Q1 2009 Earning Report of Williams Partners L P

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Q1 2009 Earning Report of Williams Partners L P

  1. 1. Williams Partners L.P. 2009 1st Quarter Earnings April 30, 2009 Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 1 © 2009 Williams Partners L.P. All rights reserved.
  2. 2. Forward Looking Statements 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,” “might,” “planned,” “potential,” “projects,” “scheduled,” “will,” and other similar words. 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; exposure to the credit risks of our customers; Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 2 © 2009 Williams Partners L.P. All rights reserved.
  3. 3. Forward Looking Statements, cont. 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. We disclaim any obligation to and do not intend to publicly update or revise any forward-looking statements or changes to our intentions, whether as a result of new information, future events or otherwise. Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2009, and our quarterly reports on Form 10-Q available from our offices or from our website at www.williamslp.com. Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 3 © 2009 Williams Partners L.P. All rights reserved.
  4. 4. Financial Overview Don Chappel Chief Financial Officer Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 4 © 2009 Williams Partners L.P. All rights reserved.
  5. 5. Financial Overview 1Q Results Lower, But In-Line with Guidance Lower NGL margins reduce results compared with ‘08 Management remains confident in ’09 guidance: • Cash distribution coverage ratio 0.9x • Current, expected pricing environment supports existing distribution level, confidence in maintaining compliance with loan covenants for ‘09 Solid quarter operationally: • Volumes up at West processing facilities; record for March at Wamsutter • Discovery fully repaired; significant new fee-based volumes coming online in 2Q Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 5 © 2009 Williams Partners L.P. All rights reserved.
  6. 6. Financial Overview Partnership Results 1Q 2009 2008 Dollars in millions, except per-unit amounts Net income $18.7 $43.6 Allocation of net income (loss) to general (a) (0.3) 6.0 partner Allocation of net income to limited partners $19.0 $37.6 (a) Net income per limited partner unit $0.36 $0.71 (a) Retrospectively adjusted for our adoption of Emerging Issues Task Force No. 07-4, “Application of the Two-Class Method under FASB Statement No. 128 Earnings per Share to Master Limited Partnerships.” Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 6 © 2009 Williams Partners L.P. All rights reserved.
  7. 7. Financial Overview Distributable Cash Flow per L.P. Unit 1Q 2009 2008 Dollars in millions, except per-unit amounts 1 Distributable cash flow for L.P. unitholders $29.4 $38.8 Weighted average units outstanding (millions) 52.8 52.8 Distributable cash flow/wtd. avg. L.P. units $0.56 $0.74 Cash distribution coverage ratio 2 0.9x 1.4x 1 Considers only actual distributions received from Wamsutter and Discovery. 2 Calculated by dividing the total Distributable Cash Flow for Partnership Operations by Total Cash Distributed, e.g. for first quarter 2009, $30.0 million/$34.2 million Note: Distributable Cash Flow, Distributable Cash Flow for L.P. unitholders and Cash Distribution Coverage Ratio are non-GAAP measures. A reconciliation to the most relevant measures included in GAAP is included at the end of this presentation. Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 7 © 2009 Williams Partners L.P. All rights reserved.
  8. 8. Financial Overview Main drivers for 1Q’09 Distributable Cash Flow DCF for partnership operations decreased $22.3MM, from $52.3MM to $30.0MM Lower cash distributions from Wamsutter and Discovery ($23.9MM) Lower NGL margins at Four Corners ($14.2MM) Lower operating and maintenance expenses $7.2MM ($20.6MM) Higher gathering and processing fee-based revenues at Four Corners $2.9MM Business interruption proceeds on Discovery investment $4.0MM Lower maintenance capital expenditures $3.4MM Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 8 © 2009 Williams Partners L.P. All rights reserved.
  9. 9. Financial Overview Recurring Segment Profit 1Q 2009 2008 Dollars in millions Segment profit $43.3 $69.5 Nonrecurring items: Involuntary conversion gain adjustment - 1.0 Wamsutter contract adjustment (3.1) - Recurring segment profit $44.3 $66.4 Recurring segment profit: $39.3 $47.3 G&P – West 0.7 13.5 G&P – Gulf 4.3 5.6 NGL Services Note: Recurring Segment Profit is a non-GAAP measure. A reconciliation to its most relevant measure included in GAAP is included at the end of this presentation. Williams Partners L.P. First Quarter Earnings/ April 30, 2009 / 9 © 2009 Williams Partners L.P. All rights reserved.
  10. 10. 2009 Commodity Price Assumptions & Financial Impacts Low High 1Q’09 Oil/NGL Crude ($/Barrel) $45 $60 $43 NGL/Crude Relationship% (Remainder 2009) 49% 60% 56% Gas NYMEX ($/MMBtu) $4.50 $4.50 $4.58 Rockies ($/MMBtu) $3.00 $3.00 $3.07 San Juan ($/MMBtu) $3.25 $3.25 $3.25 Financial Impacts (dollars in millions, except NGL Margins and Cash Distribution Coverage Ratio) Four Corners NGL margin ($/gallon) $0.27 $0.58 $0.32 Wamsutter NGL Margin ($/gallon) $0.26 $0.57 $0.25 2009 Distributable Cash Flow 1 $105 $206 $30 2009 Distributions $137 $137 $34 Cash Distribution Coverage Ratio 1 0.8x 1.5x 0.9x 1 Distributable Cash Flow and Cash Distribution Coverage Ratio are non-GAAP measures. Reconciliations to the most relevant measures included in GAAP are included at the end of this presentation. Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /10 © 2009 Williams Partners L.P. All rights reserved.
  11. 11. Appendix Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /11 © 2009 Williams Partners L.P. All rights reserved.
  12. 12. Lower 1Q Distributable Cash Flow DCF Attributable to Partnership Operations Net DCF Attributable to Partnership Operations $100 Wamsutter Four Corners $80 Discovery Conway and Carbonate Trend Indirect G&A and Interest Expense $60 $ Millions $40 $20 $0 -$20 -$40 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2007 2008 2009 * See reconciliation provided in presentation Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /12 12 © 2009 Williams Partners L.P. All rights reserved.
  13. 13. Four Corners gathering volumes Four Corners Gathering Volumes 1,600 1,550 1,500 1,450 MMBtud 1,400 1,350 1,300 1,250 1,200 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q09 2006 2007 2008 13 Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /13 © 2009 Williams Partners L.P. All rights reserved.
  14. 14. Wamsutter gathering volumes Wamsutter Gathering Volumes 600 550 500 450 MMBtud 400 350 300 250 200 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q09 2008 2007 2006 14 Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /14 © 2009 Williams Partners L.P. All rights reserved.
  15. 15. Four Corners NGL average realized net margin and volumes by quarter Total Production & Equity Production Volumes Realized Margin & Frac Spread (Cents / Gallon) (MM Gallons) Realized Margin (cpg) Equity NGL Sales (MM Gals) Total NGL Prod (MM Gals) 5 yr Avg. Realized Margin (cpg) Frac Spread (cpg) Note: Five year average realized margins of 50.4 cpg is calculated for the period 2Q04-1Q09. Frac spread is the value difference between NGL’s priced at Mt. Belvieu and natural gas priced at the San Juan Basin. 15 Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /15 © 2009 Williams Partners L.P. All rights reserved.
  16. 16. Wamsutter NGL average realized net margin and volumes by quarter Total Production & Equity Production Volumes Realized Margin & Frac Spread (Cents / Gallon) (MM Gallons) Realized Margin (cpg) Equity NGL Sales (MM Gals) Total NGL Prod (MM Gals) 5 yr Avg. Realized Margin (cpg) Frac Spread (cpg) Note: Five year average realized margins of 32.9 cpg is calculated for the period 2Q04-1Q09. Frac spread is the value difference between NGL’s priced at Mt. Belvieu and natural gas priced in the Rockies. 16 Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /16 © 2009 Williams Partners L.P. All rights reserved.
  17. 17. Discovery gross processing margin and plant sales Total Liquids Production and Plant Liquids Sales Gross Processing Margin (MM Gallons) (Cents / MMBtu) Total Liquids Production (MM Gals) Gross Processing Margin (Cents/MMBtu) 3 Year Avg. Gross Processing Margin (Cents/MMBtu) Plant Liquids Sales (MM Gals) Note: The average Gross Processing Margin of 29.1 cents per MMBtu is calculated for the period 2Q06-1Q09. 17 Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /17 © 2009 Williams Partners L.P. All rights reserved.
  18. 18. Non-GAAP Reconciliations Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /18 © 2009 Williams Partners L.P. All rights reserved.
  19. 19. Non-GAAP Disclaimer This presentation includes certain financial measures, Recurring Segment Profit, Distributable Cash Flow and Distributable Cash Flow per Limited Partner Unit that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission. Recurring segment profit excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Management believes recurring segment profit provides investors meaningful insight into Williams Partners L.P.’s results from ongoing operations. Additionally, we may make reference to Adjusted EBITDA for Discovery. For Discovery we define Adjusted EBITDA as net income plus interest (income) expense, depreciation, amortization and accretion. Our equity share of Discovery’s Adjusted EBITDA is 60%. For Williams Partners L.P. we define Distributable Cash Flow attributable to partnership operations as net income (loss) plus depreciation, amortization and accretion, less our 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. For our equity investments, Wamsutter and Discovery, we define Distributable Cash Flow as net income (loss) plus depreciation, amortization and accretion and less maintenance capital expenditures. We also adjust for certain non-cash, non-recurring items. Our equity share of Wamsutter’s Distributable Cash Flow is based on the distribution provisions of the Wamsutter LLC agreement. Our equity share of Discovery’s Distributable Cash Flow is 60%. For Williams Partners L.P. we define 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. For Williams Partners L.P. we also calculate 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 our actual cash distribution on both a per limited partner unit and total distribution basis. We have also provided these ratios calculated using the most directly comparable GAAP measures, net income per unit and net income. This presentation 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 Recurring Segment Profit, Distributable Cash Flow, nor Adjusted EBITDA are intended to represent cash flows for the period, nor are they presented as an alternative to net income (loss) or cash flow from operations. Distributable Cash Flow per Limited Partner is not presented as an alternative to net income per unit. 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 Partners L.P. First Quarter Earnings/ April 30, 2009 /19 © 2009 Williams Partners L.P. All rights reserved.
  20. 20. WPZ Recurring Segment Profit Reconciliation Dollars in millions 1st Quarter 2009 2008 Segment Profit Gathering and Processing - West $ 38.3 $ 50.4 Gathering and Processing - Gulf 0.7 13.5 NGL Services 4.3 5.6 Total Segment Profit 43.3 69.5 Nonrecurring items: Gathering and Processing - West Involuntary conversion gain adjustment 1.0 - Wamsutter contract adjustment - (3.1) Recurring Segment Profit $ 44.3 $ 66.4 Reconciliation of Non-GAAP quot;Recurring Segment Profit to GAAP quot;Segment Profitquot; Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /20 © 2009 Williams Partners L.P. All rights reserved.
  21. 21. WPZ Distributable Cash Flow per L.P. Unit Reconciliation Dollars in millions ( except per-unit amounts) 1st Quarter 2009 2008 Net income $ 18.7 $ 43.6 Depreciation, amortization and accretion 11.2 11.2 Amortization of debt issuance costs included in interest expense 0.4 0.5 Involuntary conversion gain resulting from Ignacio fire 1.0 - Equity earnings (12.1) (34.8) Reimbursements from Williams under omnibus agreement 0.3 0.8 Maintenance capital expenditures (5.1) (8.5) Distributable Cash Flow excluding equity investments 14.4 12.8 Plus: Wamsutter's cash distributions to Williams Partners L.P. 15.6 22.7 Plus: Discovery's cash distributions to Williams Partners L.P. - 16.8 Distributable cash flow attributable to partnership operations 30.0 52.3 Distributable cash flow attributable to partnership operations allocable to general partner 0.6 13.5 Distributable cash flow attributable to partnership operations allocable to limited partners $ 29.4 $ 38.8 Weighted average number of l.p. units outstanding (millions) 52.8 52.8 Distributable cash flow attributable to partnership operations per weighted average limited partner unit $ 0.56 $ 0.74 Reconciliation of Non-GAAP quot;Distributable Cash Flow Per Limited Partner Unitquot; to GAAP quot;Net incomequot; Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /21 © 2009 Williams Partners L.P. All rights reserved.
  22. 22. WPZ Coverage Ratios 1st Quarter Dollars in millions ( except per-unit amounts) 2009 2008 Net income $18.7 $43.6 $0.71 (a) Net income per common and subordinated unit $0.36 Distributable cash flow attributable to partnership $30.0 $52.3 operations Distributable cash flow attributable to partnership $0.56 $0.74 operations per limited partner unit Actual cash distribution per unit $0.635 $0.600 Total Cash Distributed $34.2 $37.9 Coverage Ratios: Distributable cash flow attributable to partnership operations per l.p. unit divided by actual cash 0.9 1.2 distribution per unit Distributable cash flow attributable to partnership 0.9 1.4 operations divided by total cash distributed Net income, per common and subordinated unit 0.6 1.2 divided by actual cash distribution per unit Net income divided by total cash distributed 0.5 1.2 (a) Retrospectively adjusted for our adoption of Emerging Issues Task Force No. 07-4, “Application of the Two-Class Method under FASB Statement No. 128 Earnings per Share to Master Limited Partnerships.” Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /22 © 2009 Williams Partners L.P. All rights reserved.
  23. 23. Distributable Cash Flow Attributable to Partnership Ops Reconciliation 2009 2007* 2008 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr (Dollars in Millions, except per-unit amounts) Williams Partners L.P. Reconciliation of Non-GAAP quot;Distributable Cash Flow Attributable to Partnership Operationsquot; to GAAP quot;Net incomequot; Net income $ 25.1 $ 46.7 $ 47.9 $ 44.9 $ 43.6 $ 71.8 $ 60.8 $ 15.1 $ 18.7 Depreciation, amortization and accretion 13.2 11.2 10.3 11.7 11.2 11.0 11.7 11.1 11.2 Amortization of natural gas purchase contract 1.2 1.2 1.2 1.2 - - - - - Non-cash amortization of debt issuance costs included in interest expense 0.4 0.4 0.4 0.4 0.5 0.4 0.4 0.4 0.4 Involuntary conversion gain resulting from Ignacio fire - - - - - (3.2) (6.0) (2.3) 1.0 Equity earnings (15.3) (24.4) (26.4) (39.0) (34.8) (46.0) (29.0) 0.7 (12.1) Reimbursements from Williams under omnibus agreement 0.9 0.8 1.1 2.6 0.8 0.9 0.7 0.7 0.3 Non-cash adjustment of 2001-2002 EFM revenue - - 3.5 - - - - - - Impairment of Carbonate Trend gathering pipeline - - - 10.4 - - - 6.2 - Maintenance capital expenditures (a)(b) (7.6) (8.6) (3.5) (7.8) (8.5) (2.6) (5.3) (5.4) (5.1) Distributable Cash Flow Excluding Equity Investments $ 17.9 $ 27.3 $ 34.5 $ 24.4 $ 12.8 $ 32.3 $ 33.3 $ 26.5 $ 14.4 Plus: Wamsutter's cash distributions to Williams Partners L.P. - - - - 22.7 26.6 29.0 20.8 15.6 Plus: Discovery's cash distributions to Williams Partners L.P. 3.6 10.9 3.6 8.4 16.8 15.6 13.2 10.8 - Distributable cash flow attributable to partnership operations $ 21.5 $ 38.2 $ 38.1 $ 32.8 $ 52.3 $ 74.5 $ 75.5 $ 58.1 $ 30.0 * Because Four Corners, Wamsutter and the additional 20% interest in Discovery were affiliates of Williams at the time of these acquisitions, the transactions were between entities under common control, and have been accounted for at historical cost. Accordingly, these tables include the historical results of Four Corners and Equity Earnings in Wamsutter and Discovery for the periods presented (a) Maintenance capital expenditures includes certain well connection capital (b) Prior-period maintenance capital expenditures have been adjusted to exclude certain efficiency (cost-reduction) type capital Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /23 © 2009 Williams Partners L.P. All rights reserved.
  24. 24. Wamsutter Distributable Cash Flow Reconciliation 1st Quarter 2009 2008 Dollars in millions Net Income $ 15.3 $ 21.2 Depreciation, amortization and accretion 5.4 5.2 Maintenance capital expenditures (5.4) (3.2) Distributable Cash Flow - 100% $ 15.3 $ 23.2 Reconciliation of Non-GAAP quot;Distributable Cash Flowquot; to GAAP quot;Net incomequot; Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /24 © 2009 Williams Partners L.P. All rights reserved.
  25. 25. Discovery Producer Services Distributable Cash Flow Reconciliation 1st Quarter 2009 2008 Dollars in millions Net income (loss) $ (5.4) $ 22.7 Depreciation, amortization and accretion 3.9 7.0 Maintenance capital expenditures - (0.2) Distributable Cash Flow - 100% $ (1.5) $ 29.5 Distributable Cash Flow - 60% $ (0.9) $ 17.7 Reconciliation of Non-GAAP quot;Distributable Cash Flowquot; to GAAP quot;Net incomequot; Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /25 © 2009 Williams Partners L.P. All rights reserved.
  26. 26. Non-GAAP Reconciliations WPZ Forecasted Distributable Cash Flow attributable to partnership operations: 2009 Low High Dollars in millions Net income $ 78 $ 190 Plus: depreciation, amortization and accretion 46 46 Plus: certain non-cash, non-recurring items (7) (7) Plus: reimbursements from Williams under omnibus agreement 6 6 Less: equity earnings (62) (120) Less: maintenance capital expenditures (28) (28) Distributable Cash Flow excluding equity investments 33 87 Plus: Wamsutter cash distributions to Williams Partners 67 99 Plus: Discovery's cash distributions to Williams Partners 5 20 Distributable cash flow attributable to partnership operations $ 105 $ 206 Total cash to be distributed $ 137 $ 137 Coverage Ratios: Distributable cash flow attributable to partnership operations divided by total cash distributed 0.8 1.5 Net income divided by total cash distributed 0.6 1.4 Reconciliation of Non-GAAP quot;Distributable Cash Flow attributable to partnership operationsquot; to GAAP quot;Net incomequot; Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /26 © 2009 Williams Partners L.P. All rights reserved.
  27. 27. Williams Partners L.P. Williams Partners L.P. First Quarter Earnings/ April 30, 2009 /27 © 2009 Williams Partners L.P. All rights reserved.

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