Williams Partners Reports Third-Quarter 2011 Financial Results

TULSA, Okla., Nov. 1, 2011 /PRNewswire/ -- Williams Partners L.P. (NYSE: WPZ) today announced unaudited third-quarter 2011 net income of $342 million, or $0.91 per common limited-partner unit, compared with third-quarter 2010 net income of $253 million, or $0.63 per common unit.

Year-to-date through Sept. 30, Williams Partners reported net income of $987 million, or $2.63 per common unit, compared with net income of $815 million, or $1.87 per common unit for the same period in 2010.

The increases in net income for the third-quarter and year-to-date 2011 periods are primarily due to higher natural gas liquid margins (NGL) and fee-based revenues in the midstream business. There is a more detailed discussion of the midstream and gas pipeline results in the business segment performance section below.

The results throughout this release have been recast to reflect the fourth-quarter 2010 asset acquisition from Williams. In the recasting of the partnership's net income, all of the acquired assets' net income occurring prior to the closing date was allocated to Williams, which resulted in a lower allocation of net income to limited partners for 2010.

Strong Business Performance, 2010 Acquisitions Drive Higher Distributable Cash Flow in 2011

For third-quarter 2011, Williams Partners' distributable cash flow attributable to partnership operations was $368 million, compared with $240 million for third-quarter 2010.  The 53-percent increase in DCF attributable to partnership operations in the third quarter was due to the previously noted improved results in the midstream business, as well as the growth of the partnership via asset acquisitions in the second half of 2010.  

Williams Partners' DCF attributable to partnership operations in the nine months of 2011 was $1,206 million, compared with $829 million for the same period in 2010.

The 45-percent increase in DCF attributable to partnership operations in the year-to-date period is primarily due to the growth of the partnership via the first-quarter 2010 asset acquisitions, as well as improved results in the midstream business.

CEO Perspective

Alan Armstrong, chief executive officer of Williams Partners' general partner, made the following comments:

"Williams Partners continues to perform very well, generating significant earnings and cash flow.  Our third-quarter adjusted segment profit was up 36 percent, while our distributable cash flow attributable to partnership operations was up 53 percent.

"Our cash distribution coverage ratio also remains very strong, allowing us to immediately reinvest in our various growth projects – reducing the need to raise additional equity capital or debt.  At the same time, we also continue to be an industry leader in distribution growth, which we expect to continue to grow at 6-10 percent annually.

"We've had a number of key growth projects come online recently and we continue to expand our opportunities and seize growth in both of our businesses.  We have significant midstream growth projects underway in all of our key regions and Transco continues to expand to meet power generation demand in the Southeast."

Guidance for 2011-13 Updated  

Williams Partners is updating its commodity price assumptions and guidance for 2011-13 adjusted segment profit and capital expenditures.

The adjusted segment profit ranges for 2011-13 are being updated with no change to the midpoint to reflect somewhat lower expected crude oil and natural gas prices.

Capital expenditure guidance for 2011 is being reduced to reflect timing changes in capital spending. The capital expenditure guidance for 2012-13 is being increased to reflect the inclusion of the proposed Keathley Canyon project in the deepwater Gulf of Mexico, as well as other timing changes on capital spending.

Williams Partners' updated assumptions for certain energy commodity prices for 2011-13 and the corresponding guidance for the partnership's earnings and capital expenditures are displayed in the following table.

Business Segment Performance

Williams Partners' operations are reported through two business segments, Gas Pipeline and Midstream Gas & Liquids.

Gas Pipeline

Williams Partners owns interests in three major interstate natural gas pipeline systems – Transco, Northwest Pipeline and Gulfstream. Transco and Northwest Pipeline have a combined total annual throughput of approximately 2,800 trillion British Thermal Units of natural gas, which is approximately 14 percent of the natural gas consumed in the United States. Combined peak-day delivery capacity is approximately 14 billion cubic feet per day (Bcf/d).

Gas Pipeline reported segment profit of $170 million for third-quarter 2011, compared with $161 million for third-quarter 2010.  For the first nine months of 2011, Gas Pipeline reported segment profit of $497 million, compared with $478 million for the nine months of 2010.

Higher transportation revenues associated with expansion projects placed into service in 2010 and 2011, along with higher equity earnings associated with the Gulfstream acquisition drove the improved results in the third-quarter and year-to-date periods.  

In late September, Williams Partners placed its third expansion project during 2011 into service – the Pascagoula Expansion.  The new pipeline, jointly owned with Florida Gas Transmission, connects the existing Mobile Bay Lateral to the outlet pipeline of an LNG import terminal in Mississippi. The partnership's share of the expansion's capacity is 467 Mdt/d.

The Pascagoula Expansion follows two other key expansions on the Transco system that were placed into service earlier in 2011.  Mobile Bay South II and 85 North phase II were placed into service during 2011 adding a combined 599 Mdt/d of firm transportation capacity to serve markets in the southeastern United States.

Two more Transco expansions are expected to be placed into service next year – the Mid-Atlantic Connector and Mid-South Phase I projects.

The partnership is also working on expansions on Northwest Pipeline that are expected to be placed into service next year: the North and South Seattle Lateral Delivery Expansions.  Williams Partners has executed agreements with Puget Sound Energy to expand the North and South Seattle laterals and provide additional lateral capacity of approximately 84 Mdt/d and 68 Mdt/d, respectively.  

Midstream Gas & Liquids

Midstream provides natural gas gathering, treating, and processing; deepwater production handling and oil transportation; and NGL fractionation, storage and transportation services.

The business reported segment profit of $301 million for third-quarter 2011, compared with segment profit of $210 million for third-quarter 2010.  Year-to-date through Sept. 30, Midstream reported segment profit of $882 million, compared with $678 million for the same period in 2010.

Higher NGL margins and fee-based revenues drove the improvement in both the third-quarter and year-to-date periods.  Higher maintenance expenses partially offset the higher NGL margins and fee-based revenues in both periods.

Higher NGL prices were the driver of the increased NGL margins in both periods.

The improvement in fee-based revenues in both periods was driven by new gathering business in the Marcellus Shale, a rate increase in the Piceance Basin associated with the assets acquired from Williams in November 2010, and new business from the Perdido Norte gas and oil pipelines in the Gulf of Mexico.

NGL equity volumes were lower in third-quarter 2011 compared with second-quarter 2011 due to unplanned maintenance at our Opal plant along with the impact of a third-party fractionator being shut-down for approximately 10 days for an expansion project.  

As a result of the fractionator shut-down, NGL takeaway capacity on the Overland Pass Pipeline from Williams Partners' western plants was reduced.  The western plants curtailed ethane production and rescheduled planned maintenance to occur while the takeaway capacity on Overland Pass was reduced.

The midstream business will continue work on several ongoing expansion projects in 2011 and beyond in all of its major locations.

Williams Partners has completed construction on a pipeline segment and related modifications necessary to reverse the flow of a Transco system pipeline in south Texas to deliver gas to the partnership's Markham gas processing facility.  In addition, a third-party pipeline that is delivering gas from the Eagle Ford shale was tied to the Markham plant.

In the Gulf region, Williams Partners has signed multiple agreements with Hess Corporation and Chevron to provide production handling, export pipeline, oil and gas gathering and gas processing services in the Tubular Bells field development located in the eastern deepwater Gulf of Mexico.  Hess and Chevron, owners of the Tubular Bells leases, will utilize Williams Partners' proprietary floating production system, Gulfstar FPS™.

Williams Partners expects Gulfstar FPS to be capable of serving as a central host facility for other deepwater prospects in the area. Gulfstar FPS will have a capacity of 60,000 barrels of oil per day, up to 200 MMcf/d of natural gas and the capability to provide seawater injection services.  It is expected to be in service in 2014.

Definitions of Non-GAAP Financial Measures

This press release includes certain financial measures – Distributable Cash Flow, Cash Distribution Coverage Ratio, and Adjusted Segment Profit – that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission.

For Williams Partners L.P., Adjusted Segment Profit excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Management believes Adjusted Segment Profit provides investors meaningful insight into Williams Partners L.P.'s results from ongoing operations.

For Williams Partners L.P. we define Distributable Cash Flow as net income plus depreciation and amortization and cash distributions from our equity investments less our earnings from our equity investments, distributions to noncontrolling interests and maintenance capital expenditures. We also adjust for payments and/or reimbursements under omnibus agreements with Williams and certain other items. Total Distributable Cash Flow is reduced by any amounts associated with operations, which occurred prior to our ownership of the underlying assets to arrive at Distributable Cash Flow attributable to partnership operations.

For Williams Partners L.P. we also calculate the ratio of Distributable Cash Flow attributable to partnership operations to the total cash distributed (Cash Distribution Coverage Ratio). This measure reflects the amount of Distributable Cash Flow relative to our cash distribution. We have also provided this ratio calculated using the most directly comparable GAAP measure, net income.

This press release is accompanied by a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures. Management uses these financial measures because they are accepted financial indicators used by investors to compare company performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the Partnership's assets and the cash that the business is generating. Neither Adjusted Segment Profit nor Distributable Cash Flow are intended to represent cash flows for the period, nor are they presented as an alternative to net income or cash flow from operations. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles.

Quarterly Materials to be Posted Shortly, Q&A Webcast Scheduled for Tomorrow

Williams Partners' third-quarter financial results package should be posted shortly at www.williamslp.com.  The package will include the data book and analyst package, and the investor presentation with a recorded commentary from Alan Armstrong, CEO of Williams Partners' general partner.  

The partnership will host the third-quarter Q&A live webcast on Wednesday, Nov. 2 at 12 p.m.  EDT. Participants are encouraged to access the webcast at www.williamslp.com.   A limited number of phone lines also will be available at (800) 723-6575. International callers should dial (785) 830-1997.

Replays of the third-quarter webcast in both streaming and downloadable podcast formats will be available for two weeks following the event at www.williamslp.com.

Form 10-Q

The partnership plans to file its third-quarter 2011 Form 10-Q with the Securities and Exchange Commission (SEC) this week. The document will be available on both the SEC and Williams Partners web sites.

About Williams Partners L.P. (NYSE: WPZ)

Williams Partners L.P. is a leading diversified master limited partnership focused on natural gas transportation; gathering, treating, and processing; storage; natural gas liquid (NGL) fractionation; and oil transportation. The partnership owns interests in three major interstate natural gas pipelines that, combined, deliver 14 percent of the natural gas consumed in the United States. The partnership's gathering and processing assets include large-scale operations in the U.S. Rocky Mountains and both onshore and offshore along the Gulf of Mexico. Williams (NYSE: WMB) owns approximately 75 percent of Williams Partners, including the general-partner interest. More information is available at www.williamslp.com. Go to http://www.b2i.us/irpass.asp?BzID=1296&to=ea&s=0 or http://www.b2i.us/irpass.asp?BzID=630&to=ea&s=0 to join our email list.

Williams Partners L.P. is a limited partnership formed by The Williams Companies, Inc. (Williams). Our reports, filings, and other public announcements may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You typically can identify forward-looking statements by various forms of words such as "anticipates," "believes," "seeks," "could," "may," "should," "continues," "estimates," "expects," "forecasts," "intends," "might," "goals," "objectives," "targets," "planned," "potential," "projects," "scheduled," "will," or other similar expressions. These forward-looking statements are based on management's beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

• Amounts and nature of future capital expenditures;
• Expansion and growth of our business and operations;
• Financial condition and liquidity;
• Business strategy;
• Cash flow from operations or results of operations;
• The levels of cash distributions to unitholders;
• Seasonality of certain business segments; and
• Natural gas and natural gas liquids prices and demand.

Forward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or results to be materially different from those stated or implied in this announcement. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:

• Whether we have sufficient cash from operations to enable us to maintain current levels of cash distributions or to pay cash distributions following establishment of cash reserves and payment of fees and expenses, including payments to our general partner;
• Availability of supplies (including the uncertainties inherent in assessing and estimating future natural gas reserves), market demand, volatility of prices, and the availability and cost of capital;
• Inflation, interest rates and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers);
• The strength and financial resources of our competitors;
• Development of alternative energy sources;
• The impact of operational and development hazards;
• Costs of, changes in, or the results of laws, government regulations (including climate change regulation and/or potential additional regulation of drilling and completion of wells), environmental liabilities, litigation and rate proceedings;
• Our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates;
• Changes in maintenance and construction costs;
• Changes in the current geopolitical situation;
• Our exposure to the credit risks of our customers;
• Risks related to strategy and financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the availability and cost of credit;
• Risks associated with future weather conditions;
• Acts of terrorism; and
• Additional risks described in our filings with the Securities and Exchange Commission (SEC).

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this announcement. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.

Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the SEC on February 24, 2011, and our quarterly reports on Form 10-Q available from our offices or from our website at www.williamslp.com.

SOURCE Williams Partners L.P.

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