- 3Q 2017 Net Income of $33 Million
- 3Q 2017 Adjusted EBITDA of $1.113 Billion
- Williams Partners Placed 4 Transco Expansions (Gulf Trace, Hillabee Phase 1, Dalton Expansion, and New York Bay Expansion) Into Service to Date in 2017; Design Capacity Up 25%
- Company Continues to Significantly Improve Credit Profile; Consolidated Net Debt (Long-term Debt Less Cash) Reduced by $3.3 Billion Since Jan. 1, 2017
- Williams Partners Achieved Key Milestones for Atlantic Sunrise Project
TULSA, Okla.–(BUSINESS WIRE)–Williams (NYSE: WMB) today announced its financial results for the three and nine months ended Sept. 30, 2017.
|Williams Summary Financial Information||3Q||YTD|
|Amounts in millions, except per-share amounts. Per share amounts are reported on a diluted basis. All amounts are attributable to The Williams Companies, Inc.||2017||2016||2017||2016|
|Cash Flow from Operations||$||569||$||628||$||1,837||$||2,097|
|Net income (loss)||$||33||$||61||$||487||($409||)|
|Net income (loss) per share||$||0.04||$||0.08||$||0.59||($0.55||)|
|Non-GAAP Measures (1)|
|Adjusted income from continuing operations||$||124||$||148||$||351||$||320|
|Adjusted income from continuing operations per share||$||0.15||$||0.20||$||0.42||$||0.43|
|Cash Flow available for Dividends and other uses||$||355||$||441||$||1,095||$||1,303|
|Dividend Coverage Ratio||1.43x||2.94x||1.47x||1.17x|
(1) Schedules reconciling adjusted income from continuing operations, adjusted EBITDA, Cash Available for Dividends and Dividend Coverage Ratio (non-GAAP measures) are available at www.williams.com and as an attachment to this news release.
Third-Quarter 2017 Financial Results
Williams reported unaudited third-quarter 2017 net income attributable to Williams of $33 million, an unfavorable change of $28 million from third-quarter 2016. The unfavorable change was driven primarily by the absence of results associated with the Geismar olefins facility, which was sold July 6, 2017, and our former Canadian business, which was sold in September 2016. In addition, results were negatively impacted by impairments of assets, largely offset by the gain related to the sale of the Geismar facility.
Year-to-date, Williams reported an unaudited net income of $487 million, an improvement of $896 million over the same period in 2016. The favorable change was driven primarily by increased fee-based revenues from expansion projects, and gains on the sale of assets and equity investments. These favorable results were partially offset by higher impairment losses on assets between the periods and the decrease related to the previously mentioned sale of the Geismar olefins facility and the September 2016 sale of our former Canadian operations. Provision for income taxes also increased, driven by higher pre-tax income, partially offset by a $127 million benefit associated with the expected utilization of a capital loss carryover.
Williams reported third-quarter 2017 Adjusted EBITDA of $1.113 billion, a $79 million decrease from third-quarter 2016. The unfavorable change was driven primarily by the absence of $101 million of Adjusted EBITDA contribution from the Williams Partners segment associated with the previously described assets sold. Williams Partners’ remaining businesses increased Adjusted EBITDA by approximately $13 million including an unfavorable impact of approximately $8 million from Hurricanes Harvey and Irma.
Year-to-date, Williams reported Adjusted EBITDA of $3.371 billion, an increase of $58 million over the corresponding nine-month reporting period in 2016. The improvement is primarily associated with favorable changes in Williams’ Other segment. The Williams Partners segment reported an improvement of $8 million over the corresponding period with increased Adjusted EBITDA from current businesses of approximately $118 million, being partially offset by $110 million of reduced EBITDA resulting from the previously described assets sold.
Alan Armstrong, president and chief executive officer, made the following comments:
“The large-scale, competitive positions we’ve established continue to generate long-term value as evidenced once again this quarter as we maintained our strong results with year-to-date Adjusted EBITDA comparable for the Williams Partners segment to 2016 results despite the impact of two hurricanes and the sale of over $3 billion in assets. We’ve substantially reduced our direct exposure to commodities and, as a result, our current businesses’ steady growth is being driven by consistent fee-based revenue growth.
“Our strategic focus on natural gas volumes continues to deliver results. So far in 2017, we’ve placed four of our ‘Big 5’ Transco expansion projects into service including Gulf Trace, Hillabee Phase 1, Dalton Expansion and New York Bay Expansion with the fifth of the ‘Big 5’ expansions – the Virginia Southside II project – expected to be placed in service during fourth-quarter 2017. The incremental capacity from the fully-contracted Transco expansion projects going in service so far this year reflects a 25 percent increase in Transco’s design capacity. And, year-to-date, Transco’s transportation revenues have increased $74 million, a 7 percent increase over last year.
“Our existing asset footprint and the efficient incremental expansions available to us have also been highlighted in Williams Partners’ Northeast G&P and West Operating Areas. Our recently announced agreement to expand our services in the Northeast for our valued customer, Southwestern Energy, showcases how well-positioned our Northeast G&P segment is to serve the growing gas production in the Marcellus and Utica. We are also positioned to capture growth in the Haynesville where in August, we completed the Springridge South plant expansion, and in Wyoming where we are able to bring more volumes onto our Wamsutter system after placing our Chain Lake compressor station into service in October to meet the growing demand of a customer.
“I’m also extremely pleased that even as we continue to deliver on our growth strategy by successfully executing on expansion projects across our operational map, we have strengthened our balance sheet and credit profile, significantly reducing our debt and continued to lower expenses. Year-to-date in 2017, total adjusted SG&A expenses have been reduced by about $40 million when compared to the same period in 2016.”
Business Segment Results
Williams’ business segments for financial reporting are Williams Partners and Other. In September 2016, Williams announced organizational changes aiming to simplify our structure, increase direct operational alignment to advance our natural gas-focused strategy, and drive continued focus on customer service and execution. Effective, Jan. 1, 2017, Williams implemented these changes which combined the management of certain of our operations and reduced the overall number of operating areas managed within our business. As a result of this realignment and the sale of our Canadian operations, the Williams NGL & Petchem Services reporting segment has been eliminated and the remaining assets are reported with Other.
|Williams||Modified and Adjusted EBITDA|
|Amounts in millions||3Q 2017||3Q 2016||YTD 2017||YTD 2016|
|Definitions of modified EBITDA and adjusted EBITDA and schedules reconciling to net income are included in this news release.|
Williams Partners Segment
Comprised of our consolidated master limited partnership, WPZ, Williams Partners segment includes gas pipeline and midstream businesses. The gas pipeline business includes interstate natural gas pipelines and pipeline joint project investments. The midstream business provides natural gas gathering, treating, processing and compression services; NGL production, fractionation, storage, marketing and transportation; deepwater production handling and crude oil transportation services; and is comprised of several wholly owned and partially owned subsidiaries and joint project investments.
Williams Partners reported third-quarter 2017 Modified EBITDA of $1 billion, a decrease of $70 million from third-quarter 2016. Adjusted EBITDA decreased by $88 million to $1.101 billion. The unfavorable change in Modified EBITDA was driven primarily by the absence of results associated with the Geismar olefins facility, which was sold July 6, 2017, and the partnership’s former Canadian business, which was sold in September 2016. In addition, results were negatively impacted by impairments of assets, largely offset by the gain related to the sale of the Geismar facility. The impairments and gain on sale are excluded from Adjusted EBITDA. The current year also reflected an unfavorable impact of approximately $8 million from Hurricanes Harvey and Irma.
Year-to-date, Williams Partners reported Modified EBITDA of $3.208 billion, an increase of $579 million over the same nine-month reporting period in 2016. Adjusted EBITDA was $3.322 billion, an $8 million increase over the corresponding nine-month reporting period. The favorable change in Modified EBITDA was driven primarily by increased fee-based revenues from expansion projects and gains on the sale of assets and equity investments. The current year also benefited from improved commodity margins, higher fee-based revenues, lower selling, general and administrative (SG&A) expenses and increased proportional EBITDA from joint ventures. These favorable results were partially offset by higher impairment losses on assets between the periods and the reduced contribution related to the previously mentioned sales.
Williams Partners’ complete financial results for third-quarter 2017 are provided in the earnings news release issued today by Williams Partners.
Williams’ Other segment reported third-quarter 2017 Modified EBITDA of ($61) million, an improvement of $6 million from third-quarter 2016 due primarily to the absence of unfavorable results from certain former Canadian operations that were sold in September 2016, partially offset by a $68 million impairment of an NGL pipeline in the Gulf Coast region in 2017. Adjusted EBITDA realized a $9 million improvement to $12 million.
Year-to-date, Williams’ Other segment reported Modified EBITDA of ($60) million, an increase of $474 million primarily reflecting the absence of a $406 million impairment charge in 2016 associated with our former Canadian business, partially offset by $91 million of impairments in 2017, including the previously described impairment of an NGL pipeline. The increase also reflects the absence of unfavorable results from our former Canadian operations and a decrease in expenses associated with our evaluation of strategic alternatives. Adjusted EBITDA realized a $50 million improvement to $49 million.
Atlantic Sunrise Update
On Sept. 18, 2017, Williams Partners reported that construction is now underway in Pennsylvania on the greenfield portion of the Atlantic Sunrise pipeline project – an expansion of the existing Transco natural gas pipeline to connect abundant Marcellus gas supplies with markets in the Mid-Atlantic and Southeastern U.S. The partnership anticipates pipeline and compressor station construction to last approximately 10 months, weather permitting. Additionally, Williams Partners also placed a portion of the project into early service on Sept. 1, 2017, providing 400,000 dth/day of firm transportation service on Transco’s existing mainline facilities to various delivery points as far south as Choctaw County, Alabama. The partial service milestone is the result of recently completed modifications to existing Transco facilities in Virginia and Maryland designed to further accommodate bi-directional flow on the existing Transco pipeline system.
Additional Notable Recent Accomplishments
On Oct. 12, 2017, Williams Partners announced the execution of agreements with Southwestern Energy Company (NYSE: SWN) (“Southwestern”) to expand its services to Southwestern in the Appalachian Basin of West Virginia where Williams Partners has established a strong operational footprint. The agreements call for Williams Partners to deliver gas processing, fractionation, and liquids handling services in Southwestern’s Wet Gas Acreage in the Marcellus and Upper Devonian Shale along with gas gathering services for Southwestern in its South Utica Dry Gas Acreage. Williams Partners will provide Southwestern with 660 million cubic feet per day (MMcf/d) of processing capacity to serve a 135,000-acre dedication in Southwestern’s Wet Gas Acreage in the Marcellus and Upper Devonian Shale in Marshall and Wetzel counties in West Virginia. As a result of this agreement, Williams Partners expects to further build out its Oak Grove processing facility for Southwestern’s expanding production of wet gas. The Oak Grove processing facility has the ability to expand by an additional 1.8 Bcf/d of gas processing capacity.
On Oct. 9, 2017, Williams Partners announced that it has placed into service an expansion of its Transco pipeline system to increase natural gas delivery capacity to New York City by 115,000 dekatherms per day in time for the 2017/2018 heating season. The New York Bay Expansion provides additional firm transportation capacity for much-needed incremental natural gas supplies to National Grid, the largest distributor of natural gas in the northeastern U.S. The company provides service to 1.8 million customers in Brooklyn, Queens, Staten Island and Long Island. The New York Bay Expansion is the fourth of Williams Partners’ projected five fully-contracted Transco expansion projects to be placed into service this year, combining with Gulf Trace, Hillabee Phase 1 and the Dalton Expansion to add more than 2.5 million dekatherms per day capacity to the Transco pipeline system so far in 2017. The partnership continues to target a fourth-quarter 2017 in-service date for its fifth Transco expansion this year – the Virginia Southside II project.
Williams’ Credit Profile Improvement including Debt Reduction Update
The company continued to strengthen its balance sheet and credit profile during the quarter with $144 million reduction of the Williams Companies’ corporate-level debt in addition to the nearly $2.1 billion debt reduction at Williams Partners. As of the end of third-quarter 2017, Williams had corporate level debt of $4.6 billion, in addition to Williams Partners’ debt of $16.5 billion. Year-to-date, consolidated cash and cash equivalents increased by $1.0 billion to $1.17 billion, which the company intends to use primarily to fund growth capital expenditures and long-term investments at Williams Partners.
The Guidance previously provided at our Analyst Day event on May 11, 2017, remains unchanged. Williams plans to announce its 2018 Guidance as part of the release of its fourth-quarter 2017 financial results.
Williams’ Third-Quarter 2017 Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow
Williams’ third-quarter 2017 financial results package will be posted shortly at www.williams.com. Note: the analyst package is included at the back of this news release.
Williams and Williams Partners will host a joint Q&A live webcast on Thursday, Nov. 2 at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). A limited number of phone lines will be available at (877) 830-2641. International callers should dial (785) 424-1809. The conference ID is 8089866. The 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 company plans to file its third-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 websites.
This news release may include certain financial measures – Adjusted EBITDA, adjusted income (“earnings”), adjusted earnings per share, cash available for dividends and other uses, WMB economic DCF, dividend coverage ratio, and economic 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 (loss) from discontinued operations, 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.
Cash available for dividends and other uses is defined as cash received from our ownership in WPZ and Adjusted EBITDA from our Other segment, less interest, taxes and maintenance capital expenditures associated with our Other segment. We also calculate the ratio of cash available for dividends to the total cash dividends paid (dividend coverage ratio). This measure reflects our cash available for dividends relative to actual cash dividends paid. We further adjust these metrics to include Williams’ proportional share of WPZ’s distributable cash flow in excess of distributions, resulting in WMB economic DCF and economic coverage ratio.
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 Company’s assets and the cash that the business is generating.
Neither Adjusted EBITDA, adjusted income, or cash available for dividends and other uses 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.
Williams (NYSE: WMB) is a premier provider of large-scale infrastructure connecting U.S. natural gas and natural gas products to growing demand for cleaner fuel and feedstocks. Headquartered in Tulsa, Okla., Williams owns approximately 74 percent of Williams Partners L.P. (NYSE: WPZ). Williams Partners is an industry-leading, large-cap master limited partnership with operations across the natural gas value chain including gathering, processing and interstate transportation of natural gas and natural gas liquids. With major positions in top U.S. supply basins, 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. www.williams.com