Williams Reports First-Quarter 2014 Financial Results
OREANDA-NEWS. First-Quarter 2014 Net Income is USD 140 Million, USD 0.20 per Share; Results Impacted by Bluegrass Project Write-off and Related Costs, Lower NGL Margins vs. Year-Ago Period.
Adjusted Net Income USD 190 Million or USD 0.28 per Share.
Williams Partners' Fee-based Revenue Up USD 63 Million or 9% vs. 2013.
Continue to Expect More Than 50% Growth in Adjusted Segment Profit + DD&A for 2015 vs. 2013.
Reaffirming Cash-Dividend Growth of 20% in each of 2014 and 2015.
Williams, Williams Partners Analyst Day Set for May 14; Management to Present on Businesses and Provide 2016 Guidance.
Williams (NYSE: WMB) has announced unaudited first-quarter 2014 net income attributable to Williams of USD 140 million, or USD 0.20 per share on a diluted basis, compared with net income of USD 161 million, or USD 0.23 per share on a diluted basis for first-quarter 2013.
The decline in net income during first-quarter 2014 was primarily due to USD 86 million of charges related to the proposed Bluegrass Pipeline project primarily reflecting the write-off of development costs that were previously capitalized and other costs that were incurred or accrued during the first quarter. At Williams Partners, increases in fee-based revenues more than offset lower natural gas liquids (NGL) margins.
Adjusted Income from Continuing Operations
Adjusted income from continuing operations was USD 190 million, or USD 0.28 per share, for first-quarter 2014, compared with USD 152 million or USD 0.22 per share for first-quarter 2013.
The USD 38 million increase in after-tax results attributable to Williams for the quarter was driven by USD 63 million growth in Williams Partners' fee-based revenues, as well as USD 63 million in higher Geismar results (including the benefit of expected business interruption insurance recoveries and planned plant expansion), partially offset by USD 38 million lower NGL margins and other changes.
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:
"Williams' core businesses performed well in the first quarter, generating a 14 percent increase in adjusted segment profit plus DD&A versus the prior year as we continued our trend of posting significant quarterly increases in fee-based revenues.
"From an execution perspective, we completed or made significant progress on several large-scale projects in the first quarter. We added a second fractionator to our Moundsville, West Virginia facility, substantially completed the Keathley Canyon deepwater pipeline and prepared Gulfstar One for commissioning. Additionally, the Geismar olefins plant is expected to begin the startup of its expanded production in June.
"We're excited about the accelerating pace of expansion projects at Transco, including Atlantic Sunrise, Dalton Expansion and our newly announced Gulf Trace project. The Atlantic Sunrise and Gulf Trace projects will serve as important infrastructure for future LNG export facilities at Cove Point and Sabine Pass.
"We believe the Bluegrass Pipeline project remains the best long-term solution in the marketplace for transporting NGLs from the northeast to the Gulf Coast and we continue to pursue support for the project. However, we are exercising financial discipline by suspending capital expenditures as we seek to secure the necessary customer commitments to move forward. Williams will focus its capital investments on the large portfolio of investment opportunities where the returns are more attractive relative to risks.
"Our strong performance, steadfast execution and constantly growing business opportunities give us confidence in our continuing expectation to grow adjusted segment profit plus DD&A by 50 percent in 2015 versus 2013 with minimal Williams Partners' equity issuances in 2014 and none planned for 2015. Growing cash flows are shifting financing toward debt while we continue to maintain investment grade credit metrics."
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. (NYSE:WPZ). Following the dropdown of Williams' currently operational Canadian assets to Williams Partners in February 2014, Williams NGL & Petchem Services segment is comprised of various developmental-stage projects. 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. (NYSE: ACMP). Prior period segment results have been recast to reflect our contribution of certain Canadian assets to Williams Partners.
Williams Partners
Williams Partners is focused on natural gas transportation, gathering, treating, processing and storage; natural gas liquids fractionation, storage and transportation; olefins production; and oil transportation.
For first-quarter 2014, Williams Partners reported segment profit of USD 503 million, compared with USD 494 million for first-quarter 2013. The increase in segment profit is primarily due to an increase in fee-based revenues, partially offset by lower NGL margins and higher operating costs (primarily depreciation) associated with ongoing growth in Williams Partners' Northeast operations.
WPZ raised its first-quarter cash distribution by 1.3 percent compared to the prior quarter. There is a more detailed description of Williams Partners' business results in the partnership's first-quarter 2014 financial results news release, also issued today.
Williams NGL & Petchem Services
As previously mentioned, following the dropdown of Williams' currently operational Canadian assets to Williams Partners in February 2014, Williams NGL & Petchem Services segment is comprised of various developmental-stage projects in Canada and the Gulf Coast.
Williams NGL & Petchem Services reported segment loss of USD 100 million for first-quarter 2014, compared with segment loss of USD 2 million for first-quarter 2013.
The decline in segment profit during first quarter was primarily due to charges of USD 95 million related to the proposed Bluegrass project, including equity losses associated with the write-off of development costs at Bluegrass that were previously capitalized and other costs incurred or accrued during the first quarter.
Access Midstream Partners
The first-quarter 2014 segment profit of USD 6 million for Access Midstream Partners includes USD 21 million of equity earnings recognized from Access Midstream Partners, L.P. reduced by USD 15 million noncash amortization of the difference between the cost of Williams' investment and the company's underlying share of the net assets of Access Midstream Partners, L.P. In the first-quarter of 2014, Williams received a regular quarterly distribution of USD 31 million from Access Midstream Partners, L.P.
ACMP raised its first-quarter cash distribution by 3.6 percent compared to the prior quarter.
Recent Operational Achievements
Northeast G&P
Williams Partners steadily increased the Northeast gathered volumes in first-quarter 2014 despite difficult winter weather conditions, reaching a new monthly average record of 2.3 billion cubic feet per day in the Utica-Marcellus. Average daily gathered volumes increased 38 percent in first-quarter 2014 versus first-quarter 2013. The Susquehanna Supply Hub grew volumes by 37 percent, Ohio Valley Midstream grew volumes by 63 percent and Laurel Mountain grew volumes by 29 percent during the quarter.
Williams Partners completed installation of additional fractionation capacity and is on track to install a de-ethanizer and stabilizer in the first half of 2014 at Ohio Valley Midstream to keep pace with producer demand.
Atlantic-Gulf
In the deepwater Gulf of Mexico, Williams Partners positioned the floating spar and completed the installation of the platform of Gulfstar One, the first-of-its-kind floating production spar, on schedule to start serving our deepwater customers in the third quarter of 2014. The turn-key product, which is part of the partnership's offshore field development program, combines production handling services with export pipeline, oil and gas gathering and processing services.
In the Gulf of Mexico, Williams Partners completed installation of the 215-mile Keathley Canyon Connector 20-inch deepwater pipeline. The USD 460 million project, which includes a new shelf platform and an onshore methanol extraction plant, is due to be completed and ready to receive production within the fourth quarter of 2014.
Timely expansions to the Transco pipeline system drove record-breaking volume deliveries in areas stretching from Mississippi to New York City. Transco set a three-day delivery record Jan. 6-8, 2014 when it delivered an average of 11.12 million dekatherms per day.
Williams Partners announced that the Atlantic Sunrise expansion project received binding commitments from nine shippers for 100 percent of the 1.7 million dekatherms of daily firm transportation capacity. The project includes 15-year shipper commitments from producers, local distribution companies and power generators. Williams Partners expects to bring Atlantic Sunrise into service in the second half of 2017, assuming all necessary regulatory approvals are received in a timely manner.
West
The Willow Creek processing plant in the Piceance Basin achieved a new quarterly average daily inlet volume throughput record of 479 million cubic feet per day in the first quarter.
NGL & Petchem Services
Williams Partners continues to rebuild, turnaround and expand the Geismar Olefins plant, which is expected to begin startup in the latter half of June 2014. The expansion will increase the ethylene production capacity by 600 million pounds per year to a total capacity of 1.95 billion pounds per year. Williams Partners' share of the total capacity is approximately 1.7 billion pounds per year.
Guidance
The company continues to expect to increase the full-year dividend it pays shareholders by 20 percent in each 2014 and 2015 – to per-share amounts of USD 1.75 and USD 2.11, respectively. Williams' full-year dividend for 2013 was USD 1.44 per share. The expected quarterly increases in Williams' dividend are subject to quarterly approval of Williams' board of directors. Williams has paid a common stock dividend every quarter since 1974.
Williams expects strong cash flow growth from Williams Partners and Access Midstream Partners to drive the cash dividend growth through the 2014 to 2015 guidance period and beyond.
Williams Partners' consolidated profitability and cash flow guidance ranges are unchanged from guidance issued on February 19, 2014. Williams Partners expects adjusted segment profit + DD&A to grow by nearly 50 percent for 2015 versus 2013. Several key drivers and assumptions are embedded in this estimate. The largest risks to achieving this growth in 2014 are:
a. Natural gas and natural gas liquids prices that drive assumed NGL margins and drilling activities, as well as olefins prices and margins.
b. Recovery of business interruption insurance proceeds offsetting the majority of the Geismar plant outage in 2014, which assumes a June startup.
c. The timely completion and producer startup of the Gulfstar One project and Discovery's Keathley Canyon System.
d. The delivery of new facilities in the Marcellus producing region along with expected volume growth.
e. The in-service date for Transco's Rockaway Lateral.
Williams Partners has USD 500 million of combined business interruption and property damage insurance related to the Geismar incident (subject to deductibles and other limitations) that is expected to significantly mitigate the financial loss. Based on commodity pricing assumptions and property damage estimates, the company estimates approximately USD 430 million of cash recoveries from insurers related to business interruption losses and approximately USD 70 million related to property damage. In first-quarter 2014, the insurers paid a second installment of USD 125 million and the total amount received to date is USD 175 million.
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.
Capital expenditures for Williams included in guidance for 2014 and 2015 have been decreased by approximately USD 1.2 billion due to the elimination of the proposed Bluegrass Pipeline project. This decrease is offset somewhat by approximately USD 250 million of higher estimated capital expenditures at Williams Partners during this period, which primarily relates to new projects.
Williams is removing the proposed Bluegrass project from its financial guidance and will focus current capital expenditures on the large portfolio of investment opportunities where the returns are more attractive relative to risks.
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