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Williams Partners Reports Second-Quarter 2017 Financial Results
Summary Financial Information 2Q YTD 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. 2017 2016 2017 2016 GAAP Measures Cash Flow from Operations $ 776 $ 742 $ 1,507 $ 1,666 Net income (loss) $ 320 ($90 ) $ 954 ($40 ) Net income (loss) per common unit $ 0.33 ($0.49 ) $ 1.00 ($0.74 ) Non-GAAP Measures (1) Adjusted EBITDA $ 1,104 $ 1,065 $ 2,221 $ 2,125 DCF attributable to partnership operations $ 698 $ 737 $ 1,450 $ 1,476 Cash distribution coverage ratio 1.22x 1.02x 1.27x 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.
Second-Quarter 2017 Financial Results
Williams Partners reported unaudited second-quarter 2017 net income attributable to controlling interests of $320 million, a $410 million improvement over second-quarter 2016. The favorable change was driven by a $452 million improvement in operating income primarily reflecting a $394 million decrease in impairments of certain assets and increased fee-based revenue from expansion projects. The decrease in impairments includes the absence of a second-quarter 2016, $341 million impairment charge associated with the partnership’s now former Canadian business that was sold in September 2016.
Year-to-date, Williams Partners reported unaudited net income of $954 million, a $994 million improvement over the same period in 2016. The favorable change was driven by a $593 million improvement in operating income primarily reflecting a $399 million decrease in impairments of certain assets and increased fee-based revenue from expansion projects. The decrease in impairments includes the absence of the impairment charge referenced above. The improvement in net income also reflects a gain of $269 million associated with the disposition of certain equity-method investments in 2017 and the absence of $112 million of impairments of equity-method investments incurred in 2016.
Williams Partners reported second-quarter 2017 Adjusted EBITDA of $1.104 billion, a $39 million increase over second-quarter 2016. The improvement is due primarily to $18 million increased fee-based revenues and a $24 million increase in proportional EBITDA of joint ventures. Partially offsetting these increases were $22 million lower olefins margins.
Year-to-date, Williams Partners reported Adjusted EBITDA of $2.221 billion, an increase of $96 million over the same six-month reporting period in 2016. The increase is due primarily to $36 million lower operating and maintenance (O&M) and selling, general and administrative (SG&A) expenses, a $28 million improvement in other income and expense, and a $29 million increase in proportional EBITDA of joint ventures.
Distributable Cash Flow and Distributions
For second-quarter 2017, Williams Partners generated $698 million in distributable cash flow (DCF) attributable to partnership operations, compared with $737 million in DCF attributable to partnership operations for second-quarter 2016. DCF for second-quarter 2017 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. Also impacting the unfavorable change were $25 million increased maintenance capital expenditures and a $19 million increase in income attributable to non-controlling interests. Partially offsetting the unfavorable changes was the previously described improvement in the quarter’s Adjusted EBITDA and a $29 million decrease in interest expense. For second-quarter 2017, the cash distribution coverage ratio was 1.22x.
Year-to-date, Williams Partners generated $1.450 billion in DCF, a decrease of $26 million over the same period in 2016. DCF for 2017 has been reduced by $116 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. Also impacting the unfavorable change were $20 million increased maintenance capital expenditures and a $17 million increase in income attributable to non-controlling interests. Partially offsetting the unfavorable changes were the previously described improvement in year-to-date Adjusted EBITDA and a $46 million decrease in interest expense. The cash distribution coverage for the first six-month reporting period was 1.27x.
Williams Partners recently announced a regular quarterly cash distribution of $0.60 per unit, payable Aug. 11, 2017, to its common unitholders of record at the close of business on Aug. 4, 2017.
CEO Perspective
Alan Armstrong, chief executive officer of Williams Partners’ general partner, made the following comments:
“The second quarter demonstrated once again the long-term, sustainable benefits of our focused strategy as we recognized year-over-year growth in Adjusted EBITDA for the 15th consecutive quarter. We met or exceeded business performance expectations in all three remaining business units, offset by weaker than expected performance at Geismar, which was impacted by a continuing outage and lower margins. Strong performance in the Atlantic-Gulf, coupled with expected growth for the balance of the year, gives us confidence in achieving our prior guidance on Adjusted EBITDA and DCF.
“We continue to deliver on project execution as planned for 2017. So far this year, we have successfully brought into service three Transco expansion projects including the 1.2 Bcf/d Gulf Trace project, the 0.8 Bcf/d Hillabee Phase 1 project, and just this week, the 0.4 Bcf/d Dalton Expansion project. The line of sight to future growth is evident as well as we are targeting second-half 2017 in-service dates for three more fully-contracted growth projects including Virginia Southside II, New York Bay, and Garden State Phase 1.
“In addition to strong year-over-year fee-based revenue growth in the Atlantic-Gulf, we also saw gathered volumes in the West up approximately 4 percent versus first-quarter 2017, adjusted for the Marcellus-for-Permian transaction. While pipeline takeaway constraints continue to impact volumes in the Northeast, we remain well-positioned for volume growth as those constraints are lifted. We’re also pleased our Susquehanna and Ohio River Systems delivered year-over-year fee-based revenue growth. As we look ahead, around 97 percent of our gross margins will come from predictable fee-based sources now that we have successfully completed the sale of Geismar – reducing our commodity exposure and further strengthening our natural gas-focused strategy.
“We continue to see benefits from the reorganization of our operating areas and operational support functions such as safety and procurement. Continuous improvement in safety performance and project execution is another commitment that we are delivering on at the mid-point of 2017 and will continue to focus on as we move through the second half of the year.”
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 are 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 2Q 2017 2Q 2016 YTD 2017 YTD 2016 Modified EBITDA Adjust. Adjusted EBITDA Modified EBITDA Adjust. Adjusted EBITDA Modified EBITDA Adjust. Adjusted EBITDA Modified EBITDA Adjust. Adjusted EBITDA Atlantic-Gulf $ 454 $ 8 $ 462 $ 360 $ 8 $ 368 $ 904 $ 11 $ 915 $ 742 $ 31 $ 773 West 356 16 372 312 112 424 741 20 761 639 185 824 Northeast G&P 247 1 248 222 - 222 473 2 475 442 5 447 NGL & Petchem Services 30 (7 ) 23 (290 ) 341 51 81 (9 ) 72 (264 ) 345 81 Other (11 ) 10 (1 ) - - - 9 (11 ) (2 ) - - - Total $ 1,076 $ 28 $ 1,104 $ 604 $ 461 $ 1,065 $ 2,208 $ 13 $ 2,221 $ 1,559 $ 566 $ 2,125 Definitions of modified EBITDA and adjusted EBITDA and schedules reconciling these measures to net income are included in this news release. Atlantic-Gulf
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 $454 million for second-quarter 2017, compared with $360 million for second-quarter 2016. Adjusted EBITDA increased by $94 million to $462 million for the same reporting period. The increase in both measures was driven primarily by $88 million increased fee-based revenues due primarily to higher volumes from Gulfstar One and Transco expansion projects placed in service, as well as higher proportional EBITDA from joint ventures related to an $11 million increase from Discovery. Partially offsetting the favorable results were $14 million in increased O&M expenses due primarily to higher costs associated with Transco’s integrity and pipeline maintenance program.
Year-to-date, the Atlantic-Gulf segment reported Modified EBITDA of $904 million, an increase of $162 million over the same six-month period in 2016. Adjusted EBITDA increased $142 million to $915 million. The drivers for the increase in both measures are an improvement in fee-based revenues due primarily to higher volumes from Gulfstar One and Transco expansion projects placed in service, $18 million higher proportional EBITDA from joint ventures primarily from Discovery, and $13 million higher commodity margins. Partially offsetting these improvements were increased O&M expenses due primarily to higher costs associated with Transco’s integrity and pipeline maintenance program and the segment’s offshore business.
West
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, an undivided 50 percent interest in an NGL fractionator near Conway, Kansas, and a 50 percent equity-method investment in OPPL. The partnership completed the sale 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 $356 million for second-quarter 2017, compared with $312 million for second-quarter 2016. Adjusted EBITDA decreased by $52 million to $372 million. The increase in Modified EBITDA was driven primarily by the absence of $48 million of impairments that impacted second-quarter 2016, which are excluded from Adjusted EBITDA. The decrease in Adjusted EBITDA was due primarily to $51 million lower fee-based revenues, including $18 million lower fee-based revenues in the Barnett from lower volumes and contract changes that occurred during 2016. Revenues in the Niobrara decreased by $7 million due to a change in revenue recognition timing resulting from contract restructuring. The unfavorable change in Adjusted EBITDA was also impacted by $10 million in decreased proportional EBITDA of joint ventures, due in part to the partnership’s sale of its interests in certain non-operated Delaware Basin assets in first-quarter 2017. Volume decreases in other areas also contributed to the unfavorable change. Partially offsetting the decrease was a $14 million decline in O&M and SG&A expenses.
Year-to-date, the West segment reported Modified EBITDA of $741 million, an increase of $102 million over the same six-month period in 2016. Adjusted EBITDA decreased by $63 million to $761 million. The increase in Modified EBITDA was driven primarily by a $65 million improvement in other income and expense, which included the absence of the impairments that impacted second-quarter 2016 and are excluded from Adjusted EBITDA. The favorable change also reflects $46 million in reduced O&M and SG&A expenses, $8 million of which are excluded from the Adjusted EBITDA measure. The decrease in Adjusted EBITDA was driven primarily by $108 million lower fee-based revenues, including $44 million lower fee-based revenues in the Barnett from lower volumes and contract changes that occurred during 2016. Revenues in the Niobrara decreased by $17 million due to a change in revenue recognition timing resulting from contract restructuring. The unfavorable change in Adjusted EBITDA was also impacted by $10 million in decreased proportional EBITDA of joint ventures, due in part to the partnership’s sale of its interests in certain non-operated Delaware Basin assets in first-quarter 2017. Volume decreases in other areas also contributed to the unfavorable change. Partially offsetting the decreases were the reduced O&M and SG&A expenses described above and $17 million in improved commodity margins.
Northeast G&P
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 Utica East Ohio Midstream (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 $247 million for second-quarter 2017, compared with $222 million for second-quarter 2016. Adjusted EBITDA increased by $26 million to $248 million. The improvement in both measures was driven primarily by a $22 million increase in proportional EBITDA of joint ventures due largely to the partnership’s increase in ownership in two Marcellus shale gathering systems in first-quarter 2017. Fee-based revenues were stable between the two periods due to increases in the Susquehanna and Ohio River systems that offset decreases in the Utica.
Year-to-date, the Northeast G&P segment reported Modified EBITDA of $473 million, an increase of $31 million over the same six-month period in 2016. Adjusted EBITDA increased by $28 million to $475 million. The improvement in both measures was driven primarily by a $21 million increase in proportional EBITDA of joint ventures due largely to the partnership’s increase in ownership in two Marcellus shale gathering systems in first-quarter 2017. Fee-based revenues were stable between the two periods due to increases in the Susquehanna and Ohio River systems that offset decreases in the Utica.
NGL & Petchem Services
On Jan. 1, 2017 this segment included the partnership’s 88.46 percent undivided interest in an olefins production facility in Geismar, Louisiana, along with a refinery grade propylene splitter. On July 6, 2017, the partnership announced that it had completed the sale of all of its membership interest in the Geismar olefins production facility and associated complex. On June 30, 2017 the partnership completed the sale of the refinery grade propylene splitter. 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 $30 million for second-quarter 2017, compared with ($290) million for second-quarter 2016. Adjusted EBITDA decreased by $28 million to $23 million. The favorable change in Modified EBITDA was driven primarily by the absence of a second-quarter 2016, $341 million impairment charge associated with Williams Partners’ now former Canadian business that was sold in September 2016. Adjusted EBITDA was unfavorably impacted by a $22 million decrease in olefins margins due primarily to lower volumes at the Geismar olefins plant due to an unexpected power outage at the plant that resulted in the facility being offline from March 12 until restarting on April 18, 2017. Lower volumes at the RGP Splitter in connection with its sale on June 30 also contributed to the unfavorable change. The quarter’s unfavorable change in Adjusted EBITDA also reflects a $19 million decrease in fee-based revenues due primarily to the third-quarter 2016 sale of the partnership’s now former Canadian business. Partially offsetting these decreases was a $15 million reduction in O&M and SG&A expenses due primarily to the September 2016 sale of the partnership’s now former Canadian business.
Year-to-date, the NGL & Petchem Services segment reported Modified EBITDA of $81 million, an improvement of $345 million over the same six-month period in 2016. Adjusted EBITDA decreased $9 million to $72 million. The favorable change in Modified EBITDA was driven primarily by the absence of a second-quarter 2016, $341 million impairment charge associated with Williams Partners’ now former Canadian business that was sold in September 2016. Adjusted EBITDA was unfavorably impacted by a $24 million decrease in fee-based revenues and a $22 million decrease in olefins margins due primarily to lower volumes. The Geismar olefins plant had lower volumes due to the previously described power outage. The segment’s lower fee-based revenues and olefins margins also reflect the sale of the partnership’s now former Canadian business in September 2016. Partially offsetting these decreases was a $28 million reduction in O&M and SG&A expenses due primarily to the third-quarter 2016 sale of Williams Partners’ now former Canadian business.
Williams Partners does not expect significant future operating results from this segment; however, as a result of the sale of its interest in the Geismar olefins facility referenced above, the partnership expects to record a gain of approximately $1.1 billion in the third quarter of 2017.
Atlantic Sunrise Update
Williams Partners received notice to proceed on the mainline portion of the project, and construction activities are underway. In third-quarter 2017, the partnership expects to begin early mainline service and to receive final permits on the greenfield portion of the project. Williams Partners continues to target mid-2018 for the project’s full in-service date.
Guidance
The Guidance previously provided at our Analyst Day event on May 11, 2017, remains unchanged.
Williams Partners’ Second-Quarter 2017 Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow
Williams Partners’ second-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, Aug. 3 at 9:30 a.m. Eastern Daylight Time (8:30 a.m. Central Daylight Time). A limited number of phone lines will be available at (877) 419-6594. International callers should dial (719) 325-4888. The conference ID is 9171330. 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.
Form 10-Q
The partnership plans to file its second-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.
ContactsWilliams Partners L.P.
Media Contact:
Keith Isbell, 918-573-7308
or
Investor Contact:
Brett Krieg, 918-573-4614
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- 2Q 2017 Net Income of $320 Million
- 2Q 2017 Adjusted EBITDA of $1.104 Billion, Up $39 Million
- 2Q 2017 Cash Distribution Coverage Ratio of 1.22x
-
Placed 3 Transco Expansions (Dalton Expansion, Hillabee Phase 1 and
Gulf Trace) Into Service So Far in 2017 -
On July 6, 2017, Completed Sale of Its Interests in Geismar Plant
for $2.1 Billion in Cash; Entered into Long-Term Supply and
Transportation Agreements with Plant Buyer -
Geismar Sale Proceeds Used to Pay Off $850 Million Term Loan and
Prefund a Portion of Growth Capex
TULSA, Okla.–(BUSINESS WIRE)–Williams Partners L.P. (NYSE: WPZ) today announced its financial results
for the three and six months ended June 30, 2017.
| Summary Financial Information | 2Q | YTD | |||||||||||||||||
|
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. |
2017 | 2016 | 2017 | 2016 | |||||||||||||||
| GAAP Measures | |||||||||||||||||||
| Cash Flow from Operations | $ | 776 | $ | 742 | $ | 1,507 | $ | 1,666 | |||||||||||
| Net income (loss) | $ | 320 | ($90 | ) | $ | 954 | ($40 | ) | |||||||||||
| Net income (loss) per common unit | $ | 0.33 | ($0.49 | ) | $ | 1.00 | ($0.74 | ) | |||||||||||
| Non-GAAP Measures (1) | |||||||||||||||||||
| Adjusted EBITDA | $ | 1,104 | $ | 1,065 | $ | 2,221 | $ | 2,125 | |||||||||||
| DCF attributable to partnership operations | $ | 698 | $ | 737 | $ | 1,450 | $ | 1,476 | |||||||||||
| Cash distribution coverage ratio | 1.22x | 1.02x | 1.27x | 1.02x | |||||||||||||||
|
(1) Adjusted EBITDA, distributable cash flow (DCF) and cash |
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Second-Quarter 2017 Financial Results
Williams Partners reported unaudited second-quarter 2017 net income
attributable to controlling interests of $320 million, a $410 million
improvement over second-quarter 2016. The favorable change was driven by
a $452 million improvement in operating income primarily reflecting a
$394 million decrease in impairments of certain assets and increased
fee-based revenue from expansion projects. The decrease in impairments
includes the absence of a second-quarter 2016, $341 million impairment
charge associated with the partnership’s now former Canadian business
that was sold in September 2016.
Year-to-date, Williams Partners reported unaudited net income of $954
million, a $994 million improvement over the same period in 2016. The
favorable change was driven by a $593 million improvement in operating
income primarily reflecting a $399 million decrease in impairments of
certain assets and increased fee-based revenue from expansion projects.
The decrease in impairments includes the absence of the impairment
charge referenced above. The improvement in net income also reflects a
gain of $269 million associated with the disposition of certain
equity-method investments in 2017 and the absence of $112 million of
impairments of equity-method investments incurred in 2016.
Williams Partners reported second-quarter 2017 Adjusted EBITDA of $1.104
billion, a $39 million increase over second-quarter 2016. The
improvement is due primarily to $18 million increased fee-based revenues
and a $24 million increase in proportional EBITDA of joint ventures.
Partially offsetting these increases were $22 million lower olefins
margins.
Year-to-date, Williams Partners reported Adjusted EBITDA of $2.221
billion, an increase of $96 million over the same six-month reporting
period in 2016. The increase is due primarily to $36 million lower
operating and maintenance (O&M) and selling, general and administrative
(SG&A) expenses, a $28 million improvement in other income and expense,
and a $29 million increase in proportional EBITDA of joint ventures.
Distributable Cash Flow and Distributions
For second-quarter 2017, Williams Partners generated $698 million in
distributable cash flow (DCF) attributable to partnership operations,
compared with $737 million in DCF attributable to partnership operations
for second-quarter 2016. DCF for second-quarter 2017 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. Also
impacting the unfavorable change were $25 million increased maintenance
capital expenditures and a $19 million increase in income attributable
to non-controlling interests. Partially offsetting the unfavorable
changes was the previously described improvement in the quarter’s
Adjusted EBITDA and a $29 million decrease in interest expense. For
second-quarter 2017, the cash distribution coverage ratio was 1.22x.
Year-to-date, Williams Partners generated $1.450 billion in DCF, a
decrease of $26 million over the same period in 2016. DCF for 2017 has
been reduced by $116 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.
Also impacting the unfavorable change were $20 million increased
maintenance capital expenditures and a $17 million increase in income
attributable to non-controlling interests. Partially offsetting the
unfavorable changes were the previously described improvement in
year-to-date Adjusted EBITDA and a $46 million decrease in interest
expense. The cash distribution coverage for the first six-month
reporting period was 1.27x.
Williams Partners recently announced a regular quarterly cash
distribution of $0.60 per unit, payable Aug. 11, 2017, to its common
unitholders of record at the close of business on Aug. 4, 2017.
CEO Perspective
Alan Armstrong, chief executive officer of Williams Partners’ general
partner, made the following comments:
“The second quarter demonstrated once again the long-term, sustainable
benefits of our focused strategy as we recognized year-over-year growth
in Adjusted EBITDA for the 15th consecutive quarter. We met
or exceeded business performance expectations in all three remaining
business units, offset by weaker than expected performance at Geismar,
which was impacted by a continuing outage and lower margins. Strong
performance in the Atlantic-Gulf, coupled with expected growth for the
balance of the year, gives us confidence in achieving our prior guidance
on Adjusted EBITDA and DCF.
“We continue to deliver on project execution as planned for 2017. So far
this year, we have successfully brought into service three Transco
expansion projects including the 1.2 Bcf/d Gulf Trace project, the 0.8
Bcf/d Hillabee Phase 1 project, and just this week, the 0.4 Bcf/d Dalton
Expansion project. The line of sight to future growth is evident as well
as we are targeting second-half 2017 in-service dates for three more
fully-contracted growth projects including Virginia Southside II, New
York Bay, and Garden State Phase 1.
“In addition to strong year-over-year fee-based revenue growth in the
Atlantic-Gulf, we also saw gathered volumes in the West up approximately
4 percent versus first-quarter 2017, adjusted for the
Marcellus-for-Permian transaction. While pipeline takeaway constraints
continue to impact volumes in the Northeast, we remain well-positioned
for volume growth as those constraints are lifted. We’re also pleased
our Susquehanna and Ohio River Systems delivered year-over-year
fee-based revenue growth. As we look ahead, around 97 percent of our
gross margins will come from predictable fee-based sources now that we
have successfully completed the sale of Geismar – reducing our commodity
exposure and further strengthening our natural gas-focused strategy.
“We continue to see benefits from the reorganization of our operating
areas and operational support functions such as safety and procurement.
Continuous improvement in safety performance and project execution is
another commitment that we are delivering on at the mid-point of 2017
and will continue to focus on as we move through the second half of the
year.”
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 are 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 | 2Q 2017 | 2Q 2016 | YTD 2017 | YTD 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Modified EBITDA | Adjust. | Adjusted EBITDA | Modified EBITDA | Adjust. | Adjusted EBITDA | Modified EBITDA | Adjust. | Adjusted EBITDA | Modified EBITDA | Adjust. | Adjusted EBITDA | |||||||||||||||||||||||||||||||||||||||||||||
| Atlantic-Gulf | $ | 454 | $ | 8 | $ | 462 | $ | 360 | $ | 8 | $ | 368 | $ | 904 | $ | 11 | $ | 915 | $ | 742 | $ | 31 | $ | 773 | ||||||||||||||||||||||||||||||||
| West | 356 | 16 | 372 | 312 | 112 | 424 | 741 | 20 | 761 | 639 | 185 | 824 | ||||||||||||||||||||||||||||||||||||||||||||
| Northeast G&P | 247 | 1 | 248 | 222 | – | 222 | 473 | 2 | 475 | 442 | 5 | 447 | ||||||||||||||||||||||||||||||||||||||||||||
| NGL & Petchem Services | 30 | (7 | ) | 23 | (290 | ) | 341 | 51 | 81 | (9 | ) | 72 | (264 | ) | 345 | 81 | ||||||||||||||||||||||||||||||||||||||||
| Other | (11 | ) | 10 | (1 | ) | – | – | – | 9 | (11 | ) | (2 | ) | – | – | – | ||||||||||||||||||||||||||||||||||||||||
| Total | $ | 1,076 | $ | 28 | $ | 1,104 | $ | 604 | $ | 461 | $ | 1,065 | $ | 2,208 | $ | 13 | $ | 2,221 | $ | 1,559 | $ | 566 | $ | 2,125 | ||||||||||||||||||||||||||||||||
|
Definitions of modified EBITDA and adjusted EBITDA and schedules reconciling these measures to net income are included in this news release. |
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Atlantic-Gulf
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 $454 million for
second-quarter 2017, compared with $360 million for second-quarter 2016.
Adjusted EBITDA increased by $94 million to $462 million for the same
reporting period. The increase in both measures was driven primarily by
$88 million increased fee-based revenues due primarily to higher volumes
from Gulfstar One and Transco expansion projects placed in service, as
well as higher proportional EBITDA from joint ventures related to an $11
million increase from Discovery. Partially offsetting the favorable
results were $14 million in increased O&M expenses due primarily to
higher costs associated with Transco’s integrity and pipeline
maintenance program.
Year-to-date, the Atlantic-Gulf segment reported Modified EBITDA of $904
million, an increase of $162 million over the same six-month period in
2016. Adjusted EBITDA increased $142 million to $915 million. The
drivers for the increase in both measures are an improvement in
fee-based revenues due primarily to higher volumes from Gulfstar One and
Transco expansion projects placed in service, $18 million higher
proportional EBITDA from joint ventures primarily from Discovery, and
$13 million higher commodity margins. Partially offsetting these
improvements were increased O&M expenses due primarily to higher costs
associated with Transco’s integrity and pipeline maintenance program and
the segment’s offshore business.
West
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, an undivided 50
percent interest in an NGL fractionator near Conway, Kansas, and a 50
percent equity-method investment in OPPL. The partnership completed the
sale 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 $356 million for
second-quarter 2017, compared with $312 million for second-quarter 2016.
Adjusted EBITDA decreased by $52 million to $372 million. The increase
in Modified EBITDA was driven primarily by the absence of $48 million of
impairments that impacted second-quarter 2016, which are excluded from
Adjusted EBITDA. The decrease in Adjusted EBITDA was due primarily to
$51 million lower fee-based revenues, including $18 million lower
fee-based revenues in the Barnett from lower volumes and contract
changes that occurred during 2016. Revenues in the Niobrara decreased by
$7 million due to a change in revenue recognition timing resulting from
contract restructuring. The unfavorable change in Adjusted EBITDA was
also impacted by $10 million in decreased proportional EBITDA of joint
ventures, due in part to the partnership’s sale of its interests in
certain non-operated Delaware Basin assets in first-quarter 2017. Volume
decreases in other areas also contributed to the unfavorable change.
Partially offsetting the decrease was a $14 million decline in O&M and
SG&A expenses.
Year-to-date, the West segment reported Modified EBITDA of $741 million,
an increase of $102 million over the same six-month period in 2016.
Adjusted EBITDA decreased by $63 million to $761 million. The increase
in Modified EBITDA was driven primarily by a $65 million improvement in
other income and expense, which included the absence of the impairments
that impacted second-quarter 2016 and are excluded from Adjusted EBITDA.
The favorable change also reflects $46 million in reduced O&M and SG&A
expenses, $8 million of which are excluded from the Adjusted EBITDA
measure. The decrease in Adjusted EBITDA was driven primarily by $108
million lower fee-based revenues, including $44 million lower fee-based
revenues in the Barnett from lower volumes and contract changes that
occurred during 2016. Revenues in the Niobrara decreased by $17 million
due to a change in revenue recognition timing resulting from contract
restructuring. The unfavorable change in Adjusted EBITDA was also
impacted by $10 million in decreased proportional EBITDA of joint
ventures, due in part to the partnership’s sale of its interests in
certain non-operated Delaware Basin assets in first-quarter 2017. Volume
decreases in other areas also contributed to the unfavorable change.
Partially offsetting the decreases were the reduced O&M and SG&A
expenses described above and $17 million in improved commodity margins.
Northeast G&P
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 Utica East Ohio Midstream (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 $247 million for
second-quarter 2017, compared with $222 million for second-quarter 2016.
Adjusted EBITDA increased by $26 million to $248 million. The
improvement in both measures was driven primarily by a $22 million
increase in proportional EBITDA of joint ventures due largely to the
partnership’s increase in ownership in two Marcellus shale gathering
systems in first-quarter 2017. Fee-based revenues were stable between
the two periods due to increases in the Susquehanna and Ohio River
systems that offset decreases in the Utica.
Year-to-date, the Northeast G&P segment reported Modified EBITDA of $473
million, an increase of $31 million over the same six-month period in
2016. Adjusted EBITDA increased by $28 million to $475 million. The
improvement in both measures was driven primarily by a $21 million
increase in proportional EBITDA of joint ventures due largely to the
partnership’s increase in ownership in two Marcellus shale gathering
systems in first-quarter 2017. Fee-based revenues were stable between
the two periods due to increases in the Susquehanna and Ohio River
systems that offset decreases in the Utica.
NGL & Petchem Services
On Jan. 1, 2017 this segment included the partnership’s 88.46 percent
undivided interest in an olefins production facility in Geismar,
Louisiana, along with a refinery grade propylene splitter. On July 6,
2017, the partnership announced that it had completed the sale of all of
its membership interest in the Geismar olefins production facility and
associated complex. On June 30, 2017 the partnership completed the sale
of the refinery grade propylene splitter. 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 $30
million for second-quarter 2017, compared with ($290) million for
second-quarter 2016. Adjusted EBITDA decreased by $28 million to $23
million. The favorable change in Modified EBITDA was driven primarily by
the absence of a second-quarter 2016, $341 million impairment charge
associated with Williams Partners’ now former Canadian business that was
sold in September 2016. Adjusted EBITDA was unfavorably impacted by a
$22 million decrease in olefins margins due primarily to lower volumes
at the Geismar olefins plant due to an unexpected power outage at the
plant that resulted in the facility being offline from March 12 until
restarting on April 18, 2017. Lower volumes at the RGP Splitter in
connection with its sale on June 30 also contributed to the unfavorable
change. The quarter’s unfavorable change in Adjusted EBITDA also
reflects a $19 million decrease in fee-based revenues due primarily to
the third-quarter 2016 sale of the partnership’s now former Canadian
business. Partially offsetting these decreases was a $15 million
reduction in O&M and SG&A expenses due primarily to the September 2016
sale of the partnership’s now former Canadian business.
Year-to-date, the NGL & Petchem Services segment reported Modified
EBITDA of $81 million, an improvement of $345 million over the same
six-month period in 2016. Adjusted EBITDA decreased $9 million to $72
million. The favorable change in Modified EBITDA was driven primarily by
the absence of a second-quarter 2016, $341 million impairment charge
associated with Williams Partners’ now former Canadian business that was
sold in September 2016. Adjusted EBITDA was unfavorably impacted by a
$24 million decrease in fee-based revenues and a $22 million decrease in
olefins margins due primarily to lower volumes. The Geismar olefins
plant had lower volumes due to the previously described power outage.
The segment’s lower fee-based revenues and olefins margins also reflect
the sale of the partnership’s now former Canadian business in September
2016. Partially offsetting these decreases was a $28 million reduction
in O&M and SG&A expenses due primarily to the third-quarter 2016 sale of
Williams Partners’ now former Canadian business.
Williams Partners does not expect significant future operating results
from this segment; however, as a result of the sale of its interest in
the Geismar olefins facility referenced above, the partnership expects
to record a gain of approximately $1.1 billion in the third quarter of
2017.
Atlantic Sunrise Update
Williams Partners received notice to proceed on the mainline portion of
the project, and construction activities are underway. In third-quarter
2017, the partnership expects to begin early mainline service and to
receive final permits on the greenfield portion of the project. Williams
Partners continues to target mid-2018 for the project’s full in-service
date.
Guidance
The Guidance previously provided at our Analyst Day event on May 11,
2017, remains unchanged.
Williams Partners’ Second-Quarter 2017 Materials to be Posted
Shortly; Q&A Webcast Scheduled for Tomorrow
Williams Partners’ second-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, Aug. 3 at 9:30 a.m. Eastern Daylight Time (8:30 a.m. Central
Daylight Time). A limited number of phone lines will be available at
(877) 419-6594. International callers should dial (719) 325-4888. The
conference ID is 9171330. 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.
Form 10-Q
The partnership plans to file its second-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.
Contacts
Williams Partners L.P.
Media Contact:
Keith Isbell,
918-573-7308
or
Investor Contact:
Brett Krieg,
918-573-4614
