Williams Partners Reports First-Quarter 2013 Financial Results, Updated Guidance
Williams Partners Reports First-Quarter 2013 Financial Results, Updated Guidance
- 1Q 2013 Net Income Is $321 Million, $0.50 per Common Unit
- Solid First-Quarter DCF Yields 1.05x Coverage Ratio
- DCF Up 5% From Year Ago Despite 50% Lower NGL Margins and Ethane Rejection
- Lowering 2013-14 Earnings and Cash Flow Guidance Driven Primarily By Higher Natural Gas Prices and Lower NGL Prices
- Williams Agrees to Provide Up to $200 Million IDR Waivers to Support Williams Partners and Bridge to Expected Cash Flow Growth from Large Portfolio of Primarily Fee-Based Development Projects
- Updating and Extending Guidance for Annual LP Cash-Distribution Growth: Up 8% to 9% in 2013; 6% to 8% in 2014 and 2015
- Expect More than 60% DCF Growth from 2013 to 2015
|Summary Financial Information||1Q|
|Amounts in millions, except per-unit and coverage ratio amounts.||2013||2012|
|Net income per common L.P. unit||$||0.50||$||0.85|
|Distributable cash flow (DCF) (1)||$||497||$||537|
|Less: Pre-partnership DCF (2)||−||(62||)|
|DCF attributable to partnership operations||$||497||$||475|
|Cash distribution coverage ratio (1)||1.05x||1.31x|
|(1) Distributable Cash Flow and Cash Distribution Coverage Ratio are non-GAAP measures. Reconciliations to the most relevant measures included in GAAP are attached to this news release.|
|(2) This amount represents DCF from the Gulf Olefins assets during 1Q 2012, since these periods were prior to the receipt of cash flows from the assets.|
Williams Partners L.P. (NYS: WPZ) today announced unaudited first-quarter 2013 net income of $321 million, or $0.50 per common limited-partner unit, compared with net income of $408 million, or $0.85 per common limited-partner unit for first-quarter 2012. Prior-period results throughout this release have been recast to include the results of the Geismar olefins production facility acquired from Williams in November 2012.
The decline in net income during first-quarter 2013 is primarily due to a sharp decline in NGL margins from near historic highs in first-quarter 2012 and related ethane rejection. NGL margins declined 50 percent from the first-quarter of 2012 as continued low ethane prices drove system wide ethane rejection and propane and butane prices also remained at depressed levels.
Higher olefin margins, particularly higher ethylene margins at Geismar, helped mitigate the impact of the lower NGL margins and higher expenses.
Distributable Cash Flow & Distributions
For first-quarter 2013, Williams Partners generated $497 million in distributable cash flow attributable to partnership operations, compared with $475 million in DCF attributable to partnership operations in first-quarter 2012.
The increase in DCF was due to the growth of the partnership via the acquisition of the Gulf Olefins assets in 2012, as well as higher gathered volumes, higher fee-based revenues and lower maintenance capital, partially offset by the previously mentioned decline in NGL margins.
Williams Partners recently announced that it increased its quarterly cash distribution to unitholders to $0.8475 per unit, a 9 percent increase over the year-ago amount.
Alan Armstrong, chief executive officer of Williams Partners' general partner, made the following comments:
"We're pleased to report a solid first quarter in the face of NGL margins that were 50 percent lower than in the prior year. Our growing fee-based business and our timely acquisition of the Williams' Geismar ethylene complex helped to mitigate the less favorable NGL commodity environment. Our focus continues to be on executing on the wide variety of growth opportunities across all our businesses that support an expected increase of more than 60 percent in our DCF from 2013 through 2015.
"We expect that ongoing tremendous North American energy infrastructure needs will continue to combine with Williams Partners' unique capabilities to create a continuing robust set of investment opportunities. As such, we have visibility to very strong growth in our businesses and cash flows beyond 2015 as our new investments develop and as we continue to seize many attractive investment opportunities."
Business Segment Performance
Beginning with its first-quarter 2013 results, Williams Partners' operations are reported through four business segments, Northeast G&P, Atlantic-Gulf, West and NGL & Petchem Services. Prior-period results have been recast to reflect the partnership's new segment reporting structure.
|Segment Profit *||Segment Profit + DD&A *|
|Amounts in millions||2013||2012||2013||2012|
|NGL & Petchem Services||120||71||127||75|
|* Schedules reconciling segment profit to adjusted segment profit and adjusted segment profit + DD&A are attached to this press release.|
|Key Operational Metrics||1Q||2Q||3Q||4Q||1Q||1Q Change|
|Fee-based Revenues (millions)||$||651||$||647||$||659||$||694||$||684||5||%||-1||%|
|NGL Margins (millions)||$||242||$||189||$||167||$||154||$||121||-50||%||-21||%|
|Ethane Equity sales (million gallons)||176||166||163||141||23||-87||%||-84||%|
|Per-Unit Ethane NGL Margins ($/gallon)||$||0.36||$||0.22||$||0.12||$||0.04||$||0.04||-89||%||0||%|
|Non-Ethane Equity sales (million gallons)||132||129||138||138||123||-7||%||-11||%|
|Per-Unit Non-Ethane NGL Margins ($/gallon)||$||1.36||$||1.17||$||1.07||$||1.08||$||0.98||-28||%||-9||%|
|Olefin Margins (millions)||$||74||$||70||$||77||$||77||$||118||59||%||53||%|
|Geismar ethylene sales volumes (millions of lbs.)||284||250||263||261||246||-13||%||-6||%|
|Geismar ethylene margin ($/pound)||$||0.18||$||0.20||$||0.22||$||0.23||$||0.37||106||%||61||%|
Northeast G&P includes the partnership's midstream gathering and processing business in the Marcellus and Utica shale regions, as well its 51-percent equity investment in Laurel Mountain Midstream (LMM), and its 47.5-percent equity investment in Caiman Energy II. This segment is in the early stages of developing large-scale energy infrastructure solutions for the Marcellus and Utica shale regions.
Northeast G&P reported a segment loss of $9 million for first-quarter 2013, compared with segment profit of $4 million in first-quarter 2012.
Continued strong results in the Susquehanna Supply Hub were more than offset by costs associated with developing business in the Ohio Valley Midstream system. Higher costs for the Ohio Valley Midstream system were also affected by various operational issues including system freeze-offs, line repairs and replacements, as well as expenses associated with the rapid growth and the high liquids content in this developing area.
Atlantic-Gulf includes the Transco interstate gas pipeline, the partnership's significant natural gas gathering and processing and crude production handling and transportation in the Gulf Coast region, as well as its 50-percent equity investment in the Gulfstream interstate gas pipeline, its 60-percent equity investment in the Discovery onshore/offshore natural gas gathering and processing system, and a 51-percent consolidated interest in the Constitution interstate gas pipeline development project.
Atlantic-Gulf reported segment profit of $159 million for first-quarter 2013, compared with $165 million for first-quarter 2012.
The lower segment profit in first-quarter 2013 was due to lower NGL margins in the Gulf processing facilities as well as lower equity earnings from the Discovery investment driven by the lower NGL margins. Lower operating costs partially offset these negative effects during the first quarter.
West includes the partnership's gathering, processing and treating operations in Wyoming, the Piceance Basin and the Four Corners area, as well as the Northwest Pipeline interstate gas pipeline system.
West reported first-quarter 2013 segment profit of $186 million, compared with $311 million for first-quarter 2012.
The significant decline in West's segment profit during first-quarter 2013 was due to lower NGL margins driven by lower NGL prices and higher gas prices as well as related ethane rejection. Fee-based revenue also declined during the first quarter due to severe winter weather, including production freeze-offs. Increased natural gas transportation revenues associated with Northwest Pipeline's new rates partially offset this decline.
NGL & Petchem Services
NGL & Petchem Services includes the partnership's NGL and natural gas marketing business, an NGL fractionator and storage facilities near Conway, Kan., a 50-percent equity interest in Overland Pass Pipeline, and an 83.3% interest and operatorship of an olefins production facility in Geismar, La., along with a refinery grade propylene splitter and pipelines in the Gulf Coast region.
NGL & Petchem Services reported first-quarter 2013 segment profit of $120 million, compared with $71 million for first-quarter 2012.
An increase in olefin product margins, primarily ethylene, drove the increase in segment profit during the first quarter. The higher olefin margins were driven by lower average per-unit ethane and propane feedstock prices and higher per-unit ethylene prices.
Williams Partners is lowering its 2013-14 guidance for earnings and distributable cash flow primarily to reflect expected lower NGL processing margins due to higher natural gas price and lower NGL price assumptions and related lower ethane transportation volumes. Additionally, the lower segment profit guidance in 2014 includes changes in in-service date assumptions for certain projects. Partially offsetting these less favorable assumptions are expectations for continued strong olefins margins.
As a result of the expected lower distributable cash flow for 2013 and 2014, Williams Partners is updating guidance for cash distributions per limited partner unit to reflect an annual growth rate of 8 percent to 9 percent for 2013 and 6 percent to 8 percent for 2014. Williams Partners is introducing cash distribution growth guidance for 2015at 6 percent to 8 percent. The partnership's guidance includes an assumed growth rate in the limited partner cash distribution of 1.5 cents per quarter beginning with distributions expected to be declared in July 2013 and paid in August 2013.
Additionally, Williams has agreed to waive incentive distribution rights of up to $200 million over the next four quarters to boost Williams Partners' expected cash distribution coverage ratio to .90x for 2013. These IDR waivers provide Williams Partners with short-term cash distribution support as a large platform of growth projects moves toward completion. Williams Partners expects a return to stronger coverage ratios in 2014 and beyond as new projects come into service. Williams Partners expects cash coverage of .97x in 2014 and 1.03x in 2015 without the benefit of IDR waivers.
Capital expenditures included in guidance have been adjusted to reflect previously announced projects including the Three Rivers Midstream joint venture with Shell, as well as a number of additional projects and revisions.
The partnership's current commodity price assumptions and the corresponding guidance for its earnings, distributable cash flow and capital expenditures are displayed in the following table:
|Commodity Price Assumptions and Financial|
|Outlook at Midpoint of Guidance (1)||2013||2014||2015|
|Commodity Price Assumptions|
|Ethane ($ per gallon)||$||0.28||$||0.30||$||0.30|
|Propane ($ per gallon)||$||0.96||$||1.15||$||1.15|
|Natural Gas - NYMEX ($/MMBtu)||$||4.06||$||4.25||$||4.25|
|Ethylene Spot ($ per pound)||$||0.59||$||0.60||$||0.60|
|Propylene Spot ($ per pound)||$||0.63||$||0.59||$||0.62|
|Crude Oil - WTI ($ per barrel)||$||91||$||90||$||90|
|NGL to Crude Oil Relationship (2)||36||%||39||%||39||%|
|Crack Spread ($ per pound) (3)||$||0.47||$||0.47||$||0.47|
|Composite Frac Spread ($ per gallon) (4)||$||0.45||$||0.49||$||0.49|
|Williams Partners Guidance|
|Amounts are in millions except coverage ratio.|
|DCF attributable to partnership ops. (5)||$||1,675||$||2,350||$||2,720|
|Total Cash Distribution (6)||$||1,853||$||2,414||$||2,649|
|Cash Distribution Coverage Ratio (5)||.90x||.97x||1.03x|
|Adjusted Segment Profit (5):|
|NGL & Petchem||440||755||760|
|Total Adjusted Segment Profit||$||1,675||$||2,390||$||2,820|
|Adjusted Segment Profit + DD&A (5):|
|NGL & Petchem||470||805||815|
|Total Adjusted Segment Profit + DD&A||$||2,465||$||3,280||$||3,805|