Williams Partners Reports Second-Quarter 2013 Financial Results, Updates Guidance

Williams Partners Reports Second-Quarter 2013 Financial Results, Updates Guidance

• 2Q 2013 Net Income Is $256 Million, $0.31 per Common Unit

• Distributable Cash Flow (DCF) From Partnership's Operations Up 32% vs. Year-Ago

• Partnership Reaffirms Guidance for Strong Distribution Growth of 8% to 9% in 2013; 6% to 8% in 2014 and 2015

• 2013 and 2014 DCF Guidance Slightly Lower Reflecting Expected Financial Impact of Geismar Incident and Lower NGL Margins; Assumes Expanded Geismar Start Up April 2014 and Significant Recovery from Business Interruption Insurance

• Expect 66% DCF Growth from 2013 to 2015

TULSA, Okla.--(BUSINESS WIRE)-- Williams Partners L.P. (NYS: WPZ) :

Williams Partners L.P. (NYS: WPZ) today announced unaudited second-quarter 2013 net income attributable to Williams Partners L.P. of $256 million, or $0.31 per common limited-partner unit, compared with net income of $243 million, or $0.29 per common limited-partner unit for second-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 and to reflect the revised segment reporting resulting from the organizational restructuring effective Jan. 1, 2013.

The increase in second-quarter net income was primarily due to an increase in transportation, gathering and processing fee revenues, higher olefin and marketing margins, and lower general and administrative expenses. Lower NGL margins and related ethane rejection substantially reduced net income for the current year quarter. NGL margins declined 44 percent from the second quarter of 2012 as continued low ethane prices drove system wide ethane rejection; propane and butane prices remained at depressed levels. Higher olefin sales prices during the quarter more than offset lower olefin sales volumes as a result of the Geismar incident.

Year-to-date through June 30, Williams Partners reported net income of $577 million, or $0.81 per common limited-partner unit, compared with $651 million, or $1.11 per common limited-partner unit, for the first half of 2012.

The decline in net income in the first half of 2013 was primarily due to 48 percent lower NGL margins partially offset by higher transportation, gathering and processing revenues, and higher olefin and marketing margins.

Distributable Cash Flow & Distributions

For second-quarter 2013, Williams Partners generated $387 million in distributable cash flow attributable to partnership operations, compared with $293 million in DCF attributable to partnership operations in second-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 the increase in income described above and lower maintenance capital.

Williams Partners recently announced that it increased its quarterly cash distribution to unitholders to $0.8625 per unit, an 8.8 percent increase over the prior year amount. It is also a 1.8 percent increase over the partnership's first-quarter 2013 distribution of $0.8475 per unit.

CEO Perspective

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

"We're pleased to report a solid second quarter due to continued growth in our growing fee-based business, which more than offset both lower commodity margins and the impact of downtime at the Geismar facility.

"At Geismar, I'm extremely proud of the progress our people have made in a relatively short amount of time to assess the damage from the incident and begin mobilizing comprehensive repair and expansion plans to achieve our April 2014 target in-service date.

"We continue to execute on our strategy to grow cash flow by developing a large portfolio of primarily fee-based projects as demonstrated by major projects completed and brought into service on time and on budget in the second quarter, including a major expansion of the Transco natural gas pipeline in the Southeast U.S. and the installation of our third train at our Fort Beeler gas-processing complex in the Northeast U.S."

Business Segment Performance

Beginning with its first-quarter 2013 results, Williams Partners' operations are reported through four business segments. Prior-period results have been recast to reflect the partnership's updated segment reporting structure.

* Schedules reconciling segment profit to adjusted segment profit and adjusted segment profit + DD&A are attached to this press release.

Northeast G&P

Northeast G&P includes the partnership's midstream gathering and processing business in the Marcellus and Utica shale regions, including Susquehanna Supply Hub and Ohio Valley Midstream, as well as its 51-percent equity investment in Laurel Mountain Midstream, 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 segment profit of $12 million for second-quarter 2013, compared with segment loss of $20 million in second-quarter 2012. Year-to-date through June 30, Northeast G&P reported segment profit of $3 million, compared with segment loss of $16 million for the first half of 2012.

Improved results are primarily due to an increase in fee revenues in the Susquehanna Supply Hub and Ohio Valley Midstream businesses and higher Laurel Mountain Midstream equity earnings, partially offset by costs associated with developing business in the Ohio Valley Midstream system. Second-quarter 2013 benefitted from the absence of costs incurred in second quarter 2012 to acquire and transition newly acquired businesses.

Atlantic-Gulf

Atlantic-Gulf includes the Transco interstate gas pipeline and a 41-percent consolidated interest in the Constitution interstate gas pipeline development project. The segment also includes the partnership's significant natural gas gathering and processing and crude production handling and transportation in the Gulf Coast region. These operations include the partnership's 51-percent ownership interest in the Gulfstar development project, as well as its 50-percent equity investment in the Gulfstream interstate gas pipeline. It also includes a 60-percent equity investment in the Discovery onshore/offshore natural gas gathering and processing system.

Atlantic-Gulf reported segment profit of $152 million for second-quarter 2013, compared with $127 million for second-quarter 2012. Year-to-date through June 30, Atlantic-Gulf reported a segment profit of $311 million, compared with segment profit of $292 million for the first half of 2012.

Segment profit for the second quarter and for the first half of 2013 increased primarily due to higher transportation fee revenues and lower project development costs, partially offset by lower NGL margins.

West

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 second-quarter 2013 segment profit of $162 million, compared with $239 million for second-quarter 2012. Year-to-date through June 30, West reported a segment profit of $348 million, compared with segment profit of $550 million for the first half of 2012.

The lower segment profit during second-quarter 2013 and the first half of the year was due to lower NGL margins, including the effects of system-wide ethane rejection and higher natural gas prices. Decreases for the year-to-date period in gathering and processing fee revenue were due to severe winter weather causing production freeze-offs in the first quarter and to declines in production in the Piceance basin area. Increased natural gas transportation revenues associated with Northwest Pipeline's new rates partially offset these declines.

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 second-quarter 2013 segment profit of $77 million, compared with $45 million for second-quarter 2012. Year-to-date through June 30, NGL & Petchem reported a segment profit of $197 million, compared with segment profit of $116 million for the first half of 2012.

An increase in olefin product margins, primarily ethylene, drove the increase in segment profit during the second quarter and the first half of 2013. The higher olefin margins were driven by lower average per-unit ethane and propane feedstock prices and higher per-unit ethylene prices, partially offset by lower volumes sold, primarily as a result of the incident at the Geismar facility on June 13.

2Q Operational Achievements for Business Segments

Northeast G&P

• Steadily increased the Northeast gathered volumes reaching a new monthly average record of 1.83 Bcf/d in June 2013. Gathered volumes in second-quarter 2013 increased 76 percent from second-quarter 2012. As planned, we placed into service three condensate pump stations in the second quarter to maximize liquids to Moundsville and four central receipt points in the first half of 2013.

• Completed the expansion of TXP III, the third turbo-expander at the Fort Beeler facility, adding 200 MMcf/d of processing capacity during the second quarter of 2013.

• Expansions to the Susquehanna Supply Hub gathering system continue to keep pace with Cabot Oil & Gas Corporation, which recently announced it would add a sixth rig in the Marcellus in August 2013.

Atlantic-Gulf

• Reached an agreement in principle settling all issues in Transco's rate case.

• Executed another tie-back agreement for Devils Tower with strong potential for additional tie-back agreements.

• Placed into service the second phase of the Mid-South Expansion, adding 130,000 dekatherms per day of capacity from Transco's Station 85 to the Cardinal interconnection near Transco's Station 160 in North Carolina. The partnership placed into service the first phase of the expansion (95,000 dekatherms per day) in the fall of 2012. The expansion provides natural gas service to power generators in North Carolina and Alabama as well as a local distribution company in Georgia.

• Filed an application with the Federal Energy Regulatory Commission (FERC) seeking approval to construct the Constitution Pipeline, a 120-mile pipeline which will connect natural gas production in northeastern Pennsylvania with northeastern markets by 2015. The Constitution Pipeline has been designed to transport up to 650,000 dekatherms of natural gas per day (enough natural gas to serve approximately 3 million homes) from Williams Partners' gathering system in Susquehanna County, Pa., to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in Schoharie County, N.Y.

West

• Achieved a new quarterly average daily inlet volume throughput record of 466 MMcf/d at Willow Creek in the second quarter.

Guidance

Williams Partners is reaffirming 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 and 2015.

Williams Partners is slightly lowering its 2013 and 2014 guidance for earnings and distributable cash flow primarily to reflect the expected financial impact of the Geismar incident as well as expected lower NGL processing margins. Guidance for 2015 remains unchanged despite expected lower NGL processing margins.

Both 2013 and 2014 include a number of other revisions including a normal reallocation of support costs between the reportable segments. The primary effect of this reallocation was a shift of support costs to the Northeast G&P segment as a result of its dramatic growth.

In May 2013, Williams agreed to waive incentive distribution rights of up to $200 million over the subsequent four quarters to boost Williams Partners' expected cash distribution coverage ratio. The full $200 million remains available; however, the guidance presented below assumes that the full $200 million will be utilized in conjunction with the upcoming cash distributions for the third and fourth quarters of 2013. These IDR waivers provide Williams Partners with short-term cash distribution support as a large platform of growth projects moves toward completion and as Geismar returns to operations. 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 1.02x in 2015 without the benefit of these additional IDR waivers. The 2014 cash coverage guidance includes expected recoveries from business interruption insurance related to the Geismar incident.

Williams Partners' Geismar plant is expected to be out of service until April 2014 as a result of the incident on June 13, 2013. Williams Partners has $500 million of combined business interruption and property damage insurance related to this event (subject to deductibles and other limitations) that is expected to significantly mitigate the financial loss. The partnership's current estimate of uninsured business interruption loss, property damage loss and other losses totals $95 million. The partnership currently estimates $384 million of cash recoveries from insurers related to business interruption losses.

Under generally accepted accounting principles Williams Partners expects to recognize insurance recovery amounts as income when they are agreed to in writing by insurers or paid in cash. As such, adjusted segment profit, distributable cash flow and cash coverage have been adjusted to accrue assumed business interruption insurance recoveries while unadjusted GAAP amounts reflect estimated timing of written agreements with or cash recoveries from insurers. GAAP financial guidance assumes a 60 day lag from period of business interruption loss to related income recognition.

Williams Partners' preliminary damage assessment and preliminary repair plan indicates an estimated cost of $102 million to repair the plant. The partnership expects to complete the plant repairs, turnaround and expansion and resume operations by April 2014. The assumed expanded plant restart date and repair cost estimate are subject to various uncertainties and risks that could cause the actual results to be materially different from these assumptions. The assumed property damage and business interruption insurance proceeds are also subject to various uncertainties and risks that could cause the actual results to be materially different from these assumptions.