Williams Reports First-Quarter 2013 Financial Results, Updated Guidance

Williams Reports First-Quarter 2013 Financial Results, Updated Guidance

• First-Quarter 2013 Net Income Is $161 Million, $0.23 per Share

• Adjusted Net Income Down From Year-Ago on 50% Lower NGL Margins and Ethane Rejection; Offset by Higher Olefin Margins, Ethylene Prices, Gathered Volumes and Fee-based Revenues

• Expecting More Than 60% Growth in 2013 to 2015 Adjusted Segment Profit + DD&A, Supporting Guidance for 20% Annual Cash-Dividend Growth in Same Period

• Reducing 2013-14 Earnings Guidance Primarily on Prices - Higher Natural Gas, Lower NGLs

• Waiving Up to $200 million in IDRs to Support Williams Partners as Bridge to Growing Cash Flows Expected from Large Portfolio of Development Projects

TULSA, Okla.--(BUSINESS WIRE)-- Williams (NYS: WMB) :

* 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) today announced unaudited first-quarter 2013 net income attributable to Williams of $161 million, or $0.23 per share on a diluted basis, compared with net income of $423 million, or $0.70 per share on a diluted basis for first-quarter 2012.

The decline in first-quarter 2013 net income was primarily due to sharply lower natural gas liquid (NGL) margins and related ethane rejection at Williams Partners, as well as the absence of $207 million of income in first-quarter 2012 associated with the sale of certain of the company's former Venezuela operations, of which $144 million was recorded within discontinued operations.

Higher olefins production margins at Williams Partners partially offset these negative impacts during the first quarter.

Adjusted Income from Continuing Operations

Adjusted income from continuing operations for first-quarter 2013 was $152 million, or $0.22 per share, compared with $236 million, or $0.39 per share for first-quarter 2012.

Lower NGL margins at Williams Partners, including the effects of system-wide ethane rejection, drove the decline in adjusted income from continuing operations during first-quarter 2013. Increased costs, primarily due to higher expenses associated with developing business that Williams Partners acquired in 2012, also contributed to the first-quarter decline. These were partially offset by higher olefins production margins and higher fee-based revenues. 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. A 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:

"Despite the headwinds we are facing with low NGL prices and higher natural gas prices, the growth opportunities in our businesses remain tremendous and enable us to project dividend growth of 20 percent annually through 2015. We expect that ongoing tremendous North American energy infrastructure needs will continue to combine with Williams' 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.

"Our large capital investment program continues to be focused on growing our fee-based businesses. The recent run-up in natural gas prices reduces the margin in the commodity-based portion of our businesses. Longer term, we think this higher price will drive greater volumes as producers respond to these more reasonable prices.

"Our focus continues to be on executing on our wide array of growth opportunities across our businesses. We announced additional growth plans in the first quarter, including a potential joint venture with Boardwalk Pipeline Partners to transport natural gas liquids from the infrastructure-constrained Marcellus and Utica shale plays to the rapidly expanding petrochemical and export complex on the U.S. Gulf Coast. Also in March, we sanctioned construction of a PDH facility in Alberta, Canada, which will allow Williams to significantly increase production of polymer-grade propylene from its Canadian operations."

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 businesses; and Access Midstream Partners includes the company's equity earnings from its 50-percent interest in privately held Access Midstream Partners GP, L.L.C. and an approximate 23-percent limited-partner interest in Access Midstream Partners, L.P. (NYS: ACMP) . Prior period segment results have been recast to reflect Williams Partners' acquisition of Williams' Gulf Olefins business, which was completed in November 2012.

* A schedule reconciling segment profit to adjusted segment profit (non-GAAP measure) is available at www.williams.com and as an attachment to this press release.

** Segment results for Access Midstream Partners for 2013 includes $17 million of non-cash amortization of the difference between the cost of Williams' investment and the company's underlying share of the net assets of Access Midstream Partners.

Williams Partners

Williams Partners is focused on natural gas transportation, gathering, treating, processing and storage; natural gas liquids fractionation; olefins production; and oil transportation.

For first-quarter 2013, Williams Partners reported segment profit of $456 million, compared with $551 million for first-quarter 2012.

The decline in Williams Partners' segment profit during first-quarter 2013 is primarily due to a sharp decline in NGL margins from near historic highs in first-quarter 2012. 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.

There is a more detailed description of Williams Partners' business results in the partnership's first-quarter 2013 financial results news release, also issued today.

Williams NGL & Petchem Services

Williams NGL & Petchem Services primarily includes Williams' midstream operations in Canada, including an oil sands offgas processing plant near Fort McMurray, Alberta and an NGL/olefins fractionation facility and butylene/butane splitter facility at Redwater, Alberta.

Williams NGL & Petchem Services reported segment profit of $36 million for first-quarter 2013, compared with $40 million for first-quarter 2012.

Segment profit decreased primarily due to increased operating and maintenance costs, including depreciation related to the Boreal pipeline, which was placed into service June 2012. Product margins remained consistent due to offsetting price and volume variances and fee-based revenues were slightly higher. Lower per-unit NGL product margins were offset by higher sales volumes; whereas higher per-unit propylene product margins were offset by lower sales volumes.

Access Midstream Partners

The segment results for Access Midstream Partners in the first quarter 2013 included $17 million of equity earnings recognized from Access Midstream Partners, offset by $17 million non-cash amortization of the difference between the cost of William's investment and the company's underlying share of the net assets of Access Midstream Partners. Access Midstream Partners, L.P. reported first-quarter adjusted EBITDA of $184.4 million, up 55.7 percent from first-quarter 2012. During first-quarter 2013, Williams received a regular quarterly distribution of $20 million from Access Midstream Partners.

Other

The Other segment benefited from a $53 million gain in 2012 related to the 2010 sale of the company's Accroven investment in Venezuela. This gain has been excluded from the adjusted segment profit for Other.

Guidance

Williams is lowering its 2013-14 guidance for earnings and cash flows 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 assumed in-service dates for certain projects. Partially offsetting these less favorable assumptions are expectations for continued strong olefins margins.

In conjunction with the lower guidance announced for Williams Partners, Williams has agreed to waive incentive distribution rights of up to $200 million over the next four quarters. Williams support is expected to boost Williams Partners cash coverage to .90x for 2013. The IDR waivers provide Williams Partners with short-term cash distribution support as a large platform of growth projects moves toward completion. Williams Partners expects cash coverage of .97x in 2014 and 1.03x in 2015 without the benefit of IDR waivers.

For 2013 through 2015, Williams expects strong cash flow growth from Williams Partners, Williams NGL & Petchem Services and Access Midstream Partners to drive 20 percent annual cash dividend growth.

Capital expenditures included in guidance have been adjusted to reflect recently announced projects including the Canada PDH project and the Three Rivers Midstream joint venture with Shell, as well as a number of additional projects and revisions.

The proposed Bluegrass Pipeline project development costs, capital, earnings and cash flow are not currently reflected in guidance as the project has not been sanctioned at this time.

Williams' current commodity price assumptions and the corresponding guidance for its earnings and capital expenditures are displayed in the following table: