Merrill Lynch resumes coverage on Williams (WMB

) with buy.

Analyst Sam Brothwell says Williams is arguably the energy sector's best turnaround story, with a clearly defined business strategy and solid liquidity. He says growth is driven by deepwater Gulf of Mexico infrastructure development and a low-risk drilling program in the Rockies. He notes Williams currently sits on $3 billion of cash and estimates $1 billion in free-cash flow in 2004 and 2005.

Brothwell sees substantially reduced leverage between now and 2005. He estimates every $100 million of debt reduction adds about 1 cent to earnings per share. He sees 13 cents 2003 earnings per share, 41 cents for 2004, and 85 cents for 2005. He has a $12 12-month target.