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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 2001
REGISTRATION NO. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE WILLIAMS COMPANIES, WILLIAMS COAL SEAM GAS ROYALTY TRUST
INC. (EXACT NAME OF CO-REGISTRANTS AS SPECIFIED IN
(EXACT NAME OF CO-REGISTRANTS AS SPECIFIED IN THEIR CHARTER) THEIR CHARTER)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
73-0569878 75-6437433
(I.R.S. EMPLOYER IDENTIFICATION NUMBER) (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
WILLIAM G. VON GLAHN, ESQ. TRUST DIVISION
SENIOR VICE PRESIDENT AND GENERAL COUNSEL ROYALTY TRUST GROUP
THE WILLIAMS COMPANIES, INC. BANK OF AMERICA, N.A.
ONE WILLIAMS CENTER 901 MAIN STREET, 17TH FLOOR
TULSA, OKLAHOMA 74172 DALLAS, TEXAS 75202
(918) 573-2000 (214) 209-2364
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
INCLUDING AREA CODE, OF AGENT FOR SERVICE) AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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WITH COPIES TO:
G. MICHAEL O'LEARY GRANT C. LIGHTLE
ANDREWS & KURTH L.L.P. THOMPSON & KNIGHT L.L.P.
600 TRAVIS, SUITE 4200 1700 PACIFIC AVENUE, SUITE 3300
HOUSTON, TEXAS 77002 DALLAS, TEXAS 75201
(713) 220-4200 (214) 969-1700
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM
TIME TO TIME AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
IF THE ONLY SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE OFFERED
PURSUANT TO DIVIDEND OR INTEREST REINVESTMENT PLANS, PLEASE CHECK THE FOLLOWING
BOX. [ ]
IF ANY OF THE SECURITIES BEING REGISTERED ON THIS FORM ARE TO BE
OFFERED ON A DELAYED OR CONTINUOUS BASIS PURSUANT TO RULE 415 UNDER THE
SECURITIES ACT OF 1933, OTHER THAN SECURITIES OFFERED ONLY IN CONNECTION WITH
DIVIDEND OR INTEREST REINVESTMENT PLANS, CHECK THE FOLLOWING BOX. [X]
IF THIS FORM IS FILED TO REGISTER ADDITIONAL SECURITIES FOR AN OFFERING
PURSUANT TO RULE 462(b) UNDER THE SECURITIES ACT, PLEASE CHECK THE FOLLOWING BOX
AND LIST THE SECURITIES ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER
EFFECTIVE REGISTRATION STATEMENT FOR THE SAME OFFERING. [ ]
IF THIS FORM IS A POST-EFFECTIVE AMENDMENT FILED PURSUANT TO RULE
462(c) UNDER THE SECURITIES ACT, CHECK THE FOLLOWING BOX AND LIST THE SECURITIES
ACT REGISTRATION STATEMENT NUMBER OF THE EARLIER EFFECTIVE REGISTRATION
STATEMENT FOR THE SAME OFFERING. [ ]
IF DELIVERY OF THE PROSPECTUS IS EXPECTED TO BE MADE PURSUANT TO RULE
434, PLEASE CHECK THE FOLLOWING BOX. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED AMOUNT TO BE AGGREGATE OFFERING AMOUNT OF
AND SOLD BY THE SELLING UNITHOLDER REGISTERED(1) PRICE(1)(2)(3) REGISTRATION FEE
------------------------------------------------------- ------------------------- ------------------------ ---------------------
Units of Beneficial Interest........................ 3,568,791 $ 47,750,423 $ 11,937.61
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TOTAL............................................... 3,568,791 $ 47,750,423 $ 11,937.61
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(1) In the event of a unit split, unit dividend or similar transaction involving
the registrant's units, in order to prevent dilution, the number of units
registered shall automatically increase to cover the additional units in
accordance with Rule 416 under the Securities Act.
(2) The proposed maximum offering price per unit will be determined from time to
time by the registrants in connection with the issuance by the registrants of
the securities registered hereunder.
(3) The proposed maximum offering price per unit has been estimated solely to
calculate the registration fee under 457(c) based on the average of the high and
low reported sales price per unit on the New York Stock Exchange on September
25, 2001.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE
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The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Subject to Completion, Dated September 28, 2001
PROSPECTUS
3,568,791 TRUST UNITS
WILLIAMS COAL SEAM GAS ROYALTY TRUST
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The Williams Companies, Inc. may offer and sell in one or more
offerings up to 3,568,791 trust units representing undivided shares of
beneficial interest in Williams Coal Seam Gas Royalty Trust. These trust units
will consist of trust units acquired by Williams under an option agreement with
an unaffiliated third party. The trust units do not represent any interest in
Williams. You should read this prospectus carefully before you invest.
The units of beneficial interest are traded on the New York Stock
Exchange under the symbol "WTU." On September 27, 2001, the last reported sales
price for the common units as reported on the New York Stock Exchange was $13.10
per trust unit.
INVESTING IN THE TRUST UNITS INVOLVES RISKS. PLEASE READ "RISK FACTORS"
BEGINNING ON PAGE 8 OF THIS PROSPECTUS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
YOU SHOULD RELY ONLY ON THE INFORMATION INCLUDED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. NEITHER THE TRUST NOR WILLIAMS HAS AUTHORIZED
ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. NEITHER THE TRUST NOR
WILLIAMS IS MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS
NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION INCORPORATED BY
REFERENCE OR PROVIDED IN THIS PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN
THE DATE ON THE FRONT OF EACH OF THOSE DOCUMENTS.
The date of this Prospectus is September , 2001.
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TABLE OF CONTENTS
ABOUT THIS PROSPECTUS.......................................................3
WHERE YOU CAN FIND MORE INFORMATION.........................................3
SUMMARY OF THE OFFERING.....................................................4
SUMMARY RESERVE INFORMATION.................................................4
THE TRUST...................................................................6
THE WILLIAMS COMPANIES, INC.................................................7
RISK FACTORS OF THE TRUST...................................................8
FORWARD LOOKING STATEMENTS.................................................13
USE OF PROCEEDS............................................................14
COMPUTATION OF NET PROCEEDS................................................14
RECENT SALES PRICES AND DISTRIBUTIONS......................................15
DESCRIPTION OF THE TRUST UNITS.............................................16
DESCRIPTION OF THE TRUST AGREEMENT.........................................19
MATERIAL FEDERAL INCOME TAX CONSEQUENCES...................................22
STATE TAX CONSIDERATIONS...................................................28
ERISA CONSIDERATIONS.......................................................28
PLAN OF DISTRIBUTION.......................................................30
LEGAL MATTERS..............................................................30
EXPERTS....................................................................30
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ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that the trust and
Williams have filed with the Securities and Exchange Commission utilizing a
"shelf" registration process. These trust units are not currently owned by
Williams, but Williams has a contractual right and, under specified
circumstances, an obligation to repurchase these units from their present owner.
Under this shelf process, Williams may sell up to a total of 3,568,791 units of
beneficial interest in one or more offerings. This prospectus provides you with
a general description of the trust and Williams and the securities Williams may
offer under this prospectus. The information in this prospectus is accurate as
of its date. You should carefully read this prospectus and any additional
information described under the heading "Where You Can Find More Information."
In this prospectus references to the "trust" mean Williams Coal Seam
Gas Royalty Trust and references to "Williams" mean The Williams Companies, Inc.
References to "WPC" mean Williams Production Company, LLC, a wholly owned
subsidiary of Williams.
WHERE YOU CAN FIND MORE INFORMATION
The trust and Williams file annual, quarterly and other reports, proxy
statements and other information with the SEC. The trust's and Williams' current
SEC filings are available to the public over the Internet or at the SEC's web
site at http://www.sec.gov. You may also read and copy any of these documents at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the operation of the public reference rooms.
The SEC allows the trust and Williams to "incorporate by reference" the
information the trust and Williams file with them, which means that the trust
and Williams can disclose important information to you by referring you to those
documents. The information incorporated by reference is considered to be an
important part of this prospectus, and information that the trust and Williams
file later with the SEC will automatically update and supersede this
information. In all cases, you should rely on the later information provided
over different information included or incorporated by reference in this
prospectus.
The trust incorporates by reference into this prospectus the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until Williams sells
all of the units offered hereby:
o its annual report on Form 10-K for the fiscal year ended December
31, 2000;
o its quarterly reports on Form 10-Q for the quarters ended March 31,
2001 and June 30, 2001;
o the description of trust units contained in the trust's
registration statement on Form 8-A, dated August 27, 1992.
Williams incorporates by reference into this prospectus the documents
listed below and any future filings made with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until Williams sells
all of the units offered hereby:
o its annual report on Form 10-K for the fiscal year ended December
31, 2000;
o its quarterly reports on Form 10-Q for the quarters ended March 31,
2001 and June 30, 2001;
o its current reports on Form 8-K filed January 5, 2001, January 31,
2001, February 8, 2001, March 16, 2001, March 19, 2001, April 2,
2001, April 12, 2001, April 27, 2001, May 1, 2001, May 3, 2001, May
7, 2001, May 22, 2001 (restatement of the financial statements for
the year ended December 31, 2000
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to reflect Williams Communications Group, Inc., as discontinued
operations due to a tax-free spinoff), June 13, 2001, July 30,
2001, August 2, 2001, September 17, 2001 and September 25, 2001.
You may request a copy of these filings, in most cases without
exhibits, at no cost, by writing or telephoning us at our principal executive
offices located at each of the following addresses:
The Williams Companies, Inc. Williams Coal Seam Gas Royalty Trust
One Williams Center 901 Main Street, 17th Floor
Tulsa, Oklahoma 74172 Dallas, Texas 75202
Attention: Corporate Secretary Attention: Royalty Trust Division
Telephone: (918) 573-2000 Telephone: (214) 209-2364
SUMMARY OF THE OFFERING
Trust units offered by Williams........................ 3,568,791
Trust units outstanding................................ 9,700,000
Trust units outstanding after offering................. 9,700,000
Estimated future net revenues attributable to the trust's
net profits interests in reserves at year end December 31,
2000................................................... $138.3 million*
Use of proceeds........................................ Williams will receive all net proceeds from this
offering, which will be used for general corporate
purposes.
NYSE symbol............................................ WTU
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* This calculation is based upon prices in effect as of December 31, 2000 as
required by criteria established by the Commission. Such prices were
influenced by seasonal demand for natural gas and other factors and may not
be the most representative prices for estimating future net revenues or
related reserve data.
SUMMARY RESERVE INFORMATION
The following table summarizes net proved reserves estimated as of
December 31, 2000, and certain related information for the net profits interests
owned by the trust and underlying properties (as defined herein) from the
December 31, 2000 Reserve Report prepared by Miller and Lents, Ltd., independent
petroleum engineers. A description of the net profits interest owned by the
trust and the underlying properties burdened by such net profits interest is set
forth in the trust's annual report on Form 10-K for the year ended December 31,
2000 (referred to as the "Trust's 10-K"). A summary of the December 31, 2000
Reserve Report is filed as an exhibit to the Trust's 10-K and incorporated by
reference in this prospectus. Additional information regarding the net proved
reserves of the trust are provided in the Trust's 10-K and the notes to the
financial statements of the Trust's 10-K. Ordinarily, proved reserves are
calculated by deducting an amount of gas sufficient, if sold at the prices used
in preparing the reserve estimates for the net profits interest, to pay the
future estimated costs and expenses deducted in the calculation of the net
proceeds of the interest. Because the owner of the underlying properties has
agreed to pay certain operating and capital costs in respect of the net revenue
interests in the underlying properties, no amount of gas has been deducted from
the amount of reserves attributable to the net profits interest. Accordingly,
the reserves presented for the net profits interests reflect quantities of gas
that are free of future costs and expenses (other than production, severance and
ad valorem taxes in respect of the working interest properties (as defined
herein)) if the
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price and cost assumptions set forth in the December 31, 2000 Reserve Report
occur. The December 31, 2000 Reserve Report was prepared in accordance with
criteria established by the Commission and, accordingly, is based upon a
contractual price for gas for December 2000, of $5.2025 per MMBtu before
transportation charges. The contractual price for gas for September 2001, is
$2.09 per MMBtu before transportation charges.
Year Ended
December 31, 2000
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Royalty Underlying
Interests Properties
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Net Proved Gas Reserves (Bcf)(a)(b)................................ 39.5 97.7
Estimated Future Net Revenues (in millions) (c).................... $ 138.3 $516.5
Discounted Estimated Future Net Revenues (in millions)(c).......... $ 95.1 $365.9
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(a) Although the prices utilized in preparing the year-end estimates
in this table are in accordance with criteria established by the
Commission, the prices were influenced by seasonal demand for
natural gas and other factors and may not be the most
representative prices for estimating future net revenues or
related reserve data.
(b) The gas reserves were estimated by Miller and Lents, Ltd. by
applying decline curve analyses utilizing type curves for the
various areas in the San Juan Basin. The bases for the
consideration of type curves are the production histories, the
water and gas production rates and the initial reservoir pressures
of the wells in the separate areas.
(c) Estimated future net revenues are defined as the total reserves
attributable to the underlying properties and net profits
interests less royalties, severance and ad valorem taxes,
operating costs and future capital expenditures in excess of
estimated amounts to be paid by the current owner of the
underlying properties. Overhead costs (beyond the standard
overhead charges for the nonoperated properties) have not been
included, nor have the effects of depreciation, depletion and
Federal income tax. Estimated future net revenues and discounted
estimated future net revenues are not intended and should not be
interpreted as representing the fair market value for the
estimated reserves.
Based upon the production estimates used in the December 31, 2000
Reserve Report for the January 1, 2001 through December 31, 2003 period, and
assuming constant future Section 29 tax credits at the estimated 2000 rate of
$1.059 per MMBtu, the estimated total future credits available from the
production and sale of the net proved reserves from the net profits interests
would be approximately $13.5 million, having a discounted present value
(assuming a 10 percent discount rate) of approximately $12.3 million.
There are many uncertainties inherent in estimating quantities and
values of proved reserves and in projecting future rates of production and the
timing of development expenditures. The reserve data set forth above, although
prepared by independent petroleum engineers in a manner customary in the
industry, are estimates only, and actual quantities and values of natural gas
are likely to differ from the estimated amounts set forth. In addition, the
reserve estimates for the net profits interests will be affected by future
changes in sales prices for natural gas produced and costs that are deducted in
calculating net proceeds from net profits interests and net proceeds from infill
wells. Further, the discounted present values shown herein were prepared using
guidelines established by the Commission for disclosure of reserves and should
not be considered representative of the market value of the reserves or the
units. A market value determination would include many additional factors.
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THE TRUST
The trust was created under the laws of the state of Delaware in 1992.
In connection with the formation of the trust, on January 13, 1993, Williams
Production Company (WPC), a Delaware corporation and trustor of the trust,
conveyed its net profits interests in proved natural gas properties located in
the San Juan Basin of New Mexico and Colorado (referred to in this prospectus as
the "underlying properties") to the trust in exchange for all of the 9,700,000
authorized units of beneficial interest in the trust. On that same date, WPC
transferred all of the units of beneficial interest to Williams, its parent.
Williams, in turn, sold an aggregate of 5,980,000 trust units by means of a
public offering in the first quarter of 1993 and an additional 151,209 trust
units through a public offering in the second quarter of 1993. In a privately
negotiated transaction, Williams sold its remaining 3,568,791 trust units to an
unaffiliated third party in August of 2000 but has the right, and under
specified circumstances the obligation, to repurchase all or any part (generally
in lots of 10,000 trust units) of the transferred units. If Williams so
repurchases trust units, Williams intends to subsequently offer such repurchased
trust units for sale pursuant to this prospectus. If all of the trust units
covered by this prospectus are sold, the trust will have outstanding 9,700,000
publicly-traded trust units.
The only assets of the trust, other than cash and temporary investments
held for the payment of expenses and liabilities and distributions to the
unitholders, are the net profits interests, which generally entitle the trust to
receive a share of the net profits from natural gas production from the
underlying properties. Neither the trust nor Williams operates any of the wells
on any of the underlying properties.
The trust is governed by a trust agreement by and among the trust,
Williams and the trustees. The net profits interests are subject to the trust
agreement and a single conveyance by WPC to the trust of the net profits
interests. The trustees are JPMorgan Chase (as successor to Chase Bank), a
Delaware banking corporation, as Delaware trustee, and Bank of America N.A. (as
successor to NationsBank of Texas, N.A.), a national banking association, as
trustee. The trustees have only such powers as are provided in the trust
agreement and do not have any control over or responsibility relating to the
operation of the properties underlying the net profits interests.
The trust maintains its principal executive offices at Bank of America,
N.A., 901 Main Street, 17th Floor, Dallas, Texas 75202, telephone (214)
209-2364.
RECENT DEVELOPMENTS
Sale of Underlying Properties
Since March 1, 2001, the underlying properties have been owned by a
third party that is not affiliated with WPC. The trust agreement expressly
permits the sale of the underlying properties.
Concurrently with such sale of the underlying properties, WPC agreed to
continue to manage the underlying properties and to handle receipt and payment
of the funds. Williams and WPC both agreed that they would continue to perform
their respective obligations to the trust pursuant to the trust documents,
including performance assurances by Williams set forth in the conveyance
documents. For a description of such performance assurances see the heading "The
Royalty Interests--Williams' Performance Assurances in the Trust's 10-K."
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THE WILLIAMS COMPANIES, INC.
Williams, together with its subsidiaries, is a leading company in the
energy sector. Williams engages in the following types of energy-related
activities through Williams Gas Pipeline Company, LLC and Williams Energy
Services, LLC and their subsidiaries:
o transportation and storage of natural gas and related activities
through operation and ownership of five wholly owned interstate
natural gas pipelines and several pipeline joint ventures;
o exploration and production of oil and gas through ownership of 3.3
trillion cubic feet of proved natural gas reserves primarily
located in Colorado, New Mexico, Wyoming and Kansas;
o natural gas gathering, processing, and treating activities through
ownership and operation of approximately 11,450 miles of gathering
lines, 12 natural gas treating plants, and 17 natural gas
processing plants (three of which are partially owned) located in
the United States and Canada;
o natural gas liquids transportation through ownership and operation
of approximately 14,300 miles of natural gas liquids pipeline
(4,568 miles of which are partially owned);
o transportation of petroleum products and related terminal services
through ownership or operation of approximately 9,170 miles of
petroleum products pipeline and 80 petroleum products terminals
(some of which are partially owned);
o light hydrocarbon/olefin transportation through 300 miles of
pipeline in Southern Louisiana;
o ethylene production through a 5/12 interest in a 1.2 billion
pound/year facility in Geismar, Louisiana;
o production and marketing of ethanol and bio-products through
operation and ownership of two ethanol plants (one of which is
partially owned) and ownership of minority interests or
investments in four other plants;
o refining of petroleum products through operation and ownership of
two refineries;
o retail marketing primarily through 50 travel centers; and
o energy commodity marketing and trading.
Williams, through its subsidiaries, also directly invests in energy
projects primarily in Canada, South America and Lithuania and continues to
explore and develop additional projects for international investments. In
addition, Williams invests in energy and infrastructure development funds in
Asia and Latin America.
Williams is a holding company headquartered in Tulsa, Oklahoma.
Williams was originally incorporated under the laws of the State of Nevada in
1949 and was reincorporated under the laws of the State of Delaware in 1987.
Williams maintains its principal executive offices at One Williams Center,
Tulsa, Oklahoma 74172, telephone (918) 573-2000.
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RISK FACTORS OF THE TRUST
NATURAL GAS PRICES FLUCTUATE DUE TO A NUMBER OF FACTORS, AND LOWER
PRICES WILL REDUCE NET PROCEEDS AVAILABLE TO THE TRUST AND DISTRIBUTIONS TO
TRUST UNITHOLDERS.
The trust's quarterly distributions are highly dependent upon the
prices realized from the sale of natural gas. Natural gas prices can fluctuate
widely on a month-to-month basis in response to a variety of factors that are
beyond the control of the trust and Williams. Factors that contribute to price
fluctuation include, among others:
o political conditions in the Middle East;
o worldwide economic conditions;
o weather conditions;
o the supply and price of foreign natural gas;
o the level of consumer demand;
o the price and availability of alternative fuels;
o the proximity to, and capacity of, transportation facilities; and
o the effect of worldwide energy conservation measures.
Moreover, government regulations, such as regulation of natural gas
transportation and price controls, can affect product prices in the long term.
Lower natural gas prices may reduce the amount of natural gas that is
economic to produce and will reduce net profits available to the trust. The
volatility of energy prices reduces the predictability of future cash
distributions to trust unitholders. Most of the natural gas produced from the
underlying properties burdened by the trust's net profits interests is currently
being sold pursuant to a gas purchase contract entered into at the inception of
the trust whereby a subsidiary of Williams purchases the gas in accordance with
a contractual pricing mechanism. At present, this contract is year-to-year and
may be terminated at the end of any calendar year upon notice, and could be
terminated as soon as December 31, 2001. Under this agreement, the adverse
impact on trust revenues and, therefore, cash available for distribution to
unitholders, that would otherwise result from low natural gas prices is somewhat
mitigated, although the gas purchase agreement may significantly reduce trust
revenues and, therefore, cash available for distribution to unitholders, that
would otherwise result from high natural gas prices. We cannot assure you that
the gas purchase contract will remain in effect after December 31, 2001. If it
is terminated, revenues of the trust and, therefore, cash available for
distribution to unitholders, will become increasingly susceptible to
fluctuations resulting from changes in prevailing natural gas prices.
INCREASED PRODUCTION AND DEVELOPMENT COSTS FOR THE NET PROFITS
INTERESTS WILL RESULT IN DECREASED TRUST DISTRIBUTIONS.
Production and development costs attributable to the net profits
interests are deducted in the calculation of the trust's share of net proceeds.
Accordingly, higher or lower production and development costs, without
concurrent increases in revenues, will directly decrease or increase the amount
received by the trust for its net profits interests.
If development and production costs of the net profits interests
located in a particular state exceed the proceeds of production from the
properties, the trust will not receive net proceeds for those properties until
future proceeds from production in that state exceed the total of the excess
costs plus accrued interest during the deficit period. Development activities
may not generate sufficient additional revenue to repay the costs.
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TRUST RESERVE ESTIMATES DEPEND ON MANY ASSUMPTIONS THAT MAY PROVE TO BE
INACCURATE, WHICH COULD CAUSE BOTH ESTIMATED RESERVES AND ESTIMATED FUTURE
REVENUES TO BE TOO HIGH.
The value of the trust units will depend upon, among other things, the
amount of reserves attributable to the trust's net profits interests and the
estimated future value of the reserves. Estimating reserves is inherently
uncertain. Ultimately, actual production, revenues and expenditures for the
underlying properties will vary from estimates and those variations could be
material. Petroleum engineers consider many factors and make assumptions in
estimating reserves. Those factors and assumptions include:
o historical production from the area compared with production rates
from similar producing areas;
o the assumed effect of governmental regulation; and
o assumptions about future commodity prices, production and
development costs, severance and excise taxes, and capital
expenditures.
Changes in these assumptions can materially change reserve estimates.
The reserve quantities attributable to the trust's net profits interest
and revenues are based on estimates of reserves and revenues for the underlying
properties. The method of allocating a portion of those reserves to the trust is
complicated because the trust holds an interest in net profits and does not own
a specific percentage of the natural gas reserves.
OPERATING RISKS FOR THE WORKING INTEREST PROPERTIES CAN ADVERSELY
AFFECT TRUST DISTRIBUTIONS.
The occurrence of drilling, production or transportation accidents at
any of the underlying properties on which the current owner holds a working
interest (referred to in this prospectus as the "working interest properties")
will reduce trust distributions by the amount of uninsured costs. These
accidents may result in personal injuries, property damage, damage to productive
formations or equipment and environmental damages. Any uninsured costs would be
deducted as a production cost in calculating net proceeds payable to the trust.
NONE OF WILLIAMS, THE TRUST NOR ITS UNITHOLDERS CONTROL THE OPERATION
OR DEVELOPMENT OF THE UNDERLYING PROPERTIES AND HAVE LITTLE INFLUENCE OVER
OPERATION OR DEVELOPMENT.
Neither the trustees nor you, as trust unitholders, can influence or
control the operation or future development of the underlying properties. The
underlying properties are owned by a company not associated with Williams.
Although, under a management services contract, WPC continues to manage the
underlying properties and handles receipt and payment of funds relating to the
underlying properties and payments to the trust for the net profits interests,
WPC is not an operator of the underlying properties. Therefore Williams is
unable to significantly influence the operations or future development of the
underlying properties.
The current operators of the underlying properties are under no
obligation to continue operating the properties. Neither the trustee nor you, as
trust unitholders, have the right to replace an operator.
THE OWNER OF ANY UNDERLYING PROPERTY MAY ABANDON ANY PROPERTY,
TERMINATING THE RELATED NET PROFITS INTEREST.
WPC recently sold the underlying properties to an unaffiliated third
party and such third party may at any time transfer all or part of the
underlying properties to another unrelated third party. You will not be entitled
to vote on any transfer, and the trust will not receive any proceeds of any
transfer. Following any transfer, the underlying properties will continue to be
subject to the net profits interests of the trust, but the net proceeds from the
transferred property would be calculated separately and paid by the transferee.
The transferee would be responsible for all of the obligations relating to
calculating, reporting and paying to the trust net profits on the transferred
portion of the underlying properties, and the current owner of the underlying
properties would have no continuing obligation to the trust for those
properties. Specified obligations of WPC to the trust with respect to the
transferred properties would remain in effect including, without limitation, the
performance obligations of WPC under the conveyance documents.
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The operators or the current owner of the underlying properties, or any
transferee may abandon any well or property if it reasonably believes that the
well or property can no longer produce in commercially economic quantities. This
could result in termination of the net profits interest relating to the
abandoned well.
THE NET PROFITS INTERESTS CAN BE SOLD AND THE TRUST WOULD BE
TERMINATED.
The trust will be terminated and the trustee must sell the net profits
interests if the holders of 75% or more of the trust units approve the sale or
vote to terminate the trust. At any time after December 31, 2002, the trust will
be terminated and its assets liquidated if the holders of at least a majority of
the trust units affirmatively vote in favor of such termination, if the ratio of
cash proceeds from the net profits interests to administrative costs is less
than 1.2 to 1.0 for each of three consecutive years or if, on March 1 of any
calendar year, based on a reserve report as of December 31 of the prior year,
the net present value of estimated future net revenues of proved reserves
attributable to the net profits interests is equal to or less than $30 million.
Following any such termination and liquidation, the net proceeds of any sale
will be distributed to the trust unitholders and unitholders will receive no
further distributions from the trust. We cannot assure you that any such sale
will be on terms acceptable to all unitholders.
TRUST UNITHOLDERS HAVE LIMITED VOTING RIGHTS.
Your voting rights as a trust unitholder are more limited than those of
stockholders of most public corporations. For example, there is no requirement
for annual meetings of trust unitholders or for an annual or other periodic
re-election of the trustee. Unlike corporations which are generally governed by
boards of directors elected by their equity holders, the trust is administered
by an institutional trustee in accordance with the trust agreement and other
organizational documents. The trustee has extremely limited discretion in its
administration of the trust. Additionally, you have no voting rights in WPC or
in Williams.
TRUST UNITHOLDERS HAVE LIMITED ABILITY TO ENFORCE THE TRUST'S RIGHTS
AGAINST THE CURRENT OR FUTURE OWNERS OF THE UNDERLYING PROPERTIES.
The trust agreement and related trust law permit the trustee and the
trust to sue the current or any other future owner of the underlying properties
to compel it to fulfill the terms of the conveyance of the net profits
interests. If the trustee does not take appropriate action to enforce provisions
of the conveyance, your recourse as a trust unitholder would likely be limited
to bringing a lawsuit against the trustee to compel the trustee to take
specified actions. You probably would not be able to sue the current or any
future owner of the underlying properties.
THE LIMITED LIABILITY OF A TRUST UNITHOLDER IS UNCERTAIN.
Consistent with Delaware law, the trust agreement provides that the
unitholders have the same limitation on liability as is accorded to stockholders
of a corporation in Delaware. No assurance can be given, however, that the
courts in jurisdictions outside of Delaware will give effect to this limitation.
TRUST ASSETS ARE DEPLETING ASSETS AND, IF OPERATORS OF THE UNDERLYING
PROPERTIES DO NOT PERFORM ADDITIONAL DEVELOPMENT PROJECTS, THE ASSETS MAY
DEPLETE FASTER THAN EXPECTED.
The net proceeds payable to the trust are derived from the sale of
depleting assets. Accordingly, the portion of the distributions to trust
unitholders attributable to depletion may be considered a return of capital. The
reduction in proved reserve quantities is a common measure of depletion. Future
maintenance and development projects on the underlying properties will affect
the quantity of proved reserves. The timing and size of these projects will
depend on the market prices of natural gas. If operators of the properties do
not implement additional maintenance and development projects, the future rate
of production decline of proved reserves may be higher than the rate currently
expected by the trust and Williams. For federal income tax purposes, depletion
is reflected as a deduction, which is dependent upon the purchase price of a
trust unitholder's trust units. Please see the section entitled "Federal Income
Tax Consequences" below.
AN INCREASE IN PAYMENTS DUE TO THE U.S. GOVERNMENT FOR GAS PRODUCED ON
FEDERAL AND INDIAN LANDS MAY RESULT IN A REDUCTION OF NET PROCEEDS FROM NET
PROFITS INTERESTS.
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Approximately 80 percent of the underlying properties are burdened by
net profits interests held by the Federal government or the Southern Ute Indian
Tribe. Royalty payments due to the U.S. Government for gas produced from Federal
and Indian lands included in the underlying properties must be calculated in
conformance with regulations issued by the Minerals Management Service (MMS).
The trustee has been advised by WPC that the MMS has from time to time
considered the inclusion of the value of the federal income tax credits
available under Section 29 of the Internal Revenue Code that are attributable to
coal seam gas production (referred to in this prospectus as "Section 29 tax
credits") in the calculation of gross proceeds for purposes of calculating the
royalty that is payable to the MMS. If regulations providing for the inclusion
of Section 29 tax credits were adopted and upheld, royalty payments to the U.S.
Government would be increased which would decrease the net proceeds from net
profits interests and, therefore, the amounts payable to the trust. The
reduction in amounts payable to the trust would cause a corresponding reduction
in associated Section 29 tax credits available to unitholders.
The MMS generally audits royalty payments within a six-year period.
Although WPC, on behalf of the current owner of the underlying properties,
calculates royalty payments in accordance with its interpretation of the then
applicable MMS regulations, WPC will not know whether the royalty payments made
to the U.S. Government are totally in conformance with MMS standards until the
payments are audited. If an MMS audit, or any other audit by a Federal or state
body, results in additional royalty charges, together with interest, relating to
production from and after October 1, 1992 in respect of the underlying
properties, such charges and interest will be deducted in calculating the net
proceeds from net profits interests for the quarter in which the charges are
billed and in each quarter thereafter until the full amount of the additional
royalty charges and interest have been recovered.
IF INFILL WELLS ARE DRILLED, THEY COULD CAUSE A REDUCTION IN AMOUNTS
PAYABLE TO THE TRUST.
The net profits interests include a net profits interest on any "infill
wells," or any possible additional well drilled on a producing drilling block if
well spacing rules are effectively modified from the existing 320 acre spacing
that are completed on the working interest properties. No infill wells have been
drilled and none will be drilled unless the well spacing limitations for coal
seam gas wells in the San Juan Basin are reduced. If such changes occur and
infill wells are drilled, the net profits interests from the infill wells will
entitle the trust to receive 20 percent of the infill net proceeds. Infill wells
may recover a portion of the reserves that would otherwise be produced from
wells burdened by the trust's net profits interests. Since the trust is entitled
to receive 60 percent of the net proceeds from production burdened by its net
profits interests but only 20 percent of the net profits from infill wells the
drilling of infill wells may reduce payments to the trust, and ultimately
distributions to trust unitholders. Further, under current law, Section 29 tax
credits will not be available to trust unitholders for production from infill
wells even if an infill well recovers a portion of the reserves that would
otherwise have been recoverable from a well burdened by the trust's net profits
interest.
THE TRUST HAS NOT REQUESTED AN IRS RULING AND THE EXPECTED TAX
TREATMENT OF THE TRUST AND DISTRIBUTIONS TO TRUST UNITHOLDERS COULD DIFFER FROM
THE DESCRIPTION IN THIS PROSPECTUS IF THE IRS SUCCESSFULLY CHALLENGED THE
TREATMENT.
The trust received an opinion of tax counsel in connection with the
public offering that the trust is a "grantor trust" for federal income tax
purposes. This means that:
o you will be taxed directly on your pro rata share of the net income
of the trust, regardless of whether all of that net income is
distributed to you;
o you will be allowed depletion deductions equal to the greater of
percentage depletion or cost depletion, computed on the tax basis
of your trust units, and your pro rata share of other deductions of
the trust; and
o you will be allowed the tax credit of your share of qualifying coal
seam gas production provided under Section 29 of the Internal
Revenue Code, subject to limitations described in this prospectus.
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Neither Williams nor the trustees have requested a ruling from the IRS
regarding these tax questions. We cannot assure you such a ruling would be
granted if requested or that the IRS will not change its position in the future.
The tax treatment of the trust and trust unitholders could be different from
that described above if the IRS were to successfully challenge that treatment.
Please see the section entitled "Federal Income Tax Consequences" below.
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FORWARD-LOOKING STATEMENTS
Some statements made by the trust and Williams in this prospectus,
including information in documents incorporated by reference, are prospective
and constitute forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. All statements, other than statements of historical facts, that address
activities, events, outcomes and other matters that Williams or the trust plans,
expects, intends, assumes, believes, budgets, predicts, forecasts, projects,
estimates or anticipates (and other similar expressions) will, should or may
occur in the future are forward-looking statements. These forward-looking
statements involve known and unknown risks, uncertainties and other factors,
many of which are beyond our control. These risks include, but are not limited
to:
o uncertainty of estimates of future natural gas production;
o uncertainty of future development and production costs;
o commodity price fluctuations;
o inflation;
o lack of availability of goods and services;
o environmental risks;
o drilling and other operating risks;
o regulatory changes; and
o uncertainties inherent in estimating proved natural gas reserves
and in projecting future rates of production and timing of
development expenditures.
Should any of the events or circumstances contemplated by the risks or
uncertainties described above or elsewhere in this prospectus occur, or should
any material underlying assumptions prove incorrect, actual results may differ
materially from future results expressed or implied by the forward-looking
statements. All forward-looking statements attributable to Williams or the trust
are expressly qualified in their entirety by this cautionary statement.
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USE OF PROCEEDS
The trust will not receive any proceeds from the sale of the trust
units. Williams will receive all net proceeds from the sale of trust units
described in this prospectus. Williams will use the net proceeds received from
the sale of the trust units offered by this prospectus for general corporate
purposes.
COMPUTATION OF NET PROCEEDS TO THE TRUST
The provisions in the Trust Agreement governing the computation of the
net proceeds are detailed and extensive. The following description of the net
profits interests and the computation of net proceeds is subject to and
qualified by the more detailed provisions contained in the conveyance providing
for the conveyance of the net profits interests to the Trust that is included as
an exhibit to the trust's most recent Annual Report on Form 10-K and
incorporated herein by reference to this registration statement. Please see the
section entitled "Where You Can Find More Information" above.
NET PROFITS INTERESTS
The net profits interests are defined net profits interests carved from
the underlying properties. The net profits interests entitle the trust to
receive a specified percentage of the net proceeds from the sale of production
attributable to the properties burdened by that particular net profits interest,
the amount of which is based on a revenue formula specified in the net profits
interest. The net profits interest in the underlying properties generally
entitle the trust to receive the following:
o 60% of the net profits interests net proceeds, or NPI net proceeds.
The NPI net proceeds consist of:
o gas produced and sold from the net revenue interests (working
interest less lease burden) in the underlying properties in
which the current owner has a working interest and
o the revenue stream received by the current owner of the
underlying properties attributable to its 35% net profits
interest on 5,348 gross acres in La Plata County, Colorado,
which are generally referred to as the farmout properties; and
o a 20% interest in the net proceeds from the sale of production if
well spacing rules are effectively modified and additional wells
are drilled on producing drilling blocks on the working interest
properties, which wells are referred to as "infill wells".
NET PROCEEDS AND GROSS PROCEEDS
The amounts paid to the trust for the net profits interests are based
on the definitions of "gross proceeds" and "net proceeds" contained in the
conveyance and described below. Under the conveyance, net proceeds are computed
quarterly. WPC, on behalf of the current owner of the underlying properties,
pays a percentage (depending on the particular net profits interest) of the
aggregate net proceeds attributable to a computation period to the trust on or
before the last business day of the month following the computation period. WPC
will not pay to the trust interest on the net proceeds held by WPC prior to
payment to the trust. The trustee makes distributions to trust unitholders
quarterly. Please see the section entitled "Description of the Trust
Units--Distributions and Income Computations."
Net proceeds is the excess of gross proceeds over production costs and
excess production costs attributable to a prior computation period.
Gross proceeds means an amount received by WPC, on behalf of the
current owner of the underlying properties, from sales of natural gas produced
from the underlying properties, after deducting:
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o all general property (ad valorem), production, severance, sales,
gathering, excise and other taxes except income taxes, and
gathering costs; and
o other payments made to the owner of an underlying property.
Gross proceeds does not include consideration for the transfer or sale
of any underlying property by the current or any subsequent owner to any new
owner. Gross proceeds also does not include any amount for natural gas lost in
production or marketing or used by the owner of the underlying properties in
drilling, production and plant operations. Gross proceeds includes payments for
future production if they are not subject to repayment in the event of
insufficient subsequent production.
RECENT SALES PRICES AND DISTRIBUTIONS
The following table sets forth, for the periods indicated, the high and
low sales prices per unit and the amount of quarterly cash distributions per
unit made by the trust.
Sales Price
Distributions
2000 High Low Per Unit
---- ---- --- --------
First Quarter $7.875 $6.125 $.403
Second Quarter $8.125 $7.063 $.305
Third Quarter $9.250 $7.813 $.246
Fourth Quarter $9.375 $7.500 $.728
Sales Price
Distributions
2001 High Low Per Unit
---- ---- --- --------
First Quarter $16.15 $8.375 $.893
Second Quarter $21.75 $12.20 $.658
------------------------
At June 30, 2001, there were 9,700,000 trust units outstanding
and approximately 469 unitholders of record.
The trust's quarterly distributions are dependent upon the
prices realized from the sale of natural gas. Natural gas prices can fluctuate
widely on a month-to-month basis in response to a variety of factors that are
beyond the control of the trust and Williams. Factors that contribute to price
fluctuation include, among others, political conditions in the Middle East,
worldwide economic conditions, weather conditions, the supply and price of
foreign natural gas, the level of consumer demand, the price and availability of
alternative fuels, the proximity to, and capacity of, transportation facilities
and the effect of worldwide energy conservation measures.
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DESCRIPTION OF TRUST UNITS
Each trust unit represents an equal undivided share of beneficial
interest in the trust and is evidenced by a transferable certificate issued by
the trustee. Each trust unit entitles its holder to the same rights as the
holder of any other trust unit, and the trust has no other authorized or
outstanding class of equity security. Currently, there are 9,700,000 trust units
outstanding and there will continue to be 9,700,000 units outstanding regardless
of whether any or all of the units covered by this prospectus are sold. The
trust may not issue additional units.
DISTRIBUTIONS AND INCOME COMPUTATIONS
Each quarter, the trustee determines the amount of cash available for
distribution to the trust unitholders. The amount of cash available is equal to
the excess, if any, of the cash received by the trust from the net profits
interests and other sources that quarter, over the liabilities of the trust paid
during that quarter. Distributions are payable each quarter to unitholders of
record on the 45th day following the end of that quarter. The trustee
distributes the amount available for quarterly distributions within 60 days
after the end of each calendar quarter to each person who was a unitholder of
record on the associated record date, together with any interest expected to be
earned from the date the trustee receives the cash from the owner of the
underlying properties to the payment date.
The net profits interests may be sold under certain circumstances and
will be sold following termination of the trust. The net proceeds from sales of
the net profits interests will be distributed, together with any interest
expected to be earned on the net proceeds, to unitholders of record on the
record date established for such distribution. A special distribution will be
made of undistributed sales proceeds and other amounts received by the trust
aggregating in excess of $9,000,000. The record date for a special distribution
amount will be the 15th day following receipt of amounts aggregating a special
distribution amount by the trust or, if such date is within 10 days of the
record date for a quarterly distribution amount, the record date will be the
date as is established for the next quarterly distribution amount.
Unless otherwise advised by counsel or the IRS, the trustee will treat
the income and expenses of the trust for each quarter as belonging to the trust
unitholders of record on the quarterly record date. Trust unitholders will
recognize income and expenses for tax purposes in the quarter the trust receives
or pays those amounts, rather than in the quarter the trust distributes them.
Minor variances may occur. For example, the trustee could establish a reserve in
one quarter that would not result in a tax deduction until a later quarter. The
trustee could also make a payment in one quarter that would be amortized for tax
purposes over several months. Please see the section entitled "Federal Income
Tax Consequences" below.
TRANSFER OF NET PROFITS INTERESTS
WPC may, at any time after January 1, 2003, purchase for cash all of
the net profits interests attributable to underlying properties which are
uneconomical to operate. Upon termination of the trust, any remaining net
profits interests will be sold by the trust and any such sales may, and under
certain circumstances will, be made to WPC or Williams or their respective
successors or assigns.
POSSIBLE DIVESTITURE OF UNITS
If a judicial or administrative proceeding seeks to cancel or forfeit
any property in which the trust has an interest or otherwise challenge any
portion of the net profits interests because of the nationality or any other
status of any one or more unitholders, the trustee will give written notice to
each unitholder whose nationality or other status is an issue in the proceeding.
The notice will constitute a demand that the unitholder dispose of his units
within 30 days. If any unitholder fails to dispose of his units in accordance
with the notice, the trustee shall have the right to cancel all outstanding
certificates issued in the name of the unitholder, transfer all units held by
the unitholder to the trustee and sell the units (including by private sale).
The proceeds of the sale (net of sales expenses) will be held by the trustee in
a non-interest bearing account for the benefit of the unitholder and paid to the
unitholder upon surrender of the certificates representing the units. Cash
distributions payable to the unitholder will also be held in a non-interest
bearing account until the disposition by the unitholder of the units or
cancellation of certificates representing the units by the trustee.
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PERIODIC REPORTS TO TRUST UNITHOLDERS
The trustee mails to trust unitholders quarterly reports showing the
assets, liabilities, receipts and disbursements of the trust for each quarter
except the fourth quarter. The trustee also furnishes to the unitholders
comparable quarterly information with respect to the underlying properties. No
later than 120 days following the end of each year, the trustee is required to
mail to the trust unitholders an annual report containing audited financial
statements of the trust.
The trustee files all required trust federal and state income tax and
information returns. The trustee prepares and mails to trust unitholders of
record quarterly, and to all trust unitholders annually, reports that trust
unitholders need to correctly report their share of the income and deductions of
the trust.
Each trust unitholder and his representatives may examine, for any
proper purpose, during reasonable business hours the records of the trust and
the trustee.
VOTING RIGHTS OF TRUST UNITHOLDERS
Trust unitholders have more limited voting rights than those of
stockholders of most public corporations. For example, there is no requirement
for annual meetings of trust unitholders or for annual or other periodic
re-election of the trustee.
The trustee or trust unitholders owning at least 10% of the outstanding
trust units may call meetings of trust unitholders. Meetings must be held in
Dallas, Texas. The trustee must send written notice of the time and place of the
meeting and the matters to be acted upon to all of the trust unitholders at
least 20 days and not more than 60 days before the meeting. Trust unitholders
representing a majority of trust units outstanding must be present or
represented to have a quorum. Each trust unitholder is entitled to one vote for
each trust unit owned.
Unless otherwise required by the trust agreement, a matter is approved
by the vote of a majority of the trust units held by the trust unitholders at a
meeting where there is a quorum. This is true even if a majority of the total
trust units did not approve the matter. The affirmative vote of a majority of
the holders of the outstanding trust units is required to:
o terminate the trust after December 31, 2002;
o remove the trustee or Delaware trustee and appoint a successor; or
o amend the trust agreement (except no provision may be amended to
increase the power of the trustee or alter the rights of
unitholders as among themselves).
Prior to January 1, 2003, the affirmative vote of the holders of not
less than 75% of the outstanding trust units is required to terminate the trust.
The trustee must consent before all or any part of the trust assets can be sold
except in connection with the termination of the trust.
LIABILITY OF UNITHOLDERS
Consistent with Delaware law, the trust agreement provides that the
trust unitholders will have the same limitation on personal liability as is
accorded under the laws of Delaware to stockholders of a corporation for profit.
No assurance can be given, however, that the courts in jurisdictions outside of
Delaware will give effect to such limitation.
TRANSFER AGENT
The trustee has appointed Mellon Investor Services, L.L.C. (as
successor to Chemical Shareholder Services Group, Inc.), as transfer agent and
registrar for the Units.
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COMPARISON OF TRUST UNITS AND COMMON STOCK
You should be aware of the following ways in which an investment in
trust units is different from an investment in common stock of a corporation.
TRUST UNITS COMMON STOCK
----------- ------------
Voting............................... Limited voting rights. Corporate statutes provide specific
voting rights to stockholders on
electing directors and major
corporate transactions.
Income Tax........................... The trust is not subject Corporations are taxed on their
to income tax; trust unitholders income, and their stockholders are
are directly subject to taxed on dividends.
income tax on their
proportionate shares of trust
income, adjusted for tax
deductions.
Distributions........................ Substantially all trust income is Stockholders receive dividends at
distributed to trust unitholders. the discretion of the board of
directors.
Business and Assets.................. Interest is limited to specific A corporation conducts an active
assets with a finite economic life. business for an unlimited term and
can reinvest its earnings and raise
additional capital to expand.
Limited Liability.................... Delaware law and the laws of the Corporate laws provide that a
other states do not specifically stockholder is not liable for the
provide for limited liability of obligations and liabilities of the
trust unitholders. However, due to corporation, subject to limited
the size and nature of the trust exceptions.
assets, liability in excess of the
trust unitholders' investment is
extremely unlikely.
Fiduciary Duties..................... The trustee has a fiduciary duty to Officers and directors have a
trust unitholders, but none of fiduciary duty of loyalty to
Williams, the current owner of the stockholders and a duty to use due
underlying properties or WPC do. care in management and
administration of a corporation.
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DESCRIPTION OF THE TRUST AGREEMENT
The following information and the information included under
"Description of the Trust Units" summarize the material information contained in
the trust agreement. This summary may not contain all the information that is
important to you. For more detailed provisions concerning the trust, you should
read the trust agreement. The trust agreement was filed as an exhibit to the
trust's Annual Report on Form 10-K for the year ended December 31, 1992.
CREATION AND ORGANIZATION OF THE TRUST; AMENDMENTS
WPC, a wholly owned subsidiary of Williams, created the net profits
interests and conveyed them to the trust in exchange for 9,700,000 trust units
which it then distributed to Williams as a dividend. Williams sold 6,131,209
trust units in public offerings and 3,568,791 units in a private transaction to
an affiliate of the current owner of the underlying properties. Williams has the
right and, under specified circumstances, the obligation to repurchase the
3,568,791 units from their current owner. If Williams so repurchases trust
units, Williams intends to subsequently offer such repurchased trust units for
sale pursuant to this prospectus.
The trust was organized under Delaware law to acquire and hold the net
profits interests for the benefit of the trust unitholders. The trust is subject
to the conveyance document between WPC and the trust and to the trust agreement
among the trust, Williams, the Delaware trustee and the trustee. The trustee has
the power to collect and distribute proceeds receivable by the trust and to pay
trust liabilities and expenses.
Neither the trust nor the trustees have any control over or
responsibility for costs relating to the operation of the underlying properties.
Neither WPC nor the other operators of the underlying properties have any
contractual commitments to the trust to conduct further drilling on or to
maintain their ownership interest in any of these properties.
The beneficial interest in the trust is divided into 9,700,000 trust
units. Each of the trust units represents an equal undivided portion of the
trust. You will find additional information concerning the trust units in
"Description of the Trust Units."
Amendment of the trust agreement requires a vote of at least a majority
of the outstanding trust units. However, no amendment may--
o increase the power of the trustee to engage in business or
investment activities; or
o alter the rights of the trust unitholders as among themselves.
ASSETS OF THE TRUST
The assets of the trust consist of net profits interests and any cash
and temporary investments being held for the payment of expenses and liabilities
and for distribution to the trust unitholders.
DUTIES AND LIMITED POWERS OF THE TRUSTEE
The duties of the trustee are specified in the trust agreement and by
the laws of the State of Delaware. The trustee's principal duties consist of:
o collecting income attributable to the net profits interests;
o paying expenses, charges and obligations of the trust from the
trust's income and assets;
o distributing distributable income to the trust unitholders; and
o taking any action it deems necessary and advisable to best achieve
the purposes of the trust.
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The trustee is also authorized to sell and convey the net profits
interests without unitholder approval in some instances, including:
o upon termination of the trust; and
o in the event a net profits interests ceases to produce in
commercially paying quantities.
If a trust liability is contingent or uncertain in amount or not yet
currently due and payable, the trustee may create a cash reserve to pay for the
liability. If the trustee determines that the cash on hand and the cash to be
received is insufficient to cover the trust's liability, the trustee may borrow
funds required to pay the liabilities. The trustee may borrow the funds from any
person, including itself. The trustee may also mortgage the assets of the trust
to secure payment of the indebtedness. If the trustee borrows funds, the trust
unitholders will not receive distributions until the borrowed funds are repaid.
If the trustee must sell the net profits interests upon termination of
the trust, the trustee will distribute to the trust unitholders the net proceeds
from the sale, which distribution will likely be in the form of a one-time
special distribution.
Each quarter, the trustee will pay trust obligations and expenses and
distribute to the trust unitholders the remaining proceeds received from the net
profits interests. The cash held by the trustee as a reserve against future
liabilities or for distribution at the next distribution date must be invested
in:
o interest bearing obligations of the United States government;
o repurchase agreements secured by interest-bearing obligations of
the United States government; or
o bank certificates of deposit.
The trust may not acquire any asset except the net profits interests,
cash and temporary cash investments, and it may not engage in any investment
activity except investing cash on hand.
The trustee may require any trust unitholder to dispose of his trust
units if an administrative or judicial proceeding seeks to cancel or forfeit any
of the property in which the trust holds an interest because of the nationality
or any other status of that trust unitholder. If a trust unitholder fails to
dispose of his trust units, the trustee must purchase for cash from trust assets
the trust units held by the ineligible holder. The trustee may then either
cancel the trust certificate for the trust units so purchased or sell them to an
eligible third party with the proceeds being held in a non-interest bearing
account for the unitholder until the unitholder surrenders the certificates.
The trustee may agree to modifications of the terms of the conveyance
of the net profits interests or to settle disputes involving the conveyance. The
trustee may not agree to modifications or settle disputes involving the royalty
part of the conveyances if these actions would change the character of the net
profits interests in such a way that the net profits interests become working
interests or that the trust becomes an operating business.
LIABILITIES OF THE TRUST
Because the trust does not conduct an active business and the trustee
has little power to incur obligations, the trust has only incurred liabilities
for routine administrative expenses, such as the trustee's fees and accounting,
engineering, legal and other professional fees. Williams does not expect the
trust to incur other types of liabilities in the future.
RESPONSIBILITY AND LIABILITY OF THE TRUSTEES
The trustees are fiduciaries for the trust unitholders and are required
to act in the best interests of the trust unitholders at all times. The trustees
must exercise the same judgment and care in supervising and
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managing the trust's assets as persons of ordinary prudence, discretion and
intelligence would exercise in supervising and managing their own assets. Under
Delaware law, the trustees' duties to the trust unitholders are similar to the
duty of care owed by a corporate director to the corporation and its
shareholders. The primary difference between the trustees' duties and a
corporate director's duties is the absence of the legal presumption protecting
the trustees' decisions from challenge.
The trustees do not make business decisions affecting the assets of the
trust. Therefore, substantially all of the trustees' functions under the trust
agreement are ministerial in nature. Please see "--Duties and Limited Powers of
the Trustee," above. The trust agreement provides that the trustees may:
o charge for their services as trustees;
o retain funds to pay for future expenses and deposit them in its own
account in compliance with applicable law;
o lend funds at commercial rates to the trust to pay the trust's
expenses; and
o seek reimbursement from the trust for their out-of-pocket expenses.
In discharging their duties to trust unitholders, the trustees may act
in their discretion and will be liable to the trust unitholders only for fraud,
gross negligence or acts or omissions in bad faith. The trustees will not be
liable for any act or omission of their agents or employees unless the trustees
acted in bad faith or with gross negligence in their selection and retention.
The trustees will be indemnified for any liability or cost that they incur in
the administration of the trust, except in cases of fraud or acts or omissions
in bad faith. The trustees have a lien on the assets of the trust as security
for this indemnification and compensation earned as trustees. The trustees are
entitled to indemnification from trust assets. Trust unitholders will not be
liable to the trustees for any indemnification. Please see "Description of the
Trust Units--Liability of Trust Unitholders" above. The trustees must ensure
that recourse for all contractual liabilities of the trust are limited to the
assets of the trust and will be liable for such contractual liabilities if it
fails to do so.
Under Delaware law, if the trustees act in bad faith or with gross
negligence, the trustees will be liable to the trust unitholders for damages.
Delaware law also permits the trust unitholders to file actions seeking other
remedies, including:
o removal of a trustee;
o specific performance;
o appointment of a receiver;
o an accounting by a trustee to trust unitholders; and
o punitive damages.
DURATION OF THE TRUST; SALE OF NET PROFITS INTERESTS
The trust will terminate if:
o the trust sells all of the net profits interests;
o the ratio of cash proceeds from the net profits interests to
administrative costs is less than 1.2 to 1.0 for each of three
consecutive years;
o prior to January 1, 2003 the holders of 75% or more of the
outstanding trust units vote in favor of dissolution and,
thereafter, a majority of the outstanding trust units vote in favor
of dissolution;
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o on March 1 of any calendar year if, based on a reserve report as of
December 31 of the prior year, as of that date, the net present
value of estimated future net revenues of proved reserves
attributable to the net profits interests is equal to or less than
$30 million; or
o December 31, 2012.
WPC has the option to purchase the remaining net profits interests
within 60 days following the date of termination. The trustees would then sell
all of the trust's remaining assets, either by private sale or public auction,
and distribute the net proceeds of the sale to the trust unitholders.
COMPENSATION OF THE TRUSTEE
The trustees' compensation will be paid out of the trust's assets.
For the fiscal year ended December 31, 2000, the trustee was paid $
41,324.00 and the Delaware trustee was paid $6,149.00. The trust agreement
provides that the fee for each trustee shall increase 3% annually.
MISCELLANEOUS
The trustee may consult with counsel, accountants, geologists and
engineers and other parties the trustees believe to be qualified as experts on
the matters for which advice is sought. Under the trust agreement, the trustee
is protected from liability for any action it takes in good faith reliance upon
the opinion of the expert.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
This section summarizes the material federal income tax consequences of
the ownership and sale of trust units applicable to individuals who are citizens
or residents of the United States. Many aspects of federal income taxation that
may be relevant to a particular taxpayer or to certain types of taxpayers
subject to specific tax treatment are not addressed. In addition, the tax laws
can and do change regularly, and any future changes could have an adverse effect
on the ownership or sale of trust units.
This discussion is based on current provisions of the Internal Revenue
Code, existing and proposed regulations, current administrative rulings and
court decisions, all of which are subject to changes that may or may not be
retroactively applied. Some of the applicable provisions of the Internal Revenue
Code have not been interpreted by the courts or the IRS. The trust will not
request advance rulings from the IRS with respect to the tax consequences of
ownership or sale of trust units. Since no ruling is being requested from the
IRS with respect to the trust or trust unitholders, the IRS could successfully
challenge the statements made in this discussion, which do not bind the IRS or
the courts.
PROSPECTIVE TRUST UNITHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX LAWS
TO THEIR PARTICULAR SITUATION AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE
LAWS OF ANY STATE, LOCAL OR FOREIGN JURISDICTION.
TREATMENT OF TRUST UNITS
A purchaser of a trust unit will be treated, for federal income tax
purposes, as purchasing directly an interest in each of the net profits
interests. A purchaser will therefore be required to allocate the purchase price
of his unit between the net profits interest in the underlying properties and
the net profits interest in any infill wells in the proportion that the fair
market value of each bears to the fair market value of the trust unit. No infill
wells have been drilled to date. Williams believes that substantially all of the
purchase price will be allocated to the net profits interest in the underlying
properties. Information regarding purchase price allocations will be furnished
to unitholders by the trustee.
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CLASSIFICATION AND TAXATION OF THE TRUST
The trust is treated as a grantor trust and not as a business entity.
As a grantor trust, the trust is not subject to tax at the trust level. For tax
purposes, the trust unitholders are considered to own and receive the trust's
assets and income as though no trust were in existence. The trust files an
information return, reporting all items of income, credit or deduction which
must be included in the tax returns of the trust unitholders based on their
respective accounting methods and taxable years without regard to the accounting
method and tax year of the trust.
If the trust was determined to be a business entity at any time after
December 31, 1996 it would be taxable as a partnership unless it elected to be
taxed as a corporation. The principal tax consequence of the trust's being
treated as a partnership would be that it would report income on the accrual
method of accounting on a calendar year basis and all trust unitholders would
report their share of income from the trust in their tax year with which or
within which the tax year of the trust ends.
DIRECT TAXATION OF TRUST UNITHOLDERS
Since the trust is treated as a grantor trust for federal income tax
purposes, each trust unitholder is treated as owning a direct interest in the
net profits interests, is taxed directly on his share of trust income and is
entitled to claim his share of trust credits and deductions, subject to the
specific limitations discussed below. Trust unitholders report their share of
trust income, credits and expenses consistent with their method of accounting
and their tax year.
The trust, however, will allocate income, credits and deductions to
unitholders based on record ownership at quarterly record dates established for
distributions to the unitholders. It is unknown whether the IRS will accept that
allocation or will require income, credits and deductions of the trust to be
determined and allocated daily or require some method of daily proration, which
could result in an increase in the administrative expenses of the trust.
The trust will make quarterly distributions to unitholders of record on
each quarterly record date established for that distribution. The terms of the
trust agreement seek to assure to the extent practicable that income
attributable to cash being distributed will be reported to the unitholder who
receives the distribution, assuming that the unitholder is the owner of record
on the quarterly record date established for the distribution. In certain
circumstances, however, a unitholder will not receive the cash giving rise to
that income. For example, if the trustee establishes a reserve or borrows money
to satisfy debts and liabilities of the trust, income associated with the cash
used to establish that reserve or to repay that loan must be reported by the
unitholder, even though that cash is not distributed.
ROYALTY INCOME AND DEPLETION
The income of the trust consists primarily of a specified share of the
proceeds from the sale of coal seam gas produced from properties underlying the
net profits interest which is treated as royalty income qualifying for an
allowance for depletion. In order for an interest in an oil and gas property to
be a depletable interest for federal income tax purposes, the interest must
generally not be a production payment. A production payment is an interest which
has an expected economic life, at the time of its creation, that is shorter than
the economic life of the property it burdens. If the IRS were to successfully
contend that any portion of the net profits interest is a production payment as
a consequence of any retained interest, cash attributable to that portion would
be treated as interest income and principal repayment under the rules of the
Internal Revenue Code and an allowance for depletion would not be available for
that portion. That treatment would likely result in a material reduction in the
after-tax yield to a unitholder.
The depletion allowance must be computed separately by each trust
unitholder for each gas property. The IRS is presently taking the position that
a net profits interest burdening multiple properties is a single property for
depletion purposes. The trust takes the position that each of the net profits
interest in the underlying properties, the infill net profits interest and the
pre-1980 production net profits interest is a separate property for depletion
purposes.
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The deduction for depletion is determined annually and is the greater
of cost depletion or, if allowable, percentage depletion. Royalty income from
production attributable to trust units owned by independent producers qualifies
for percentage depletion. In general, percentage depletion is a statutory
allowance equal to 15% of the gross income from production from a property. An
owner of net profits interest includes in his gross income a percentage of gross
income from the properties burdened by the net profits interest equal to the
percentage derived from dividing his share of gross proceeds from the sale of
production from these properties by total gross proceeds from the sale of
production from these properties. Thus, gross income attributable to gross
proceeds used to pay production or other costs taken into account in computing
net profits generally are not included in the gross income of the owner of a net
profits interest. Percentage depletion is subject to a net income limitation of
100% of the taxable income from the property, computed without regard to
depletion deductions and specified loss carrybacks. The depletion deduction
attributable to percentage depletion for a taxable year is limited to 65% of the
taxpayer's taxable income for the year before allowance of independent producers
percentage depletion and specified loss carrybacks. Unlike cost depletion,
percentage depletion is not limited to the adjusted tax basis of the property,
although, like cost depletion, it reduces the adjusted tax basis, but not below
zero.
In computing cost depletion for each property for any year, the
allowance for the property is calculated by dividing the adjusted tax basis of
the property at the beginning of the year by the estimated total number of Mcf
of natural gas recoverable from the property. This amount is then multiplied by
the number of Mcf of natural gas produced and sold from the property during the
year. Cost depletion for a property cannot exceed the adjusted tax basis of the
property. Each trust unitholder computes cost depletion using his basis in his
trust units. Information is provided to each trust unitholder reflecting how his
basis should be allocated among each property represented by his trust units.
OTHER INCOME AND EXPENSES
During 2000, the only other income of the trust was interest income
earned on funds held as a reserve or pending distribution. Other expenses of the
trust include any state and local taxes imposed on the trust and administrative
expenses. Some amount of these administrative expenses may be the type of
miscellaneous itemized deductions that are allowable only to the extent that
they total more than 2% of an individual's adjusted gross income. We do not
anticipate that the amount of these expenses will be significant in relation to
the trust's income.
SECTION 29 COAL SEAM GAS TAX CREDIT
Unitholders will be entitled, provided specified requirements are met,
to claim tax credits pursuant to Section 29 of the Internal Revenue Code with
respect to sales of coal seam gas production attributable to the net profits
interest, the gross income from which is included in their taxable income. The
Section 29 tax credit provides to a taxpayer a dollar-for-dollar reduction in
his regular federal income tax liability, and, therefore, generally provides to
him a greater benefit than a deduction which merely reduces the amount of his
taxable income.
Williams believes that substantially all of the production currently
attributable to the net profits interests is coal seam gas. Provided a number of
requirements, many of which are factual in nature, are met, taxpayers are
entitled to the Section 29 tax credit for gas produced from coal seams. The
Section 29 tax credit applies only to coal seam gas produced in the United
States and sold to an unrelated party prior to January 1, 2003, from wells
drilled after December 31, 1979, and prior to January 1, 1993 but only if it is
from a property that did not produce coal seam gas in marketable quantities
before 1980, referred to as the "pre-80 property rule." The Section 29 tax
credit is equal to $3.00 per barrel of oil equivalent of qualified fuels
adjusted for inflation since 1979 by the GNP annual implicit price deflator.
Thus, the Section 29 tax credit was $ 6.14 per barrel of oil equivalent for
2000. The available Section 29 tax credit was approximately $1.38 per unit for a
unitholder who owned the same units of record on all four quarterly record dates
during 2000.
If production from a well becomes attributable to the net profits
interests because federal unit participating areas are expanded in the future,
that well (and any similar well) may be burdened by the pre-80 production net
profits interest and not the net profits interest in the underlying properties.
The IRS has administratively adopted a definition of the term "property" which,
if applied, should not result in a loss of Section 29 credits to the unitholders
with respect to their interest in production attributable to the net profits
interest in the underlying properties because of the pre-80 property rule.
Additionally, although no published authority on the definition of the term
"property"
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exists for this purpose, the term "property" is generally defined for federal
income tax purposes in a manner so that unitholders should not lose any of the
Section 29 tax credits by virtue of the pre-80 property rule even if production
from that well (or a similar well) becomes attributable to the net profits
interests.
Based on representations made by Williams with respect to the coal seam
production attributable to the net profits interests at the time of the initial
public offering of trust units that (a) production is coal seam gas; (b)
production is from wells drilled after 1979 and before 1993; (c) production will
be sold at a lawful price which is determined without regard to the provisions
of Section 107 of the Natural Gas Recovery Act of 1978 and subtitle B of title I
of such Act; and (d) none of the wells burdened by the net profits interest
produced marketable quantities of nonconventional production before 1980, and
based on the assumption that production will be sold to a party unrelated to the
unitholder subject to all the limitations discussed below, a unitholder will be
eligible to claim the Section 29 tax credit with respect to sales of coal seam
gas production attributable to the net profits interest in the underlying
properties, the gross income from which is included in his income, other than
any Section 29 tax credits lost as a result of the pre-80 property rule.
The amount included in income is determined by reference to a
unitholder's share of gross proceeds from the sale of production. Thus, for
example, if no net proceeds are payable to the trust, the unitholders will have
no gross income from production and no Section 29 tax credits will be available
to them. Further, if the IRS were to successfully contend that any portion of
the net profits interest is a production payment as a consequence of any
retained interest, no Section 29 tax credit will be available to a unitholder
with respect to that portion. In addition, no Section 29 tax credits will be
available under current law to a unitholder with respect to production
attributable to the infill net profits interest even if an infill well recovers
a portion of the reserves that prior to the drilling and completion of an infill
well were recoverable from a well burdened by the net profits interest that
qualified for Section 29 tax credits.
Finally, if a unit covering an underlying property is expanded as a
result of the addition of areas not generating production which qualifies for
the Section 29 tax credit, a unitholder's share of production qualifying for the
Section 29 tax credit will be reduced and his share of production not qualifying
for the Section 29 tax credit will be increased. That event could materially
reduce a unitholder's after-tax yield from the trust.
A unitholder is entitled to Section 29 tax credits only to the extent
that he is an owner of the economic interest at the time the coal seam gas is
produced. The trustee allocates the income received by the trust for a quarter,
and the Section 29 tax credit allocable to that income, to unitholders of record
on the quarterly record date for that quarter. That allocation may be challenged
by the IRS, but any challenge is likely to have material adverse effect only if
successful and only for unitholders who do not own trust units for a full
quarter for each record date, particularly unitholders who acquire trust units
shortly before a record date and sell shortly after a record date.
LIMITS ON DEDUCTIONS AND CREDITS
Generally, a taxpayer is entitled to claim deductions and tax credits
generated by an investment only if the investment has economic substance. The
application of this principle in the context of the production and sale of coal
seam gas which generate the Section 29 tax credit is uncertain because
application of this principle has not been addressed either by a court or the
IRS. An investment has economic substance if the investor can demonstrate that
there is a reasonable possibility of deriving an economic profit from the
investment in excess of a de minimis amount, apart from tax benefits. In many
cases, economic profit has been computed by comparing the taxpayer's total cash
investment to the total cash reasonably expected to be received by the taxpayer
as a result of the investment. At the time of the public offering, Williams,
expressed its belief only in connection with the public offering that the
purchaser of a unit in the public offering, who did not borrow funds in order to
purchase his unit, had a reasonable possibility of deriving an economic profit
in excess of a de minimis amount apart from tax benefits associated with
ownership of the unit. No assurance is given either by the trustee or counsel to
the trustee to a purchaser of trust units as to whether (and to what extent) a
purchaser will be entitled to claim deductions and the Section 29 tax credit
generated with respect to the trust units.
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ALTERNATIVE MINIMUM TAX
All taxpayers are subject to an alternative minimum tax. Alternative
minimum taxable income is the taxpayer's taxable income recomputed with various
adjustments plus items of tax preference. Alternative minimum tax is the excess
of a taxpayer's tentative minimum tax for a tax year over his regular tax for
that year.
The Section 29 tax credit allowable for any taxable year cannot exceed
the excess of the taxpayer's regular tax liability for that taxable year, as
reduced by the taxpayer's foreign tax credits and certain nonrefundable credits,
over the taxpayer's tentative minimum tax liability for that year. Any amount of
Section 29 tax credit disallowed for the tax year solely because of this
limitation will increase the taxpayer's minimum tax credit carryover. This
credit may be carried forward indefinitely as a credit against the taxpayer's
regular tax liability, subject, however to the limitation described in the first
sentence of this paragraph. There is no provision for the carryback or
carryforward of the Section 29 tax credit in any other circumstances, so, a
trust unitholder may not receive the full benefit of the tax credit depending on
the trust unitholder's particular circumstances.
SALE OF NET PROFITS INTERESTS
WPC may purchase, at any time after January 1, 2003, all or a portion
of the net profits interests attributable to underlying properties which are
uneconomical to operate. Additionally, the assets of the trust, including the
net profits interests, will be sold by the trustee in connection with the
termination of the trust. A sale by the trust of net profits interests will be
treated for federal income tax purposes as a sale of net profits interests by a
unitholder. Thus, a unitholder will recognize gain or loss on a sale of the net
profits interests by the trust. A portion of that income may be treated as
ordinary income to the extent of depletion recapture.
NON-PASSIVE ACTIVITY INCOME AND LOSS
The income, credits and expenses of the trust will not be taken into
account in computing the passive activity losses and income under Internal
Revenue Code Section 469 for a trust unitholder who acquires and holds trust
units as an investment and did not acquire the trust units in the ordinary
course of a trade or business. Section 29 tax credits generated by an investment
in the trust units, therefore, can be utilized to offset regular tax liability
on income from any source, subject to the limitations discussed above or arising
from the individual tax circumstances of each unitholder.
UNRELATED BUSINESS TAXABLE INCOME
Organizations that are generally exempt from tax under Internal Revenue
Code Section 501 are subject to tax on specified types of business income
defined as "unrelated business income." The income of the trust will not be
unrelated business taxable income so long as the trust units are not
debt-financed property within the meaning of Section 514(b) of the Internal
Revenue Code. In general, a trust unit would be debt-financed if the exempt
organization incurs debt to acquire a trust unit or otherwise incurs or
maintains a debt that would not have been incurred or maintained if the trust
unit had not been acquired.
SALE OF TRUST UNITS; DEPLETABLE BASIS
Generally, a trust unitholder will realize gain or loss on the sale or
exchange of his trust units measured by the difference between the amount
realized on the sale or exchange and his adjusted basis for his trust units. A
trust unitholder's basis in his trust units will be equal to the amount he paid
for the trust units, reduced by deductions for depletion claimed by the trust
unitholder, but not below zero. Except to the extent of the depletion recapture
amount explained below, gain or loss on the sale of trust units by a trust
unitholder who is an individual holding his trust units as a capital asset
should be a long-term capital gain, taxable at a maximum rate of 20%, if the
trust units have been held for more than 12 months. Upon the sale of the trust
units, a trust unitholder will be treated as having sold his share of the net
profits interests and must treat as ordinary income his depletion recapture
amount, which is an amount equal to the lesser of the gain on the sale or the
sum of the prior depletion deductions taken on the trust units, but not in
excess of the initial basis of the trust units. The IRS could take the position
that a portion of the
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sales proceeds is ordinary income to the extent of any accrued income at the
time of the sale that was allocable to the trust units sold even though the
income is not distributed to the selling trust unitholder.
BACKUP WITHHOLDING
Distributions of trust income generally will not be subject to backup
withholding unless the trust unitholder is an individual or other noncorporate
taxpayer and fails to comply with specified reporting procedures.
TAX SHELTER REGISTRATION
To avoid any potential penalty, the trust has been registered as a tax
shelter with the IRS. The trust's tax shelter registration number is
92364000072. The trustee will furnish the tax shelter registration number to
each trust unitholder. Each trust unitholder must disclose this number by
attaching Form 8271 to his tax return.
ISSUANCE OF A TAX SHELTER REGISTRATION NUMBER DOES NOT INDICATE THIS
INVESTMENT OR THE CLAIMED TAX BENEFITS HAVE BEEN REVIEWED, EXAMINED OR APPROVED
BY THE IRS.
SIGNIFICANT TAX BENEFITS
Based upon the representations and assumptions described in this
prospectus, counsel is of the opinion that the federal income tax benefits
described that are a significant feature of an investment in the trust units
will more likely than not, in the aggregate, be realized by unitholders.
Utilization of these benefits is subject to a number of limitations, however, as
described in this discussion of federal income tax consequences.
REPORTS
The trustee furnishes to trust unitholders tax information concerning
royalty income, depletion and the Section 29 tax credits on an annual basis.
Year end tax information is furnished to unitholders no later than March 15 of
the following year.
SUBSTANTIAL UNDERSTATEMENT PENALTY
The Internal Revenue Code imposes a penalty in certain circumstances
for a substantial understatement of taxes if a taxpayer's tax liability is
understated by more than the greater of (a) 10 percent of the taxes required to
be shown on the return and (b) $5,000 ($10,000 for most corporations). The
penalty (which is not deductible) is 20 percent of the understatement.
Except in the case of understatements attributable to "tax shelter"
items, which are subject to special rules discussed below, an item of
understatement will not give rise to the penalty if: (i) there is or was
"substantial authority" for the taxpayer's treatment of the item or (ii) all the
facts relevant to the tax treatment of the item are adequately disclosed on the
return or on a statement attached to the return and there is a reasonable basis
for the tax treatment of such item. In the case of trust units, an individual
unitholder may make adequate disclosure with respect to particular tax items if
specified conditions are met.
Special rules enacted in December 1994 could affect the application of
these provisions with regard to a corporation acquiring trust units after
December 8, 1994, to the extent these provisions were found to apply to the
ownership of trust units.
In the case of understatements attributable to "tax shelter" items, the
substantial understatement penalty may be avoided only if the taxpayer
establishes that, in addition to having substantial authority for his position,
he reasonably believed that the treatment claimed was more likely than not the
proper treatment of the item. A "tax shelter" item is one that arises from a
form of investment if its principal purpose was the avoidance or evasion of
federal income tax. Regulations promulgated by the IRS indicate that an entity
or person has a principal purpose of avoidance or evasion of federal income tax
if that purpose "exceeds any other purpose." No assurance is given either by the
trustee or counsel to the trustee as to the possible application of this
penalty, in part because that application
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depends largely upon the individual circumstances under which the trust units
were acquired. As a result, purchasers of trust units in should consult with
their personal tax advisors.
STATE TAX CONSIDERATIONS
The following is intended as a brief summary of information regarding
state income taxes and other state tax matters affecting individuals who are
unitholders. Unitholders are urged to consult their own legal and tax advisors
with respect to these matters.
Unitholders should consider state and local tax consequences of holding
trust units. The trust owns net profits interests burdening gas properties
located in New Mexico and Colorado. Both New Mexico and Colorado have income
taxes applicable to individuals. A unitholder is generally required to file
state income tax returns and/or pay taxes in those states and may be subject to
penalties for failure to comply with such requirements. In addition, these
states may require the trust to withhold tax from distributions to unitholders
to the extent these distributions are attributable to income from properties
located in these states.
The trustee will provide information concerning the trust units
sufficient to identify the income from trust units that is allocable to each
state. Unitholders should consult their own tax advisors to determine their
income tax filing requirements with respect to their share of income of the
trust allocable to states imposing an income tax on that income.
The trust has been structured to cause the trust units to be treated
for certain state law purposes essentially the same as other securities, that
is, as interests in intangible personal property rather than as interests in
real property. If the trust units are held to be real property or an interest in
real property under the laws of either or both of these states, a unitholder,
even if not a resident of these states, could be subject to devolution, probate
and administration laws, and inheritance or estate and similar taxes, under the
laws of that state.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974 regulates pension,
profit-sharing and other employee benefit plans to which it applies. ERISA also
contains standards for evaluation of fulfillment of legally prescribed fiduciary
duties and responsibilities by persons who are fiduciaries of those plans and
requirements which are applicable to transactions involving assets of those
plans. In addition, the Internal Revenue Code provides similar requirements and
standards which are applicable to transactions involving assets of qualified
plans, which include the types of plans mentioned above and to individual
retirement accounts ("IRAs"), whether or not subject to ERISA.
A fiduciary of any such plan that is subject to ERISA should carefully
consider fiduciary standards under ERISA regarding the plan's particular
circumstances before authorizing an investment in trust units. A fiduciary
should consider, among other things:
o whether the investment satisfies the prudence requirements of
Section 404(a)(1)(B) of ERISA;
o whether the investment satisfies the diversification requirements
of Section 404(a)(1)(C) of ERISA; and
o whether the investment is in accordance with the documents and
instruments governing the qualified plan as required by Section
404(a)(1)(D) of ERISA.
A fiduciary should also consider whether an investment in trust units
might result in direct or indirect nonexempt prohibited transactions under
Section 406 of ERISA and Internal Revenue Code Section 4975. In deciding whether
an investment involves a prohibited transaction, a fiduciary must determine
whether there are plan assets involved in the transaction. On November 13, 1986,
the Department of Labor published final regulations concerning whether or not a
qualified plan's assets would be deemed to include an interest in the underlying
assets of an entity for purposes of the reporting, disclosure, fiduciary
responsibility and prohibited transactions restrictions provisions of ERISA and
parallel provisions of the Internal Revenue Code. These regulations provide that
the
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underlying assets of an entity will not be considered "plan assets" if the
equity interests in the entity in which an ERISA plan and/or an IRA invests are
a publicly offered security. The trust units are publicly traded on the New York
Stock Exchange. Fiduciaries, however, will need to determine whether the
acquisition of trust units could result in a nonexempt prohibited transaction
under the general requirements of ERISA Section 406 and Internal Revenue Code
Section 4975.
The prohibited transaction rules are complex, and persons involved in
prohibited transactions are subject to civil penalties and possible personal
liability for breach of fiduciary duties as a result of involvement in any
violation of prohibited transactions restrictions. For those reasons, potential
plan investors should consult with their legal counsel to determine the
consequences under ERISA and the Internal Revenue Code of their acquisition and
ownership of trust units.
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PLAN OF DISTRIBUTION
Williams may sell trust units in one or more transactions:
o directly to purchasers or through agents in individually negotiated
transactions; or
o at a fixed price or prices, which may be changed, through
underwriter(s) who may act as principal(s) or as agents(s).
If a sale of trust units will be through underwriters, a prospectus
supplement will be filed and will name any underwriters and describe the terms
of the transaction with them, which will be incorporated in an underwriting
agreement that will be entered into at the time of the sale. The underwriting
agreement may provide for indemnification of the underwriters by Williams
against specific liabilities, including liabilities under the Securities Act of
1933.
One or more of the underwriters or agents for Williams, or affiliates
of those underwriters or agents, may engage in transactions with and perform
services for Williams in the ordinary course of business.
LEGAL MATTERS
Andrews & Kurth L.L.P., Houston, Texas, counsel for Williams, will give
a legal opinion as to the validity of the trust units being offered and a tax
opinion described in the section of this prospectus captioned "Federal Income
Tax Consequences." Any additional information regarding counsel for any
underwriters will be described in a prospectus supplement.
EXPERTS
Certain information incorporated by reference in this prospectus
regarding the estimated quantities of reserves of the underlying properties and
net profits interests owned by the trust, the future net revenues from such
reserves and the present value thereof is based on estimates of the reserves and
present values prepared by or derived from estimates prepared by, Miller and
Lents, Ltd., independent petroleum engineers.
The financial statements of the Williams Coal Seam Gas Royalty Trust
appearing in the trust's Annual Report (Form 10-K) for the year ended December
31, 2000, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
With respect to the unaudited condensed interim financial information
for the three-month periods ended March 31, 2001 and 2000 and the three-month
and six-month periods ended June 30, 2001 and 2000, incorporated by reference in
this Prospectus, Ernst & Young LLP have reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate reports, included in Williams Coal Seam Gas
Royalty Trust's Quarterly Reports on Form 10-Q for the quarters ended March 31
and June 30, 2001, and incorporated herein by reference, state that they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted considering the limited nature of the review procedures applied.
The independent auditors are not subject to the liability provisions of Section
11 of the Securities Act of 1933 (the "Act") for their reports on the unaudited
interim financial information because those reports are not a "report" or a
"part" of the Registration Statement prepared or certified by the auditors
within the meaning of Sections 7 and 11 of the Act.
The consolidated financial statements and schedules of The Williams
Companies, Inc. at December 31, 2000 and 1999, and for each of the three years
in the period ended December 31, 2000, appearing in Williams's Form 8-K filed
with the Securities and Exchange Commission on May 22, 2001, have been audited
by Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements and schedules are incorporated herein by reference in
reliance upon such report given on the authority of such firm as experts in
accounting and auditing.
-30-
33
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the approximate amount of the fees
and expenses payable by Williams in connection with the offering described in
this Registration Statement:
APPROXIMATE
AMOUNT
-----------
Securities and Exchange Commission registration fee............... $ 11,937
Accounting fees and expenses...................................... 30,000
Legal fees and expenses........................................... 50,000
Miscellaneous expenses............................................ 1,000
-----------
TOTAL.................................................... $ 92,937
===========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The trust agreement provides that the trustees will be indemnified by
the trust against any and all liability and expenses incurred by each of them
individually or as trustees in the administration of the trust, except for any
liability or expense resulting from fraud or acts or omissions in bad faith.
Williams, a Delaware corporation, is empowered by Section 145 of the
General Corporation Law of the State of Delaware, subject to the procedures and
limitations stated therein, to indemnify any person against expenses (including
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by them in connection with any threatened, pending, or
completed action, suit, or proceeding in which such person is made party by
reason of their being or having been a director, officer, employee, or agent of
Williams. The statute provides that indemnification pursuant to its provisions
is not exclusive of other rights of indemnification to which a person may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors, or otherwise. The By-laws of Williams provide for indemnification by
Williams of its directors and officers to the fullest extent permitted by the
General Corporation Law of the State of Delaware. In addition, Williams has
entered into indemnity agreements with its directors and certain officers
providing for, among other things, the indemnification of and the advancing of
expenses to such individuals to the fullest extent permitted by law, and to the
extent insurance is maintained, for the continued coverage of such individuals.
Policies of insurance are maintained by Williams under which the
directors and officers of Williams are insured, within the limits and subject to
the limitations of the policies, against certain expenses in connection with the
defense of actions, suits, or proceedings, and certain liabilities which might
be imposed as a result of such actions, suits or proceedings, to which they are
parties by reason of being or having been such directors or officers.
II-1
34
ITEM 16. EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*4.1 Trust Agreement of Williams Coal Seam Gas Royalty Trust
effective as of December 1, 1992, by and among Williams
Production Company, The Williams Companies, Inc. and Chemical
Bank Delaware and Bank of America, N.A. (as successor to
NationsBank of Texas, N.A.), as trustees (filed as Exhibit 4.1
to the Registrant's Form 10-K for the year ended December 31,
1992 and incorporated herein by reference).
*4.2 First Amendment to the Trust Agreement of Williams Coal Seam
Gas Royalty Trust effective as of December 15, 1992, by and
among Williams Production Company, The Williams Companies,
Inc., Chemical Bank Delaware and Bank of America, N.A. (as
successor to NationsBank of Texas, N.A.) (filed as Exhibit 4.2
to the Registrant's Form 10-K for the year ended December 31,
1992 and incorporated herein by reference).
*4.3 Second Amendment to the Trust Agreement of Williams Coal Seam
Gas Royalty Trust effective as of January 12, 1993, by and
among Williams Production Company, The Williams Companies,
Inc., Chemical Bank Delaware and Bank of America, N.A. (as
successor to NationsBank of Texas, N.A.) (filed as Exhibit 4.3
to the Registrant's Form 10-K for the year ended December 31,
1992 and incorporated herein by reference).
*4.4 Net Profits Conveyance effective as of October 1, 1992, by and
among Williams Production Company, The Williams Companies,
Inc., and Bank of America, N.A. (as successor to NationsBank
of Texas, N.A.), and Chemical Bank Delaware (filed as Exhibit
4.4 to the Registrant's Form 10-K for the year ended December
31, 1992 and incorporated herein by reference).
5.1 Opinion of Andrews & Kurth L.L.P. as to legality of the
securities registered hereby.
8.1 Opinion of Andrews & Kurth L.L.P. regarding tax matters.
23.1 Consent of Ernst & Young LLP regarding Williams Coal Seam Gas
Royalty Trust
23.2 Consent of Ernst & Young LLP regarding The Williams Companies,
Inc.
23.3 Consent of Andrews & Kurth L.L.P. (set forth in their opinion
filed as Exhibit 5.1)
23.4 Consent of Miller and Lents, Ltd.
24.1 Power of Attorney.
99.1 The information under the section captioned "Tax
Considerations".
*99.2 Reserve Report, dated November 21, 1992, on the estimated
reserves, estimated future net revenues and the discounted
estimated future net revenues attributable to the Net profits
interests and the underlying properties as of October 1, 1992,
prepared by Miller and Lents, Ltd., independent petroleum
engineers, included as Exhibit A of the Prospectus dated
January 13, 1993, which constitutes a part of the Registration
Statement on Form S-3 of The Williams Companies, Inc.
(Registration No. 33-53662) (filed as Exhibit 28.1 to the
Registrant's Form 10-K for the year ended December 31, 1992
and incorporated herein by reference).
*99.3 Reserve Report, dated March 6, 2001, on the estimated
reserves, estimated future net revenues and the discounted
estimated future net revenues attributable to the Net profits
interests and the underlying properties as of December 31,
2000, prepared by Miller and Lents, Ltd., independent
petroleum engineers (filed as Exhibit 99.3 to the Registrant's
Form 10-K for the year ended December 31, 2000 and
incorporated herein by reference).
II-2
35
----------
* Such exhibit has heretofore been filed with the Securities and Exchange
Commission as part of the filing indicated and is incorporated herein by
reference.
ITEM 17. UNDERTAKINGS.
The trust and Williams hereby undertake that, for purposes of
determining any liability under the Securities Act, each filing of the trust's
and Williams' annual reports pursuant to Section 13(a) of 15(d) of the Exchange
Act that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The trust and Williams hereby undertake:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) to reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereto) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) (sec.230.424(b) of
this chapter) if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective registration
statement;
(iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement;
(2) that, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering; and
(4) that for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrants' annual report pursuant
to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
36
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of Williams pursuant to the foregoing provisions, or otherwise, Williams has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event a claim for indemnification against
such liabilities (other than the payment by Williams of expenses incurred or
paid by a director, officer or controlling person of Williams in a successful
defense of any action, suit or proceeding) is asserted against Williams by such
director, officer or controlling person in connection with the securities being
registered, Williams will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Dallas and State of Texas (with respect to the
trust) or in the City of Tulsa and State of Oklahoma (with respect to Williams)
on the 28th day of September 2001.
WILLIAMS COAL SEAM GAS ROYALTY TRUST
By: Bank of America, trustee
By: /s/ RON E. HOOPER
-----------------------------------
Ron E. Hooper
Senior Vice President
THE WILLIAMS COMPANIES, INC.
By: /s/ SUZANNE H. COSTIN
-----------------------------------------
Suzanne H. Costin
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the date indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Keith E. Bailey Chairman of the Board & September 28, 2001
-------------------------------------- Chief Executive Officer
Keith E. Bailey* (principal executive officer)
/s/ Jack D. McCarthy Senior Vice President September 28, 2001
-------------------------------------- (principal financial officer)
Jack D. McCarthy*
/s/ Gary R. Belitz Controller September 28, 2001
-------------------------------------- (principal accounting officer)
Gary R. Belitz*
/s/ Hugh M. Chapman Director September 28, 2001
--------------------------------------
Hugh M. Chapman*
/s/ Glenn A. Cox Director September 28, 2001
--------------------------------------
Glenn A. Cox*
II-4
37
/s/ Thomas H. Cruikshank Director September 28, 2001
--------------------------------------
Thomas H. Cruikshank*
/s/ William E. Green Director September 28, 2001
--------------------------------------
William E. Green*
/s/ W.R. Howell Director September 28, 2001
--------------------------------------
W.R. Howell*
/s/ James C. Lewis Director September 28, 2001
--------------------------------------
James C. Lewis*
/s/ Charles M. Lillis Director September 28, 2001
--------------------------------------
Charles M. Lillis*
/s/ George A. Lorch Director September 28, 2001
--------------------------------------
George A. Lorch*
/s/ Gordon R. Parker Director September 28, 2001
--------------------------------------
Gordon R. Parker*
/s/ Janice D. Stoney Director September 28, 2001
--------------------------------------
Janice D. Stoney*
/s/ Joseph H. Williams Director September 28, 2001
--------------------------------------
Joseph H. Williams*
* By: /s/ Suzanne H. Costin
--------------------------------------
Suzanne H. Costin
Attorney-in-Fact
II-5
38
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
*4.1 Trust Agreement of Williams Coal Seam Gas Royalty Trust
effective as of December 1, 1992, by and among Williams
Production Company, The Williams Companies, Inc. and Chemical
Bank Delaware and Bank of America, N.A. (as successor to
NationsBank of Texas, N.A.), as trustees (filed as Exhibit 4.1
to the Registrant's Form 10-K for the year ended December 31,
1992 and incorporated herein by reference).
*4.2 First Amendment to the Trust Agreement of Williams Coal Seam
Gas Royalty Trust effective as of December 15, 1992, by and
among Williams Production Company, The Williams Companies,
Inc., Chemical Bank Delaware and Bank of America, N.A. (as
successor to NationsBank of Texas, N.A.) (filed as Exhibit 4.2
to the Registrant's Form 10-K for the year ended December 31,
1992 and incorporated herein by reference).
*4.3 Second Amendment to the Trust Agreement of Williams Coal Seam
Gas Royalty Trust effective as of January 12, 1993, by and
among Williams Production Company, The Williams Companies,
Inc., Chemical Bank Delaware and Bank of America, N.A. (as
successor to NationsBank of Texas, N.A.) (filed as Exhibit 4.3
to the Registrant's Form 10-K for the year ended December 31,
1992 and incorporated herein by reference).
*4.4 Net Profits Conveyance effective as of October 1, 1992, by and
among Williams Production Company, The Williams Companies,
Inc., and Bank of America, N.A. (as successor to NationsBank
of Texas, N.A.), and Chemical Bank Delaware (filed as Exhibit
4.4 to the Registrant's Form 10-K for the year ended December
31, 1992 and incorporated herein by reference).
5.1 Opinion of Andrews & Kurth L.L.P. as to legality of the
securities registered hereby.
8.1 Opinion of Andrews & Kurth L.L.P. regarding tax matters.
23.1 Consent of Ernst & Young LLP regarding Williams Coal Seam Gas
Royalty Trust
23.2 Consent of Ernst & Young LLP regarding The Williams Companies,
Inc.
23.3 Consent of Andrews & Kurth L.L.P. (set forth in their opinion
filed as Exhibit 5.1)
23.4 Consent of Miller and Lents, Ltd.
24.1 Power of Attorney.
99.1 The information under the section captioned "Tax
Considerations".
*99.2 Reserve Report, dated November 21, 1992, on the estimated
reserves, estimated future net revenues and the discounted
estimated future net revenues attributable to the Net profits
interests and the underlying properties as of October 1, 1992,
prepared by Miller and Lents, Ltd., independent petroleum
engineers, included as Exhibit A of the Prospectus dated
January 13, 1993, which constitutes a part of the Registration
Statement on Form S-3 of The Williams Companies, Inc.
(Registration No. 33-53662) (filed as Exhibit 28.1 to the
Registrant's Form 10-K for the year ended December 31, 1992
and incorporated herein by reference).
39
*99.3 Reserve Report, dated March 6, 2001, on the estimated
reserves, estimated future net revenues and the discounted
estimated future net revenues attributable to the Net profits
interests and the underlying properties as of December 31,
2000, prepared by Miller and Lents, Ltd., independent
petroleum engineers (filed as Exhibit 99.3 to the Registrant's
Form 10-K for the year ended December 31, 2000 and
incorporated herein by reference).
----------
* Such exhibit has heretofore been filed with the Securities and Exchange
Commission as part of the filing indicated and is incorporated herein by
reference.