-- Net Income, DCF Performance Continue to Improve-- Strong 3Q Results: DCF Up 97% Over 2Q-- 3Q Distribution Coverage Ratio is 1.80x
Oct. 29, 2009 (PR Newswire) -- TULSA, Okla., Oct. 29 /PRNewswire-FirstCall/ -- Williams Partners L.P. (NYSE: WPZ) today announced unaudited third-quarter 2009 net income of $55.9 million, compared with third-quarter 2008 net income of $60.8 million. Net income per limited-partner unit for third-quarter 2009 was $1.04, compared with $1.00 per limited-partner unit, as revised, for third-quarter 2008.
Lower natural gas liquid (NGL) margins, driven by much lower NGL prices, were the primary reason for the decline in net income in the third quarter. The lower prices were significantly offset by sharply lower natural gas prices. Gathering volumes at Wamsutter and Four Corners remained steady. Lower operating and maintenance expenses at Four Corners and higher volumes at Discovery partially offset the lower NGL margins.
Year-to-date through Sept. 30, Williams Partners' net income was $100.0 million, compared with $176.3 million for the same period in 2008. Net income per limited-partner unit for the first nine months of 2009 was $1.88, compared with $2.92, as revised, for the first nine months of 2008.
Lower NGL margins, due to much lower NGL prices, were also the primary reason for the decline in net income in the year-to-date period. These lower prices were significantly offset by the benefit of sharply lower natural gas prices. Lower operating and maintenance expenses at Four Corners also helped partially offset the lower NGL margins.
Third-quarter and year-to-date 2008 net income per limited-partner unit have been revised pursuant to the adoption of an accounting rule change in 2009, which changed the method the partnership previously used to allocate undistributed earnings between the limited partners and the general partner.
Distributable Cash Flow Significantly Improved Versus 2Q '09
For third-quarter 2009, the key measure of distributable cash flow per weighted-average limited partner unit was $1.15, compared with $0.96 for third-quarter 2008. Distributable cash flow for limited-partner unitholders was $60.5 million for third-quarter 2009, compared with $50.5 million for third-quarter 2008.
Distributable cash flow per weighted-average limited partner unit was $2.29 for the first nine months of 2009, compared with $2.65 for the first nine months of 2008. Distributable cash flow for limited-partner unitholders was $120.6 million for the first nine months of 2009, compared with $139.3 million for the same period in 2008.
The 2009 amounts were significantly, favorably impacted by Williams' (NYSE: WMB) waiver of its incentive distribution rights for 2009. The waiver, which was detailed in the partnership's April 15, 2009, press release, decreases the amount of distributable cash flow allocated to the general partner.
Although distributable cash flow is down compared to 2008 for the year-to-date period, it has significantly improved throughout 2009, and is up 97 percent over second-quarter 2009. The partnership's cash distribution coverage ratio was 1.80x for third-quarter 2009, which included the benefit of Williams' IDR waiver. Without that benefit, the partnership's cash distribution coverage ratio would have been 1.48x for third-quarter 2009.
The year-over-year declines in distributable cash flow in the 2009 periods are due to lower cash distributions from the Discovery and Wamsutter investments, as well as lower results from Four Corners. Lower NGL margins drove the decline in results at Four Corners and Wamsutter.
As a result of 2008 hurricane impacts and sharply lower NGL margins, Discovery did not make cash distributions to the partnership earlier in the year. However, Discovery was fully operational for third-quarter 2009 and paid the partnership an $11.1 million cash distribution in September.
Partnership Strengthens Outlook for 2009 DCF, Distribution Coverage
Williams Partners' management is updating its outlook for full-year 2009 commodity price assumptions and the corresponding effect on select partnership results to reflect year-to-date results and the outlook for the fourth quarter.
The partnership's outlook for 2009 distributable cash flow and cash distribution coverage ratio have both been increased compared with previous guidance, which was issued on Aug. 6. The full commodity price outlook and guidance are presented in the following chart.
2009 Commodity Price Results, Assumptions and Outlook
-----------------------------------------------------
YTD 3Q Full-Year 2009
Results Results Assumptions/Outlook
------- ------- -------------------
Low High
--- ----
Natural Gas ($/MMBtu):
NYMEX $3.93 $3.39 $3.95 $4.35
Rockies $2.79 $2.71 $3.00 $3.40
San Juan $3.02 $2.95 $3.20 $3.50
Oil / NGL: Low High
--- ----
Crude Oil - WTI ($/barrel) $53 $68 $55 $60
NGL to Crude Oil relationship* 51% 47% 49% 51%
Financial Impacts
-----------------
Amounts in millions, except NGL
margins and coverage ratios
Four Corners NGL Margins
($/gallon) $0.39 $0.46 $0.40 $0.44
Wamsutter NGL Margins
($/gallon) $0.36 $0.43 $0.36 $0.39
2009 Distributable Cash Flow** $123 $62 $170 $190
2009 Distributions $103 $34 $137 $137
Cash Distribution Coverage 1.2x 1.8x 1.2x 1.4x
Ratio**
* This is calculated as the price of natural gas liquids as a
percentage of the price of crude oil on an equal volume basis.
** 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.
Management is also providing its initial outlook for 2010 distributable cash flow and cash distribution coverage, as well as NGL margins at Four Corners and Wamsutter, based on current forward market commodity prices for 2010. This information is presented in the following chart. The cash distribution coverage ratio range shown below is based on current annual cash distribution per limited-partner unit of $2.54 and includes full payment of incentive distribution rights to Williams in 2010.
2010 Base Business Outlook
--------------------------
Market
(10-19-09)
----------
Natural Gas ($/MMBtu):
NYMEX $6.31
Rockies $5.74
San Juan $5.83
Oil / NGL:
Crude Oil - WTI ($/barrel) $82.52
Crude to Gas Ratio 13:1
NGL to Crude Oil relationship* 50% - 55%
Financial Impacts
-----------------
Four Corners NGL margin
($/gallon) $0.48 - $0.59
Wamsutter NGL margin
($/gallon) $0.43 - $0.52
Distributable Cash Flow (in
millions) ** $175 - $210
Cash Distribution Coverage
Ratio** 1.1x - 1.3x
* This is calculated as the price of
natural gas liquids as a percentage of
the price of crude oil on an equal
volume basis.
** 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.
Chief Operating Officer Perspective
"The partnership turned in a very strong performance in the third quarter, as NGL margins have continued to improve and gathering and equity sales volumes were strong across all of our gathering and processing businesses," said Alan Armstrong, chief operating officer of the general partner of Williams Partners.
"Our well connect program in the West helped drive a 7 percent increase in gathered volumes at Wamsutter during the quarter; and the new Tahiti volumes, as well as full recovery from the '08 hurricane effects, led to a 51 percent increase in plant inlet volumes at Discovery," Armstrong said.
"Our strong performance in the second half of the year will also enable us to pursue some small organic growth opportunities and small bolt-on acquisitions," Armstrong said.
Business Segment Performance
Business segment performance includes results for the partnership's three business segments: Gathering and Processing - West, which includes Four Corners and the Wamsutter investment; Gathering and Processing - Gulf, which includes the Discovery investment; and NGL Services, which includes the Conway fractionation and storage complex.
Consolidated Segment Profit
3Q YTD
---- -----
Amounts in
thousands 2009 2008 2009 2008
Gathering and
Processing - West $63,482 $70,691 $142,642 $207,874
Gathering and
Processing - Gulf 10,925 8,480 15,591 30,437
NGL Services 5,796 6,315 15,286 15,270
----- ----- ------ ------
Consolidated Segment
Profit $80,203 $85,486 $173,519 $253,581
======= ======= ======== ========
Recurring Consolidated Segment Profit*
Amounts in thousands
Gathering and
Processing - West $58,482 $64,681 $138,608 $195,533
Gathering and
Processing - Gulf 10,925 9,370 15,591 31,327
NGL Services 5,796 6,315 15,286 15,270
----- ----- ------ ------
Recurring
Consolidated Segment
Profit* $75,203 $80,366 $169,485 $242,130
======= ======= ======== ========
* A schedule reconciling segment profit to recurring segment profit is
attached to this press release.
Lower per-unit NGL margins at Four Corners drove the lower results for the Gathering & Processing - West segment during the third quarter. Lower operating and maintenance expenses at Four Corners, as well as higher equity earnings from Wamsutter partially offset the lower NGL margins. The lower operating and maintenance expenses at Four Corners were primarily due to lower system losses.
The higher third-quarter equity earnings from Wamsutter were due to a higher allocation of Wamsutter's net income to the partnership in 2009 compared with 2008. Based on the provisions of Wamsutter's LLC agreement, Williams Partners' share of Wamsutter's net income varies depending on its year-to-date net income for a given period and the partnership's overall level of ownership. This higher allocation offset the decrease in Wamsutter's total net income.
Higher third-quarter equity earnings from the Discovery investment drove the higher segment profit in the Gathering and Processing -- Gulf segment for the third-quarter of 2009. Discovery's third-quarter 2008 equity earnings were reduced by approximately $5.0 million as a result of hurricane-related damages and downtime.
Lower per-unit NGL margins at Four Corners and lower equity earnings from Wamsutter were the key drivers of the lower year-to-date results in the Gathering and Processing - West segment. Lower per-unit NGL margins led to the lower equity earnings at Wamsutter.
Downtime at Ignacio due to the June 2009 pipeline rupture also negatively affected the year-to-date results. Lower operating and maintenance expenses at Four Corners, as well as higher fee-based revenues at Wamsutter on higher gathering volumes partially offset the lower NGL margins. The lower operating and maintenance expenses at Four Corners were primarily due to lower system losses.
Lower equity earnings from the Discovery investment drove the lower segment profit results in the Gathering and Processing - Gulf segment for the year-to-date 2009 period. The reduced equity earnings were due primarily to lower per-unit NGL margins and lower plant inlet volumes as both Discovery and its producers worked to recover from the 2008 hurricane damage. These negative impacts were partially offset in the year-to-date period by the receipt of $4.2 million in business interruption insurance proceeds on the Discovery investment during the first quarter.
Reconciliations of the partnership's distributable cash flow for limited-partner unitholders to net income, cash distribution coverage ratio, as well as recurring segment profit to reported segment profit, are available on Williams Partners' web site at www.williamslp.com and as an attachment to this document.
Definitions of Non-GAAP Financial Measures
Williams Partners defines recurring segment profit as segment profit excluding items of income or loss that the partnership characterizes as unrepresentative of its ongoing operations.
Williams Partners defines distributable cash flow attributable to partnership operations as net income (loss) plus depreciation, amortization and accretion, less earnings from equity investments, as well as adjustments for certain non-cash, non-recurring items, plus reimbursements from Williams under an omnibus agreement and less maintenance capital expenditures, plus the actual cash distributed by Wamsutter and Discovery.
Distributable cash flow per weighted average limited-partner unit is a key measure of the partnership's financial performance and available cash flows to unitholders. Williams Partners defines distributable cash flow per limited-partner unit as distributable cash flow attributable to partnership operations allocable to limited partners divided by the weighted average limited partner-units outstanding. Distributable cash flow attributable to partnership operations allocable to limited partners is calculated by allocating the distributable cash flow attributable to partnership operations, as defined in the preceding paragraph, between the general partner and the limited partners in accordance with the cash-distribution provisions of our partnership agreement.
Williams Partners calculates the ratio of distributable cash flow per limited partner unit to the actual cash distribution per unit paid and the ratio of distributable cash flow attributable to partnership operations to the total cash distributed (cash distribution coverage ratio). These two measures reflect the amount of distributable cash flow relative to the partnership's actual cash distribution on both a per limited partner unit and total distribution basis.
Today's Analyst Call
Williams Partners' management will discuss the partnership's third-quarter 2009 financial results during a live webcast today beginning at 11 a.m. EDT. Participants are encouraged to access the webcast and slides for viewing, downloading and printing at www.williamslp.com.
A limited number of phone lines also will be available at (888) 208-1812. International callers should dial (719) 325-2327. Replays of the third-quarter webcast, in both streaming and downloadable podcast formats, will be available for two weeks at www.williamslp.com following the event.
Form 10-Q
The partnership plans to file its Form 10-Q with the Securities and Exchange Commission today. The document will be available on both the SEC and Williams Partners web sites.
About Williams Partners L.P. (NYSE: WPZ)
Williams Partners L.P. is a publicly traded master limited partnership that owns natural gas gathering, transportation, processing and treating assets serving regions where producers require large scale and highly reliable services, including the Gulf of Mexico, the San Juan Basin in New Mexico and Colorado, and the Washakie Basin in Wyoming. The partnership also serves the natural gas liquids (NGL) market through its NGL fractionating and storage assets. The general partner is Williams Partners GP LLC. More information about the partnership is available at www.williamslp.com. Go to http://www.b2i.us/irpass.asp?BzID=1296&to=ea&s=0 to join our e-mail list.
Contact: Jeff Pounds
Williams (media relations)
(918) 573-3332
Sharna Reingold
Williams (investor relations)
(918) 573-2078
Williams Partners L.P. is a limited partnership formed by The Williams Companies, Inc. (Williams). Our reports, filings, and other public announcements 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 the Private Securities Litigation Reform Act of 1995. You typically can identify forward-looking statements by the use of forward-looking words, such as "anticipates," believes," "could," "may," "should," "continues," "estimates," "expects," "forecasts," "intends," "might," "objectives," "planned," "potential," "projects," "scheduled," "will," and other similar expressions. These statements are based on our present intentions and our assumptions about future events and are subject to risks, uncertainties, and other factors. In addition to any assumptions, risks, uncertainties or other factors referred to specifically in connection with such statements, other factors not specifically referenced could cause our actual results to differ materially from the results expressed or implied in any forward-looking statements. Those factors include, among others:
-- whether we have sufficient cash from operations to enable us to maintain
current levels of cash distributions or to pay the minimum quarterly
distribution following establishment of cash reserves and payment of
fees and expenses, including payments to our general partner;
-- availability of supplies (including the uncertainties inherent in
assessing and estimating future natural gas reserves), market demand,
volatility of prices, and the availability and cost of capital;
-- inflation, interest rates and general economic conditions (including the
current economic slowdown and the disruption of global credit markets
and the impact of these events on our customers and suppliers);
-- the strength and financial resources of our competitors;
-- development of alternative energy sources;
-- the impact of operational and development hazards;
-- costs of, changes in, or the results of laws, government regulations
(including proposed climate change legislation), environmental
liabilities, litigation, and rate proceedings;
-- changes in maintenance and construction costs;
-- changes in the current geopolitical situation;
-- our exposure to the credit risks of our customers;
-- risks related to strategy and financing, including restrictions stemming
from our debt agreements, future changes in our credit ratings, and the
availability and cost of credit;
-- risks associated with future weather conditions;
-- acts of terrorism; and
-- additional risks described in our filings with the Securities and
Exchange Commission.
Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change. Such changes in our intentions may also cause our results to differ.
