- 1Q 2017 Net Income of $634 Million, Up $584 Million
- 1Q 2017 Adjusted EBITDA of $1.117 Billion, Up 5.4%
- Cash Distribution Coverage Ratio of 1.33x
- Announced Agreement to Sell Its Interests in Geismar Plant for $2.1 Billion and to Provide Feedstock to Plant Buyer via Long-Term Supply and Transportation Agreements
- Williams Partners Analyst Day Set for May 11
TULSA, Okla.–(BUSINESS WIRE)–Williams Partners L.P. (NYSE: WPZ) today announced its financial results for the three months ended March 31, 2017.
|Summary Financial Information||1Q|
Amounts in millions, except per-unit amounts. Per-unit amounts are reported on a diluted basis. All amounts are attributable to Williams Partners L.P.
|Net income (loss)||$||634||$||50|
|Net income (loss) per common unit||$||0.68||($0.25||)|
|Cash Flow from Operations||$||731||$||924|
|Non-GAAP Measures (1)|
|DCF attributable to partnership operations||$||752||$||739|
|Cash distribution coverage ratio||1.33x||1.02x|
|(1) Adjusted EBITDA, distributable cash flow (DCF) and cash distribution coverage ratio are non-GAAP measures. Reconciliations to the most relevant measures included in GAAP are attached to this news release.|
First-Quarter 2017 Financial Results
Williams Partners reported unaudited first-quarter 2017 net income attributable to controlling interests of $634 million, a $584 million increase over first-quarter 2016. The favorable change was driven by a $271 million increase in investing income, primarily associated with a transaction involving certain joint-venture interests, as well as a $141 million improvement in operating income and the absence of $112 million of impairments of equity-method investments in 2016.
Williams Partners reported first-quarter 2017 Cash Flow from Operations (CFFO) of $731 million, a $193 million decrease from first-quarter 2016. The decrease from the prior year is driven by the absence of $198 million of cash received in 2016 associated with minimum volume commitments, which were replaced by contract restructurings that occurred in the latter part of 2016. The prior year also included $80 million of cash received as a milestone payment associated with Transco’s Hillabee expansion project. These unfavorable changes in CFFO were partially offset by improved operating results.
Williams Partners reported first-quarter 2017 Adjusted EBITDA of $1.117 billion, a $57 million increase over first-quarter 2016. The increase is due primarily to $37 million higher commodity margins and $30 million lower operating and maintenance (O&M) and selling, general and administrative (SG&A) expenses, and a $16 million favorable change in other income and expense primarily related to our former Canadian operations which were sold in September 2016. Partially offsetting these increases was a $30 million decrease in fee-revenues due primarily to lower West segment results, partially offset by increases in the Atlantic-Gulf segment.
Distributable Cash Flow and Distributions
For first-quarter 2017, Williams Partners generated $752 million in distributable cash flow (DCF) attributable to partnership operations, compared with $739 million in DCF attributable to partnership operations for first-quarter 2016. The increase is due primarily to the previously described improvement in the quarter’s Adjusted EBITDA and $17 million lower interest expense. DCF has been reduced by $58 million for the planned removal of non-cash deferred revenue amortization associated with the fourth-quarter 2016 contract restructuring in the Barnett Shale and Mid-Continent region. For first-quarter 2017, the cash distribution coverage ratio was 1.33x.
Williams Partners recently announced a regular quarterly cash distribution of $0.60 per unit, payable May 12, 2017 to its common unitholders of record at the close of business on May 5, 2017.
Alan Armstrong, chief executive officer of Williams Partners’ general partner, made the following comments:
“We continue to differentiate ourselves with a focused strategy on natural gas infrastructure in support of consistent and sustainable growth in gas volumes. We continue to deliver top quartile EBITDA growth among our peers as we increased year-over-year Adjusted EBITDA for the 14th quarter in a row. This quarter, our growth was delivered despite some significant impacts from third-party outages and more extreme weather in the Rockies area, proving once again the resiliency of our business model.
“Our project teams continued to deliver as we brought on the 1.2 Bcf/D Gulf Trace project ahead of schedule and under budget. That is just one of five Transco pipeline system expansions that we expect to place in service in 2017. Our successful 2016 work to bring the Gunflint and Kodiak tiebacks in service was showcased this quarter by Atlantic-Gulf’s higher volumes and higher fee-based revenues. And our backlog of projects continues to grow as we had a very successful Southeastern Trail open season in the quarter as well.
“We continue to strengthen our foundation for long-term, sustainable growth in our core business, as highlighted by the recently announced agreement to sell our interests in the Geismar olefins facility while gaining a new third party fee-based revenue stream for our Bayou Ethane system. With the expected sale of Geismar, and the sale of our Canadian business in late 2016, we’ll realize around 97 percent of our gross margins coming from predictable, fee-based sources.
“Our consolidation of operating areas from five to three became effective in first-quarter 2017 – not only streamlining our organization, but helping us continue the cost-savings momentum we began in the second quarter of last year. We expect to realize further cost savings through the consolidation of offices and systems.”
Business Segment Results
Effective, Jan. 1, 2017, Williams Partners implemented certain changes in its reporting segments as part of an operational realignment. As a result beginning with the reporting of first-quarter 2017 financial results, Williams Partners operations will be comprised of the following reportable segments: Atlantic-Gulf, West, Northeast G&P, and NGL & Petchem Services.
|Williams Partners||Modified and Adjusted EBITDA|
|Amounts in millions||1Q 2017||1Q 2017||1Q 2016||1Q 2016|
|NGL & Petchem Services||51||(2||)||49||26||4||30|
|Definitions of modified EBITDA and adjusted EBITDA and schedules reconciling these measures to net income are included in this news release.|
This segment includes the partnership’s interstate natural gas pipeline, Transco, and significant natural gas gathering and processing and crude oil production handling and transportation assets in the Gulf Coast region, including a 51 percent interest in Gulfstar One (a consolidated entity), which is a proprietary floating production system, and various petrochemical and feedstock pipelines in the Gulf Coast region, as well as a 50 percent equity-method investment in Gulfstream, a 41 percent interest in Constitution (a consolidated entity) which is under development, and a 60 percent equity-method investment in Discovery.
The Atlantic-Gulf segment reported Modified EBITDA of $450 million for first-quarter 2017, compared with $382 million for first-quarter 2016. Adjusted EBITDA increased by $48 million to $453 million for the same time period. The increase in both measures was driven primarily by higher fee-based revenues due primarily to contributions from offshore expansion projects completed during 2016 and new Transco projects Rock Springs (in service in August 2016) and Gulf Trace (in service in February 2017). Also contributing to the increase in both measures were $12 million improved commodity margins. Partially offsetting these increases were increased O&M expenses due primarily to higher costs associated with Transco’s integrity and pipeline maintenance program.
This segment includes the partnership’s interstate natural gas pipeline, Northwest Pipeline, and natural gas gathering, processing, and treating operations in New Mexico, Colorado, and Wyoming, as well as the Barnett Shale region of north-central Texas, the Eagle Ford Shale region of south Texas, the Haynesville Shale region of northwest Louisiana, and the Mid-Continent region which includes the Anadarko, Arkoma, Delaware and Permian basins. This reporting segment also includes an NGL and natural gas marketing business, storage facilities, and undivided 50 percent interest in an NGL fractionator near Conway, Kansas, and a 50 percent equity-method investment in OPPL. The partnership completed the disposal of its 50 percent equity-method investment in a Delaware Basin gas gathering system in the Mid-Continent region during first-quarter 2017.
The West segment reported Modified EBITDA of $385 million for first-quarter 2017, compared with $327 million for first-quarter 2016. Adjusted EBITDA of $389 million is $11 million lower than the same period in 2016. The increase in Modified EBITDA was driven primarily by $35 million lower O&M and SG&A expenses and $21 million higher commodity margins. The Adjusted EBITDA decrease was due primarily to $57 million lower fee-based revenues including $25 million lower fee-based revenues in the Barnett from lower volumes and contract changes that occurred during 2016. Fee-based revenues were also impacted by more extreme weather in 2017.
This segment includes the partnership’s natural gas gathering and processing, compression and NGL fractionation businesses in the Marcellus Shale region primarily in Pennsylvania, New York, and West Virginia and Utica Shale region of eastern Ohio, as well as a 66 percent interest in Cardinal (a consolidated entity), a 62 percent equity-method investment in UEOM, a 69 percent equity-method investment in Laurel Mountain, a 58 percent equity-method investment in Caiman II, and Appalachia Midstream Services, LLC, which owns an approximate average 66 percent equity-method investment in multiple gas gathering systems in the Marcellus Shale (Appalachia Midstream Investments).
The Northeast G&P segment reported Modified EBITDA of $226 million for first-quarter 2017, compared with $220 million for first-quarter 2016. Adjusted EBITDA increased $2 million to $227 million. The increase in both measures was due primarily to lower SG&A expenses. Fee-based revenues and proportional EBITDA from joint ventures were stable between the two periods due to increases in the Bradford, Susquehanna and Ohio River systems that offset decreases in the Utica.
NGL & Petchem Services
This segment includes the partnership’s 88.46 percent undivided interest in an olefins production facility in Geismar, Louisiana, along with a refinery grade propylene splitter. On April 17, 2017, the partnership announced an agreement to sell the subsidiary that owns its interests in the Geismar olefins production facility. Prior to September 2016, this reporting segment also included an oil sands offgas processing plant near Fort McMurray, Alberta, and an NGL/olefin fractionation facility, which were subsequently sold.
The NGL & Petchem Services segment reported Modified EBITDA of $51 million for first-quarter 2017, compared with $26 million for first-quarter 2016. Adjusted EBITDA increased by $19 million to $49 million. The increase in both measures was due primarily to a favorable change in other income and expense related to our former Canadian operations, which were sold in September 2016. Additionally, lower O&M and SG&A expenses positively impacted the quarter. Ethylene margins were stable between the two periods due to favorable 2017 per-unit ethylene margins offsetting lower 2017 production volumes caused by an unexpected power outage and related repair activities. The unplanned shutdown and subsequent repair work resulted in the Geismar olefins plant being offline from March 12 until restarting on April 18, 2017. For first-quarter 2017, the Geismar plant contributed approximately $37 million in Adjusted EBITDA.
Notable Recent Events
On March 30, 2017, Williams Partners announced that it had completed separate transactions with Western Gas Partners, LP (NYSE: WES) (“Western Gas”), Anadarko Petroleum Corporation (NYSE: APC) (“Anadarko”), and Energy Transfer Partners, L.P. (NYSE: ETP) (“Energy Transfer”), and certain of their respective affiliates, for an aggregate cash consideration of $200 million paid to Williams Partners and an increase in Williams Partners’ ownership in two Marcellus shale gathering systems, in exchange for Williams Partners’ assignment of interests in certain non-operated Delaware Basin assets.
On April 17, 2017, Williams Partners announced that it has agreed to sell 100 percent of its membership interests in Williams Olefins LLC, which owns an 88.46 percent undivided ownership interest in the Geismar, Louisiana, olefins plant and associated complex, to NOVA Chemicals for $2.1 billion in cash. The transaction is expected to close in summer 2017. Closing is subject to customary closing conditions and regulatory approvals. Additionally, upon closing of the transaction, Williams Partners subsidiaries will enter into long-term supply and transportation agreements with NOVA Chemicals to provide feedstock to the Geismar olefins plant via Williams Partners’ ethane pipeline system in the U.S. Gulf Coast. These agreements will secure a meaningful long-term fee-based revenue stream for the partnership.
Williams Partners, Williams Analyst Day Set for May 11
Williams Partners and Williams are scheduled to host their 2017 Analyst Day event May 11. During the event, Williams’ management will give in-depth presentations covering all of the partnership’s and company’s energy infrastructure businesses and update certain aspects of its financial guidance. This year’s Analyst Day meeting is scheduled from approximately 8:00 a.m. to 2:00 p.m. EDT.
Presentation slides along with a link to the live webcast will be accessible at www.williams.com the morning of May 11. A replay of the Analyst Day webcast will be available on the website for at least 90 days following the event.
Williams Partners’ First-Quarter 2017 Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow
Williams Partners’ first-quarter 2017 financial results package will be posted shortly at www.williams.com. The materials will include the analyst package.
Williams Partners and Williams will host a joint Q&A live webcast on Thursday, May 4 at 9:30 a.m. EDT. A limited number of phone lines will be available at (877) 741-4253. International callers should dial (719) 325-4783. The conference ID is 2089672. A link to the webcast, as well as replays of the webcast, will be available for at least 90 days following the event at www.williams.com.
The partnership plans to file its first-quarter 2017 Form 10-Q with the Securities and Exchange Commission (SEC) this week. Once filed, the document will be available on both the SEC and Williams Partners websites.
Definitions of Non-GAAP Measures
This news release may include certain financial measures – Adjusted EBITDA, distributable cash flow and cash distribution coverage ratio – that are non-GAAP financial measures as defined under the rules of the SEC.
Our segment performance measure, Modified EBITDA, is defined as net income (loss) before income tax expense, net interest expense, equity earnings from equity-method investments, other net investing income, impairments of equity investments and goodwill, depreciation and amortization expense, and accretion expense associated with asset retirement obligations for nonregulated operations. We also add our proportional ownership share (based on ownership interest) of Modified EBITDA of equity-method investments.
Adjusted EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Management believes these measures provide investors meaningful insight into results from ongoing operations.
We define distributable cash flow as Adjusted EBITDA less maintenance capital expenditures, cash portion of interest expense, income attributable to noncontrolling interests and cash income taxes, plus WPZ restricted stock unit non-cash compensation expense and certain other adjustments that management believes affects the comparability of results. Adjustments for maintenance capital expenditures and cash portion of interest expense include our proportionate share of these items of our equity-method investments.
We also calculate the ratio of distributable cash flow 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 using the most directly comparable GAAP measure, net income (loss).
This news 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 EBITDA 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.
About Williams Partners
Williams Partners is an industry-leading, large-cap natural gas infrastructure master limited partnership with a strong growth outlook and major positions in key U.S. supply basins. Williams Partners has operations across the natural gas value chain from gathering, processing and interstate transportation of natural gas and natural gas liquids to petchem production of ethylene, propylene and other olefins. Williams Partners owns and operates more than 33,000 miles of pipelines system wide – including the nation’s largest volume and fastest growing pipeline – providing natural gas for clean-power generation, heating and industrial use. Williams Partners’ operations touch approximately 30 percent of U.S. natural gas. Tulsa, Okla.-based Williams (NYSE: WMB), a premier provider of large-scale U.S. natural gas infrastructure, owns approximately 74 percent of Williams Partners.
The reports, filings, and other public announcements of Williams Partners L.P. (WPZ) 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 (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters.
All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements. Forward-looking statements can be identified 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,” “assumes,” “guidance,” “outlook,” “in service date” 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:
- Expected levels of cash distributions to limited partner interests;
- Our and our affiliates’ future credit ratings;
- 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;
- Seasonality of certain business components;
- Natural gas, natural gas liquids, and olefins prices, supply, and demand;
- Demand for our services.
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 report. 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 will produce sufficient cash flows to provide the level of cash distributions that Williams expects;
- Whether we elect to pay expected levels of cash distributions;
- Whether we will be able to effectively execute our financing plan including the receipt of anticipated levels of proceeds from planned asset sales;
- Whether Williams will be able to effectively manage the transition in its board of directors and management as well as successfully execute its business restructuring;
- Availability of supplies, including lower than anticipated volumes from third parties served by our midstream business, and market demand;
- Volatility of pricing including the effect of lower than anticipated energy commodity prices and margins;
- Inflation, interest rates, and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on customers and suppliers);
- The strength and financial resources of our competitors and the effects of competition;
- Whether we are able to successfully identify, evaluate, and timely execute our capital projects and other investment opportunities in accordance with our forecasted capital expenditures budget;
- Our ability to successfully expand our facilities and operations;
- Development of alternative energy sources;
- The impact of operational and developmental hazards, unforeseen interruptions, and the availability of adequate coverage for such interruptions;
- The impact of existing and future laws, regulations, the regulatory environment, environmental liabilities, and litigation as well as our ability to obtain permits and achieve favorable rate proceeding outcomes;
- Williams’ costs and funding obligations for defined benefit pension plans and other postretirement benefit plans;
- 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 risk of our customers and counterparties;
- Risks related to financing, including restricti
Williams Partners L.P.
Keith Isbell, 918-573-7308
John Porter, 918-573-0797
Brett Krieg, 918-573-4614