Williams Reports Year-End 2012 Financial Results
Williams Reports Year-End 2012 Financial Results
2012 Net Income is $859 Million, $1.37 per Share
Adjusted Earnings Impacted by Sharply Lower NGL Margins
Williams Partners' Midstream Fee-based Business Continues Strong Growth; Up 18% in 4Q vs. Prior Year, Up 17% for Full Year
Reaffirming Strong Cash Dividend Growth Guidance of 20% Annually Through 2014
Lowering 2013-2014 Earnings Guidance due to Effect of Sharply Lower Ethane, Propane Prices; Expect Fee-Based Business Growth Will Partially Offset
Robust Demand for Infrastructure, Related Projects, Investments Drive Strong Growth
TULSA, Okla.--(BUSINESS WIRE)-- Williams (NYS: WMB) :
Year-End Summary Financial Information | 2012 | 2011 | |||||||||||||
Per share amounts are reported on a diluted basis. All | millions | per share | millions | per share | |||||||||||
Income from continuing operations | $ | 723 | $ | 1.15 | $ | 803 | $ | 1.34 | |||||||
Income (loss) from discontinued operations | 136 | 0.22 | (427 | ) | (0.71 | ) | |||||||||
Net income | $ | 859 | $ | 1.37 | $ | 376 | $ | 0.63 | |||||||
Adjusted income from continuing operations* | $ | 695 | $ | 1.11 | $ | 734 | $ | 1.23 | |||||||
Quarterly Summary Financial Information | 4Q 2012 | 4Q 2011 | |||||||||||||
Per share amounts are reported on a diluted basis. | millions | per share | millions | per share | |||||||||||
Income from continuing operations | $ | 151 | $ | 0.23 | $ | 79 | $ | 0.13 | |||||||
Loss from discontinued operations | (2 | ) | − | (523 | ) | (0.87 | ) | ||||||||
Net income (loss) | $ | 149 | $ | 0.23 | ($444 | ) | ($0.74 | ) | |||||||
Adjusted income from continuing operations* | $ | 160 | $ | 0.25 | $ | 214 | $ | 0.36 | |||||||
* A schedule reconciling income from continuing operations to adjusted income from continuing operations (non-GAAP measures) is available at www.williams.com and as an attachment to this press release. |
Williams (NYS: WMB) announced 2012 unaudited net income attributable to Williams of $859 million, or $1.37 per share on a diluted basis, compared with net income of $376 million, or $0.63 per share on a diluted basis for 2011.
The increase in net income for 2012 was primarily due to the absence of a $427 million loss from discontinued operations in 2011. The significant loss from discontinued operations in 2011 was primarily due to significant non-cash property impairment and other charges associated with Williams' former exploration and production business. The 2012 net income also benefited from $136 million of income from discontinued operations, primarily due to gains following the sale of certain of our former Venezuela operations.
For fourth-quarter 2012, Williams reported net income of $149 million, or $0.23 per share on a diluted basis, compared with a net loss of $444 million, or a loss of $0.74 per share, for fourth-quarter 2011.
The substantial increase in net income during the fourth quarter of 2012 is due to the absence of the previously described non-cash property impairment and other charges associated with Williams' former exploration and production business recorded in fourth-quarter 2011.
Adjusted Income from Continuing Operations
Adjusted income from continuing operations was $695 million, or $1.11 per share, for 2012, compared with $734 million, or $1.23 per share for 2011. For fourth-quarter 2012, adjusted income from continuing operations was $160 million, or $0.25 per share, compared with $214 million, or $0.36 per share for fourth quarter 2011.
Lower NGL margins at Williams Partners and increased costs, partially offset by higher fee-based revenue and increased olefin margins, drove the decline in adjusted income from continuing operations during the 2012 periods. There is a more detailed description of the business results later in this press release.
Adjusted income from continuing operations reflects the removal of items considered unrepresentative of ongoing operations and is a non-GAAP measure. Reconciliation to the most relevant GAAP measure is attached to this news release.
CEO Comment
Alan Armstrong, Williams' president and chief executive officer, made the following comments:
"This past year was one of significant growth and change at Williams. We spun off WPX Energy at the end of 2011 and followed that up by seizing on a significant number of strategic growth opportunities. Our focus now is executing on our portfolio of great growth projects across of our operating areas - from the Marcellus and Utica Shale and Canada to the deepwater Gulf of Mexico.
"We've reaffirmed our annual dividend growth guidance of 20 percent in each of 2013 and 2014 in the face of sharply lower ethane and propane prices. We're basing our strong dividend growth outlook on the continued rapid growth of our fee-based business and the strong mitigating effect of the Geismar ethylene complex. We also continue to expect strong growth in 2014 and beyond as we place into service the large-scale projects that are currently under construction. As well, recent investments, including Access Midstream and Caiman II, serve to sustain our long-term growth.
"There continues to be significant demand for energy infrastructure to connect North America's prolific shale plays to growing markets, from power generation to petrochemical manufacturing. Williams is well-positioned to provide the kind of large-scale infrastructure solutions that are needed to meet demand," Armstrong said.
2013-14 Guidance
Williams is lowering its 2013-14 earnings guidance primarily to reflect sharply lower commodity margin assumptions.
Capital expenditures for 2013-14 are increasing, primarily due to increases of approximately $220 million in 2013 and $210 million in 2014 associated with a change in the forecasting presentation for Williams Partners' Gulfstar FPS and Constitution Pipeline projects. Previous capital expenditure guidance only reflected Williams Partners' 51-percent interest in Gulfstar and its 51-percent interest in Constitution. While Williams Partners' interests in each project are unchanged, the new guidance reflects Gulfstar and Constitution on a fully consolidated basis with our partners non-controlling interests reflected separately. The capital increases associated with this presentation change will be fully offset by capital contributions from the partners on each project.
Earlier this month, Williams Partners announced that Marubeni Corporation agreed to acquire a 49-percent interest in the Gulfstar project. Cabot Oil & Gas (NYS: COG) and Piedmont Natural Gas (NYS: PNY) own 25-percent and 24-percent interests in Constitution, respectively.
Williams expects cash tax rates for 2013-14 to be sharply lower than previous guidance due to legislation that extended bonus depreciation and the company's investment in ACMP.
Williams' current commodity price assumptions and the corresponding guidance for its earnings and capital expenditures are displayed in the following table:
Commodity Price Assumptions and Financial Outlook | ||||||||||||||||||||||||
As of Feb. 20, 2013 | 2013 | 2014 | ||||||||||||||||||||||
Low | Mid | High | Low | Mid | High | |||||||||||||||||||
Commodity Price Assumptions | ||||||||||||||||||||||||
Ethane ($ per gallon) | $ | 0.23 | $ | 0.33 | $ | 0.43 | $ | 0.30 | $ | 0.40 | $ | 0.50 | ||||||||||||
Propane ($ per gallon) | $ | 0.81 | $ | 0.96 | $ | 1.11 | $ | 1.05 | $ | 1.20 | $ | 1.35 | ||||||||||||
Natural Gas - NYMEX ($/MMBtu) | $ | 3.00 | $ | 3.50 | $ | 4.00 | $ | 3.50 | $ | 4.00 | $ | 4.50 | ||||||||||||
Ethylene Spot ($ per pound) | $ | 0.46 | $ | 0.56 | $ | 0.66 | $ | 0.46 | $ | 0.56 | $ | 0.66 | ||||||||||||
Propylene Spot ($ per pound) | $ | 0.50 | $ | 0.60 | $ | 0.70 | $ | 0.46 | $ | 0.56 | $ | 0.66 | ||||||||||||
Crude Oil - WTI ($ per barrel) | $ | 75 | $ | 90 | $ | 105 | $ | 75 | $ | 90 | $ | 105 | ||||||||||||
NGL to Crude Oil Relationship (1) | 40 | % | 40 | % | 39 | % | 45 | % | 44 | % | 43 | % | ||||||||||||
Crack Spread ($ per pound) (2) | $ | 0.36 | $ | 0.42 | $ | 0.48 | $ | 0.33 | $ | 0.39 | $ | 0.45 | ||||||||||||
Composite Frac Spread ($ per gallon) (3) | $ | 0.47 | $ | 0.56 | $ | 0.65 | $ | 0.52 | $ | 0.61 | $ | 0.71 | ||||||||||||
Capital & Investment Expenditures (millions) | ||||||||||||||||||||||||
Williams Partners | $ | 3,550 | $ | 3,750 | $ | 3,950 | $ | 1,950 | $ | 2,150 | $ | 2,350 | ||||||||||||
Williams NGL & Petchem Services | 390 | 490 | 590 | 425 | 575 | 725 | ||||||||||||||||||
Access Midstream Partners | − | − | − | − | − | − | ||||||||||||||||||
Other | 35 | 35 | 35 | 25 | 25 | 25 | ||||||||||||||||||
Total Capital & Investment Expenditures | $ | 3,975 | $ | 4,275 | $ | 4,575 | $ | 2,400 | $ | 2,750 | $ | 3,100 | ||||||||||||
Cash Flow from Operations (millions) | $ | 2,075 | $ | 2,313 | $ | 2,550 | $ | 3,025 | $ | 3,250 | $ | 3,475 | ||||||||||||
Adjusted Segment Profit (millions) (5) | ||||||||||||||||||||||||
Williams Partners | $ | 1,625 | $ | 1,838 | $ | 2,050 | $ | 2,300 | $ | 2,575 | $ | 2,850 | ||||||||||||
Williams NGL & Petchem Services | 50 | 100 | 150 | 95 | 155 | 215 | ||||||||||||||||||
Access Midstream Partners | 25 | 38 | 50 | 80 | 95 | 110 | ||||||||||||||||||
Other | 0 | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||
Total Adjusted Segment Profit | $ | 1,700 | $ | 1,975 | $ | 2,250 | $ | 2,475 | $ | 2,825 | $ | 3,175 | ||||||||||||
Adjusted Segment Profit + DD&A (millions) | ||||||||||||||||||||||||
Williams Partners | $ | 2,410 | $ | 2,643 | $ | 2,875 | $ | 3,210 | $ | 3,505 | $ | 3,800 | ||||||||||||
Williams NGL & Petchem Services | 75 | 130 | 185 | 135 | 200 | 265 | ||||||||||||||||||
Access Midstream Partners (4) | 90 | 103 | 115 | 145 | 160 | 175 | ||||||||||||||||||
Other | 20 | 20 | 20 | 25 | 25 | 25 | ||||||||||||||||||
Total Adjusted Segment Profit + DD&A | $ | 2,595 | $ | 2,895 | $ | 3,195 | $ | 3,515 | $ | 3,890 | $ | 4,265 | ||||||||||||
Adjusted Diluted Earnings Per Share (5) | $ | 0.75 | $ | 0.95 | $ | 1.15 | $ | 1.20 | $ | 1.45 | $ | 1.70 | ||||||||||||
(1) | Calculated as the price of natural gas liquids as a percentage of the price of crude oil on an equal volume basis. | |
(2) | Crack spread is based on Delivered U.S. Gulf Coast Ethylene and Mont Belvieu Ethane. | |
(3) | Composite frac spread is based on Henry Hub natural gas and Mont Belvieu NGLs. | |
(4) | Amortization adjustment for Access Midstream Partners reflects the amortization of the basis difference between Williams' investment and its proportional share of the underlying net assets. | |
(5) | Adjusted Segment Profit and Adjusted Diluted EPS are adjusted to remove items considered unrepresentative of ongoing operations and are non-GAAP measures. Reconciliations to the most relevant GAAP measures are attached to this news release. | |
Business Segment Results
Williams' business segments for financial reporting are Williams Partners, Williams NGL & Petchem Services, Access Midstream Partners, and Other.
The Williams Partners segment includes the consolidated results of Williams Partners L.P. (NYS: WPZ) ; Williams NGL & Petchem Services includes the results of Williams' Canadian midstream and NGL/olefin pipelines in the U.S. Gulf Coast region; and Access Midstream Partners includes the company's equity earnings from its 50-percent indirect interest in privately held Access Midstream Partners GP, L.L.C. and its approximate 24-percent limited-partner interest in Access Midstream Partners, LP (NYS:
