payment of these advances within the next twelve months and has
recorded such advances as current in the accompanying Post-Acquisition
Balance Sheet. According to Williams' general corporate policy, the
interest rate on intercompany demand notes is the London Interbank Offered
Rate on the first day of the month plus 0.45%.
The acquisition of Transco Energy Company and its subsidiaries, including
TGPL, by Williams has been accounted for using the purchase method of
accounting. Accordingly, an allocation of the estimated purchase price
was assigned to the assets and liabilities of TGPL based on their
estimated fair values. The accompanying post-acquisition financial
statements reflect the pushdown of TGPL's share of the estimated purchase
price. The estimated purchase price allocation to TGPL primarily
consisted of a $1.3 billion allocation to property, plant and equipment,
which is being amortized on a straight-line basis at approximately $30
million per year, and adjustments to deferred taxes based upon the book
basis of the net assets recorded as a result of the acquisition. Current
Federal Energy Regulatory Commission (FERC) policy does not permit TGPL to
recover through rates amounts in excess of original cost.
Williams is continuing to evaluate the purchase price allocation.
Therefore, TGPL's Condensed Balance Sheet as of June 30, 1995 and
Condensed Statements of Income for the three months ended June 30, 1995
and for the period January 18, 1995 to June 30, 1995 have been prepared
based on a preliminary allocation of the purchase price prior to the
completion of studies and other information necessary for the final
purchase price allocation. Accordingly, the amounts presented are subject
to change, but any differences in the final purchase price allocation are
not expected to have a material effect on TGPL's condensed financial
statements.
Further, as a result of the change in control of Transco on January 18,
1995 and the effects of the preliminary allocation of the estimated
purchase price, TGPL's Condensed Statement of Income and Condensed
Statement of Cash Flows for the six months ended June 30, 1995, have been
segregated into a pre-acquisition period ending January 17, 1995 and a
post-acquisition period beginning January 18, 1995.
Certain other reclassifications have been made in the 1994 financial
statements to conform with the 1995 presentation.
<PAGE>
B. MERGER WITH THE WILLIAMS COMPANIES, INC.
The following table presents the changes in the components of TGPL's
common stockholder's equity, including the effects of the acquisition by
Williams, for the six months ended June 30, 1995 (expressed in thousands).
<TABLE>
<CAPTION>
Post-Acquisition | Pre-Acquisition
_________________ | ___________________
For the Period | For the Period
January 18, 1995 | January 1, 1995
to June 30, 1995 | to January 17, 1995
_________________ | ___________________
|
<S> <C> | <C>
Common Stock: |
Balance at beginning and end of period $ - | $ -
______________ | _______________
|
Premium on Capital Stock and Other Paid-in Capital: |
Balance at beginning of period 285,792 | 285,792
Loss on reacquired preferred stock, net (369) | -
Acquisition adjustment to eliminate retained earnings 519,179 | -
Acquisition adjustment to record assets and |
liabilities at fair value 717,060 | -
Capital contribution of aircraft by parent 5,540 | -
Capital contribution by parent 5,539 | -
______________ | _______________
|
Balance at end of period 1,532,741 | 285,792
______________ | _______________
|
Retained Earnings: |
Balance at beginning of period 519,179 | 529,035
Net income (loss) 44,904 | (9,662)
Dividends on preferred stock (722) | (194)
Acquisition adjustment to eliminate retained |
earnings (519,179) | -
_______________ | _______________
|
Balance at end of period 44,182 | 519,179
_______________ | _______________
|
Total Common Stockholder's Equity $ 1,576,923 | $ 804,971
_______________ | _______________
_______________ | _______________
</TABLE>
C. CONTINGENT LIABILITIES AND COMMITMENTS
There have been no new developments from those described in TGPL's 1994
Annual Report on Form 10-K or in TGPL's First Quarter Form 10-Q other than
described below.
Rate and Regulatory Matters
___________________________
Rate Matters
As discussed in TGPL's 1994 Annual Report on Form 10-K, on December 23,
1994, the United States Court of Appeals for the D. C. Circuit (D. C.
Circuit) issued an opinion remanding to the FERC the FERC's September 17,
1992 order establishing TGPL's rate of return in Docket No. RP92-137. On
June 7, 1995, the FERC issued an order on remand, stating that it was
considering using TGPL's capital structure, but seeking comments on a
number of issues related to the D. C. Circuit's remand. On August 7,
1995, TGPL filed comments in response to the June 7 order.
As discussed in TGPL's 1994 Annual Report on Form 10-K, on October 26,
1994, the FERC issued a notice of a request for initiation of a complaint
proceeding to investigate the functionalization of TGPL production area
facilities. On November 28, 1994, TGPL filed an answer to the complaint,
asking the FERC to delay action until June 1, 1995, at which time TGPL
would either submit a proposal to the FERC or notify the FERC of its
intentions. On June 1, 1995, TGPL filed with the FERC a letter advising
that, in light of certain outstanding issues concerning the FERC's
gathering policies, TGPL has not yet determined the precise form that a
gathering proposal to the FERC might take, or the timing of any such proposal.
On March 1, 1995, TGPL filed with the FERC a general rate case (Docket No.
RP95-197). The general rate filing proposes changes in the rates for
TGPL's transportation, sales and storage service rate schedules effective
April 1, 1995. The changes in rates would generate additional
jurisdictional revenues of approximately $132 million over the rates
currently in effect, based primarily on: (1) an increase in rate base
resulting from additional plant and higher working capital requirements
and a reduction in accumulated deferred income taxes; (2) an increase in
operation and maintenance expenses; and (3) an increase in TGPL's cost of
capital resulting from an increase in the equity component of the capital
structure used (the filing is based on TGPL's own capital structure) and
in the cost of equity from the pre-filed rate of return on equity of 14.45
percent to the proposed rate of return on equity of 15.25 percent.
TGPL also proposes to: (1) eliminate the non-gas demand charge under Rate
Schedule FS; (2) refunctionalize certain jointly owned transmission
facilities to the gathering function; and (3) eliminate the interruptible
transportation (IT) crediting mechanism. TGPL also filed pro forma tariff
sheets, to be effective on a prospective basis, for two new Part 284
services, an interconnect transfer service and a gas management service,
and a pro forma tariff sheet to reflect market-based rates for its non-IT
feeder transactions, should the FERC decide to set TGPL's IT rates for
hearing in this docket. TGPL further proposed to eliminate the "at risk"
certificate condition governing its Mobile Bay facilities on a
prospective basis. Finally, TGPL proposed certain other changes to the
terms and conditions of its tariff, none of which would have a significant
impact on operating income.
On March 31, 1995, the FERC issued an order on TGPL's filing which accepts
and suspends the tariff sheets, to be effective September 1, 1995, subject
to refund, relating to TGPL's rates, and establishes hearing procedures.
The March 31 order also accepts, to be effective April 1, 1995, the tariff
sheets changing TGPL's terms and conditions of service, subject to the
outcome of a technical conference at which parties will have the
opportunity to discuss TGPL's terms and conditions of service, system
operations and proposed new services. In that regard, on June 13, 1995,
the FERC granted TGPL's motion to transfer issues relating to the proposed
new services to the second phase of the hearing established for this
proceeding, described below. As to market-based IT rates, the FERC
accepted TGPL's pro forma tariff sheet but deferred action until after the
FERC has completed its generic review of market-based rates. As to the
elimination of the IT crediting mechanism, the FERC permitted TGPL to
eliminate the IT crediting mechanism subject to the outcome of the hearing
where the reasonableness of TGPL's test period projections for
interruptible services must be examined.
At a prehearing conference on April 18, 1995, the presiding Administrative
Law Judge (ALJ) adopted a procedural schedule establishing a phased
hearing for the rate issues raised by TGPL's filing. The first phase will
address the rate of return and capital structure in the filing with a
hearing schedule to commence in October 1995, and the second phase will
address the remaining rate issues with a hearing to commence in May 1996.
As discussed in TGPL's 1994 Annual Report on Form 10-K, the issue of the
allocation of certain costs to TGPL's merchant sales service, among
others, was referred to the hearing in TGPL's general rate case (Docket
No. RP92-137) by the FERC orders approving TGPL's implementation of Order
636. In an ALJ's initial decision issued on October 20, 1994, the ALJ
determined that there is no genuine issue of material fact warranting a
trial-type hearing on the issue, and directed TGPL to remove from its
gathering function approximately $5.6 million of indirect costs and to
reassign this amount to its merchant sales service. On November 21, 1994,
TGPL filed a brief on exceptions with the FERC, seeking to reverse the
ALJ's decision. On December 12, 1994, certain parties, including the
FERC's staff, filed briefs opposing TGPL's exceptions. In late February
1995, the FERC issued an order affirming the ALJ's October 20, 1994
decision and directing TGPL to file, within 15 days after the FERC's final
order on the initial decision, to remove from its gathering function a
total of $5.6 million of indirect costs and to reassign that amount to its
merchant service. TGPL filed for rehearing of the FERC's February 1995
order, and on May 24, 1995, the FERC denied TGPL's request for rehearing.
On June 1, 1995, TGPL filed revised tariff sheets to comply with the
FERC's orders. On June 29, 1995, the FERC issued an order accepting
TGPL's June 1 filing, effective July 1, 1995, subject to certain
corrections by TGPL which were filed on July 14, 1995. The revised tariff
sheets will have effect from July 1, 1995, until September 1, 1995, when
the RP95-197 rates become effective.
Order 636
As discussed in TGPL's 1994 Annual Report on Form 10-K, the issues of
TGPL's limited Section 4 filing with the FERC relating to TGPL's
production area rate design, TGPL's use of a systemwide cost of service
and the level of TGPL's gathering rates and aggregation/pooling services
in TGPL's production area were referred to a hearing in Docket No. RP92-
137. On July 19, 1995, the ALJ issued an initial decision finding that
TGPL's proposed production area rate design, and its existing use of a
systemwide cost of service and allocation of firm capacity in the
production area are unjust and unreasonable. The ALJ therefore
recommended that TGPL divide its costs between its production area and
market area, and permit its customers to renominate their firm
entitlements. The ALJ's decision is subject to review by the FERC.
Should the FERC issue an order consistent with the ALJ's recommendations,
such order would be for prospective effect only. TGPL intends to file
exceptions to the ALJ's decision on or before August 18, 1995.
TGPL expects that any Order 636 transition costs incurred should be
recovered from customers of TGPL, subject only to the costs and other
risks associated with the difference between the time such costs are
incurred and the time when those costs may be recovered from customers.
Order 94-A
TGPL's Rate Settlement and GIC Docket No. RP90-8 Settlement contains a
provision pursuant to which TGPL's customers, with the exception of
Columbia Gas Transmission Corporation (Columbia), have agreed not to
contest the Order 94-A payments previously made to TGPL by them. TGPL had
billed to and recovered from Columbia approximately $7 million of Order
94-A costs. In October 1993, TGPL and Columbia filed with the FERC for
approval a letter agreement in which TGPL agreed to refund $1.4 million to
Columbia, which amount is inclusive of principal and interest, in full and
final settlement of all issues in this proceeding. On January 26, 1994,
Columbia filed a letter with the FERC stating that, due to developments in
other pipeline company proceedings involving settlements of the issue of
recovery of Order 94-A costs from Columbia, Columbia could no longer
support the settlement between TGPL and Columbia. On February 13, 1995,
the FERC issued an order rejecting the October 26 settlement and requiring
TGPL to refund to Columbia within 30 days the principal amount of the
Order 94-A costs collected from Columbia. The FERC granted an extension
of time for making the refund, to and including 30 days after FERC action
on requests for rehearing. Both TGPL and Columbia requested rehearing of
the February 13 order. On May 1, 1995, the FERC issued an order denying
both TGPL's and Columbia's requests for rehearing of that order, and
directing TGPL to refund to Columbia within 30 days the principal amount
of the Order 94-A costs collected from Columbia, plus interest from
March 15, 1995. On May 31, 1995, TGPL made the required refund for which
TGPL had previously provided a reserve. On June 30, 1995, TGPL and
Columbia each filed with the D. C. Circuit a petition for review of the
FERC's orders.
<PAGE>
Legal Proceedings
_________________
Royalty claims
As discussed in TGPL's 1994 Annual Report on Form 10-K, in connection with
TGPL's renegotiations with producers to resolve take-or-pay and other
contract claims and to amend gas purchase contracts, TGPL has entered into
certain settlements which may require the indemnification by TGPL of
certain claims for "excess royalties" which producers may be required to
pay as a result of such settlements.
As also discussed in TGPL's 1994 Annual Report on Form 10-K, on
January 14, 1994, a lawsuit was filed in the 4th Judicial District Court
of Rusk County, Texas (Marathon Oil Company vs. Transcontinental Gas Pipe
Line Corporation and Transco Energy Company (Marathon) and, on March 15,
1994, a lawsuit was filed in the 189th Judicial District Court of Harris
County, Texas (Texaco, Inc. vs. Transcontinental Gas Pipe Line Corporation
(Texaco)). In the Marathon and Texaco lawsuits, the respective plaintiffs
each have made claims against TGPL for reimbursements of settlement
amounts paid to royalty owners. In the Marathon lawsuit, the court, on
July 17, 1995, granted TGPL's motion for partial summary judgement thereby
rejecting a major portion of one of Marathon's claims against TGPL.
Additionally, Marathon and Texaco have each now agreed to mediate with
TGPL the matters at issue in these lawsuits.
Dakota Gasification litigation
As discussed in TGPL's 1994 Annual Report on Form 10-K, the FERC issued an
order in October 1994, setting for hearing before an ALJ TGPL's petition
with the FERC requesting approval of the settlement agreement entered into
by TGPL and Dakota Gasification Company. The settlement agreement, if
approved by the FERC, would resolve litigation between TGPL and Dakota.
The hearing before the ALJ concluded in July 1995, and, pursuant to the
FERC's October 1994 order, the ALJ must issue an initial decision by
December 31, 1995.
Environmental Matters
_____________________
As of June 30, 1995, TGPL's reserve for estimated environmental assessment
and remediation and related costs was approximately $46 million.
During the second quarter of 1995, TGPL was named as a potentially
responsible party at an additional Superfund site in Louisiana. TGPL's
exposure for remediation of the site is currently estimated to be minimal.
In February 1995, three citizens filed suit against TGPL in federal
district court in Virginia for alleged violations of several provisions of
both federal and state law. Since 1991, TGPL has worked with the
appropriate Virginia authorities pursuant to an agreement to resolve
certain emissions issues also raised by the citizens. TGPL believes the
state environmental agency is in agreement with the actions proposed by
TGPL which will resolve those emission issues at its Virginia facilities.
TGPL believes the citizens' claims are without merit and is prepared to
vigorously defend the suit brought by the citizens. In March 1995, TGPL
filed a motion to dismiss based on lack of subject matter jurisdiction and
failure to state a claim. This motion is still pending.
TGPL has agreed to settle as a defendant in the Combustion, Inc. toxic
tort class action pending in U. S. District Court in Baton Rouge,
Louisiana. The District Court Judge has approved the settling parties'
Joint Motion and Preliminary Settlement Agreement, but the settlement will
not be final unless approved at the settlement fairness hearing scheduled
to be held in September 1995.
<PAGE>
Summary
While no assurances may be given, TGPL does not believe that the ultimate
resolution of the foregoing matters, taken as a whole and after
consideration of amounts accrued, insurance coverage or other
indemnification arrangements, will have a materially adverse effect upon
TGPL's future financial position, results of operations and cash flow
requirements.
D. FINANCING
Recapitalization
________________
In connection with the Merger, in January 1995, the Boards of Directors of
Transco and Williams approved a recapitalization plan for Transco. The
following actions were completed through the second quarter of 1995 in
connection with the recapitalization plan, as it impacts TGPL:
- Termination of Transco's Amended Bank Credit Facility dated
December 31, 1993, and the repayment of the outstanding balance of $36
million, replacing it with the Williams Credit Agreement described
below;
- Termination of the program to sell monthly trade receivables of TGPL,
replacing it with a new receivables program described below;
- Termination of Transco's Reimbursement Facility dated December 31,
1993; and
- Redemption by TGPL of all of its outstanding preferred stock at $100
per share plus accrued dividends.
Transco's Amended Bank Credit Facility was replaced with a Credit
Agreement among Williams and certain of its subsidiaries, including TGPL
(Williams Credit Agreement).
The Williams Credit Agreement, with a group of 22 banks, provides for an
$800 million working capital line of credit, under which TGPL can borrow
up to $400 million. Interest on advances is paid at a rate based on the
base rate of Citibank N.A.; the latest three-week moving average of
secondary market morning offering rates in the United States for three-
month certificates of deposit of major United States money market banks,
plus 1/2%; or the Federal Funds Rate in effect, plus 1/2%. As of June 30,
1995, outstanding borrowings under this agreement totaled $30 million.
Sale of Receivables
___________________
In May 1995, TGPL entered into a one year agreement with a major
commercial bank (Bank) pursuant to which TGPL can sell to the Bank up to
$100 million of undivided interests in certain of its trade receivables.
As of June 30, 1995, $89.7 million of these receivables were held by the
Bank.
E. PREFERRED STOCK
TGPL redeemed all outstanding shares of its three cumulative preferred
stock series in March 1995 for $49.7 million, or $100 per share, plus
accrued dividends of $0.6 million.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF TRANSCONTINENTAL GAS
PIPE LINE CORPORATION'S (TGPL) FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the financial
statements, notes and management's discussion contained in Items 7 and 8
of TGPL's 1994 Annual Report on Form 10-K and in TGPL's First Quarter
Report on Form 10-Q and with the condensed financial statements and notes
contained in this report.
INTRODUCTION
As discussed in TGPL's 1994 Annual Report on Form 10-K, Transco and
Williams entered into a Merger pursuant to which Williams acquired Transco
and its wholly-owned subsidiaries. On the May 1, 1995 effective date of
the Merger, Transco declared and paid as dividends to Williams all of
Transco's interests in TGPL.
CAPITAL RESOURCES AND LIQUIDITY
Financing
_________
Prior to the completion of the cash tender offer by Williams, TGPL funded
its capital requirements, including its working capital requirements, with
cash flows from operating activities, including the sale of trade
receivables, supplemented, when required, by repayments of funds advanced
to Transco or advances by Transco.
After the completion of the tender offer, TGPL began funding its capital
requirements with cash flows from operating activities, including the sale
of trade receivables, by repayments of funds advanced to Transco and
Williams, by advances from Transco and Williams and by borrowings under
the Williams Credit Agreement. At June 30, 1995, there were outstanding
borrowings under the Williams Credit Agreement totaling $30 million and
advances due TGPL by Williams totaled $76.9 million.
In connection with the Merger, in January 1995, the Boards of Directors of
Transco and Williams approved a recapitalization plan for Transco. See
Notes D and E of the Notes to Condensed Financial Statements for a
discussion of the actions completed through the second quarter of 1995 in
connection with the recapitalization plan, as it impacts TGPL.
In February 1995, Standard & Poor's Corporation and Moody's Investors
Service upgraded TGPL's debt securities from BB and Ba2 to BBB and Baal,
respectively. These upgrades should provide TGPL with greater access to
capital markets. A security rating is not a recommendation to buy, sell
or hold securities; it may be subject to revision or withdrawal at any
time by the assigning rating organization. Each rating should be
evaluated independently of any other rating.
Capitalization and Cash Flows
_____________________________
As shown in the following table, which is expressed in millions, at
June 30, 1995, the percentage of total debt to total invested capital was
30.2%, compared to 42.7% at December 31, 1994. The increase in common
stockholder's equity due to the preliminary allocation of the Williams
purchase price, partially offset by the retirement of TGPL's preferred
stock and borrowings under the Williams Credit Agreement, was the primary
reason for the reduction of the percentage of total debt to total invested
capital.
<PAGE>
<TABLE>
<CAPTION>
Post-Acquisition Pre-Acquisition
_______________ | _______________
June 30, | December 31,
1995 | 1994
_____________ | ____________
|
<S> <C> | <C> <C>
Common Stockholder's Equity $ 1,576.9 | $ 814.8
Preferred Stock - | 49.4
Long-term Debt, less Current Maturities 681.7 | 644.2
___________ | ___________
Total Capitalization 2,258.6 | 1,508.4
Short-term Debt and Current Maturities of Long-term Debt - | -
___________ | ___________
Total Invested Capital $ 2,258.6 | $ 1,508.4
___________ | ___________
___________ | ___________
|
Long-term Debt, less Current Maturities, as a Percentage |
of Total Capitalization 30.2% | 42.7%
Common Stockholder's Equity as a Percentage |
of Total Capitalization 69.8% | 54.0%
Total Debt as a Percentage of Total Invested Capital 30.2% | 42.7%
</TABLE>
For purposes of the discussion of variances between the six months ended
June 30, 1995 and the six months ended June 30, 1994, the pre-acquisition
and post-acquisition periods presented in the accompanying financial
statements for the first six months of 1995 have been combined for a pro
forma presentation of cash flows for the first six months of 1995.
<TABLE>
<CAPTION>
Six Months
Ended June 30,
__________________________
1995 1994
__________ __________
(In millions)
<S> <C> <C> <C>
Cash Flows Provided by Operating Activities $ 70.8 $ 31.7
__________ __________
__________ __________
</TABLE>
Net cash flows provided by operating activities for the six months ended
June 30, 1995 were $39 million higher than for the six months ended
June 30, 1994. The increase in cash flows was primarily the result of
lower cash refunds related to TGPL's rate cases paid during the six months
ended June 30, 1995 than during the same period of 1994 and the amount and
timing of collections of receivables and disbursements for payables.
<TABLE>
<CAPTION>
Six Months
Ended June 30,
__________________________
1995 1994
__________ __________
(In millions)
<S> <C> <C> <C> <C>
Cash Flows Used in Financing Activities $ 15.9 $ 5.4
__________ __________
__________ __________
</TABLE>
Net cash flows used in financing activities for the six months ended
June 30, 1995 included cash outflows for the retirement of $50 million of
preferred stock by TGPL, partly offset by net borrowings of $30 million by
TGPL under the Williams Credit Agreement and a capital contribution from
Williams of $5 million.
Net cash flows used in financing activities for the six months ended
June 30, 1994 were attributable to dividends of $3 million on preferred
stock and $2 million for the retirement of preferred stock.
<TABLE>
<CAPTION>
Six Months
Ended June 30,
__________________________
1995 1994
__________ __________
(In millions)
<S> <C> <C> <C> <C>
Cash Flows Used in Investing Activities $ 52.6 $ 25.7
__________ __________
__________ __________
</TABLE>
For the six months ended June 30, 1995, net cash flows used in investing
activities primarily consisted of $108 million for capital expenditures
for property, plant and equipment as shown in the following table. This
amount was partly offset by the repayment of advances to affiliates of $39
million and proceeds of $16 million for the sale of assets of which $12
million is from the sale of an interest in the Mobile Bay Lateral.
For the six months ended June 30, 1994, cash flows used in investing
activities were primarily for capital expenditures for property, plant and
equipment, partly offset by Transco's net repayment of advances from TGPL.
<TABLE>
<CAPTION>
Six Months
Ended June 30,
__________________________
<S> <C> <C>
Capital Expenditures 1995 1994
____________________ __________ __________
(In millions)
Market-Area Projects $ 33.3 $ 3.7
Supply-Area Projects 1.4 7.3
Existing Facilities and Other Projects 73.8 22.6
__________ __________
Total Capital Expenditures $ 108.5 $ 33.6
__________ __________
__________ __________
</TABLE>
Other Capital Requirements and Contingencies
____________________________________________
TGPL's capital requirements and contingencies are discussed in its 1994
Annual Report on Form 10-K. Other than described in Note C of the Notes
to Condensed Financial Statements, there have been no new developments
from those described in TGPL's 1994 Annual Report on Form 10-K with regard
to other capital requirements and contingencies.
CONCLUSION
__________
Although no assurances can be given, TGPL currently believes that the
aggregate of cash flows from operating activities, supplemented, when
necessary, by advances or capital contributions from Williams and
borrowings under the Williams Credit Agreement, will provide sufficient
liquidity to meet its capital requirements. If necessary, TGPL also
expects to be able to access public and private markets to finance its
capital requirements.
<PAGE>
RESULTS OF OPERATIONS
TGMC, through an agency agreement with TGPL, manages all jurisdictional
merchant gas sales made by TGPL. The financial performance of TGPL's
sales service, both merchant and non-merchant, is discussed separately in
the following discussion.
For purposes of the discussion of variances between the six months ended
June 30, 1995 and the six months ended June 30, 1994, the pre-acquisition
and post-acquisition periods presented in the accompanying financial
statements for the six months of 1995 have been combined for a pro forma
presentation of results of operations for the six months of 1995.
Net and Operating Income
TGPL's net income for the three months and six months ended June 30, 1995
was $23.9 million and $34.3 million, respectively, compared with net
income of $24.3 million and $51.9 million, respectively, for the three
months and six months ended June 30, 1994. The results for the three
months ended June 30, 1995 include net after-tax charges related to the
Merger totaling $4.4 million primarily for the amortization of the amount
of the Williams purchase price allocated to TGPL's property, plant and
equipment. The results for the six months ended June 30, 1995 include net
after-tax charges related to the Merger totaling $22.7 million, primarily
to provide for executive severance and termination benefits, substantially
all of which were not deductible for federal income tax purposes, and the
amortization of the amount of the Williams purchase price allocated to
TGPL's property, plant and equipment. Excluding the after-tax charges
related to the Merger, TGPL's net income for the three and six months
ended June 30, 1995 would have been $28.3 million and $57.0 million,
respectively.
Excluding the charges related to the Merger, the higher net income for the
three and six months ended June 30, 1995 was primarily due to higher net
transportation revenues of $7.9 million and $13.2 million, respectively,
(net of the related cost of transportation) and lower dividends on
preferred stock of $1.6 million and $2.3 million, respectively, partly
offset by increased operating expenses of $5.0 million and $10.2 million,
respectively.
Operating Expenses
Excluding the pre-tax effects of the charges related to the Merger in 1995
and the cost of sales and transportation of $172.9 million and $355.9
million for the three and six months ended June 30, 1995, respectively,
and $226.3 million and $481.1 million, respectively, for the comparable
periods in 1994, TGPL's operating expenses for the three and six months
ended June 30, 1995, were approximately $5.0 million and $10.2 million
higher, respectively, than the comparable periods in 1994. The increases
for the three and six months ended June 30, 1995 are primarily due to
increased underground storage costs of $2.3 million and $4.7 million,
respectively, increased contractual and professional services of $1.1
million and $2.4 million, respectively, and increased property and
liability insurance of $0.6 million and $1.0 million, respectively.
Transportation Services
TGPL's operating revenues related to its transportation services,
increased $8.1 million to $174.5 million for the three months ended
June 30, 1995 and increased $17.6 million to $350.1 million for the six
months ended June 30, 1995, when compared to the same periods in 1994.
Total transportation revenues increased for the three and six months ended
June 30, 1995 when compared to the same periods in 1994, primarily due to
higher revenues of $6.5 million and $10.6 million, respectively, from
increased throughput on the Mobile Bay lateral as a result of the change
from interruptible transportation to firm transportation.
As shown in the table below, TGPL's total market-area deliveries for the
three months ended June 30, 1995 were 11.8 TBtu, or 4%, higher than the
same period in 1994. The increased deliveries, primarily firm
transportation volumes, were mainly due to market growth and TGPL's new
Southeast Expansion service which began in the fourth quarter of 1994.
TGPL's total market-area deliveries for the six months ended June 30, 1995
were comparable to the same period of 1994.
The production-area deliveries for the three months and six months ended
June 30, 1995, decreased 12.6 TBtu, or 23%, and 11.1 TBtu, or 12%,
respectively, when compared to the same periods in 1994, due primarily to
increased competition among pipelines, especially intrastate pipelines,
for transportation of production area volumes and the release of firm
transportation capacity in the post Order 636 era. Additionally, in 1994
there were greater volumes transported for electricity generation due to
the shut-in of nuclear plants.
As a result of a straight fixed-variable (SFV) rate design and the
interruptible transportation revenue crediting requirement, decreases or
increases in system deliveries have no significant impact on operating
income.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
__________________________ ________________________
TGPL System Deliveries (TBtu) 1995 1994 1995 1994
____________________________ __________ __________ __________ _________
<S> <C> <C> <C> <C>
Market-area deliveries:
Long-haul transportation 202.6 192.8 426.9 432.4
Market-area transportation 95.6 93.6 239.6 233.0
__________ __________ _________ _________
Total market-area deliveries 298.2 286.4 666.5 665.4
Production-area transportation 41.6 54.2 80.7 91.8
__________ __________ _________ _________
Total system deliveries 339.8 340.6 747.2 757.2
__________ __________ _________ _________
__________ __________ _________ _________
</TABLE>
TGPL's facilities are divided into seven rate zones. Four are located in
the production area and three are located in the market area. Long-haul
transportation is gas that is received in one of the production-area zones
and delivered in a market-area zone. Market-area transportation is gas
that is both received and delivered within market-area zones. Production-
area transportation is gas that is both received and delivered within
production-area zones.
See Note C of the Notes to Condensed Financial Statements for a discussion
of TGPL's rate and regulatory matters.
Sales services
TGPL makes jurisdictional merchant gas sales to customers through a Firm
Sales (FS) program and an Optional Firm Sales (OFS) program coupled with
a firm transportation program as replacement for contract sales quantity.
These programs give customers the option to purchase daily quantities of
gas from TGPL at market-responsive prices in exchange for a demand charge
payment to TGPL designed to recover the costs of gas in excess of current
month spot prices that TGPL is obligated to pay under its producer
contracts. In addition, TGPL makes jurisdictional merchant sales through
an Interruptible Sales (IS) program and a Negotiated Sales (NS) program.
TGPL's operating revenues related to its sales services decreased $53
million to $142 million for the quarter ended June 30, 1995, when compared
to the same period in 1994. This decrease is primarily due to lower
volumes sold through TGPL's jurisdictional merchant sales services. For
the six months ended June 30, 1995, sales service revenues decreased $129
million to $293 million, when compared with the same period in 1994. Of
this decrease, $120 million was related to lower volumes sold through
TGPL's jurisdictional merchant sales services, $5 million was related to
the renegotiated FS fee beginning in April 1995, and $3 million was
related to TGPL's cash-out program for the settlement of current month
transportation imbalances. However, these decreases in revenues had no
effect on TGPL's operating or net income variances when compared to the
prior year quarter since the decrease was offset by a corresponding
decrease in the cost of sales.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
__________________________ ________________________
Gas Sales Volumes (TBtu) (1) 1995 1994 1995 1994
____________________________ __________ __________ __________ _________
<S> <C> <C> <C> <C>
Long-term sales 50.5 53.6 106.1 121.2
Short-term sales 19.5 31.3 48.1 49.7
__________ __________ _________ _________
Total gas sales 70.0 84.9 154.2 170.9
__________ __________ _________ _________
__________ __________ _________ _________
(1) TGMC, through an agency agreement with TGPL, manages all jurisdictional merchant gas sales made
by TGPL.
</TABLE>
Storage Services
TGPL's operating revenues for the three and six months ended June 30, 1995
related to its storage services increased $2.8 million and $5.3 million,
respectively, when compared to the three and six months ended June 30,
1994. These increases reflect an increase in TGPL's storage rates
effective in July 1994 due to higher storage rates charged to TGPL by the
operator of the Leidy and Wharton storage fields; however, this increase
in revenues was offset by a corresponding increase in underground storage
costs as reflected in the operating expense variance discussed above.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See discussion of legal proceedings in Note D of the Notes to
Condensed Financial Statements included herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
1 - TGPL filed a Form 8-K, Current Report dated April 18,
1995, to report that Transco notified Arthur Andersen
LLP that it was replacing Arthur Andersen LLP with Ernst
& Young LLP, the independent public accountants of The
Williams Companies, Inc.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSCONTINENTAL GAS PIPE LINE
CORPORATION
Dated: August 11, 1995 By /s/ Nick A. Bacile
__________________________________
(Signature)
Nick A. Bacile
Vice President, Finance and Controller
(Principal Financial Officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEET AND THE CONDENSED STATEMENT OF INCOME FOR THE SIX
MONTHS ENDED JUNE 30, 1995, CONTAINED IN TRANSCONTINENTAL GAS PIPE LINE
CORPORATION'S 1995 SECOND QUARTER REPORT ON FORM 10-Q AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000099250
<NAME> TGPL
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 4,045
<SECURITIES> 0
<RECEIVABLES> 24,072
<ALLOWANCES> 0
<INVENTORY> 60,445
<CURRENT-ASSETS> 428,396
<PP&E> 3,126,872
<DEPRECIATION> 99,648
<TOTAL-ASSETS> 3,626,880
<CURRENT-LIABILITIES> 417,037
<BONDS> 681,651
<COMMON> 0
0
0
<OTHER-SE> 1,576,923
<TOTAL-LIABILITY-AND-EQUITY> 3,626,880
<SALES> 292,542
<TOTAL-REVENUES> 723,962
<CGS> 292,385
<TOTAL-COSTS> 543,918
<OTHER-EXPENSES> 16,048
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,463
<INCOME-PRETAX> 64,958
<INCOME-TAX> 29,716
<INCOME-CONTINUING> 35,242
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,242<F1>
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>BEFORE PREFERRED DIVIDENDS OF $916.
</FN>
</TABLE>
