Exhibit 99.1

 

			Williams Partners L.P. (NYSE: WPZ)
			One Williams Center
			Tulsa, OK 74172
			800-600-3782
			www.williamslp.com

 

 

DATE: Oct. 31, 2012

 

MEDIA CONTACT:		INVESTOR CONTACTS:
Jeff Pounds (918) 573-3332		John Porter (918) 573-0797		Sharna Reingold (918) 573-2078

Williams Partners Reports Third-Quarter 2012 Financial Results

 

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3Q 2012 Net Income is $237 Million, $0.38 per Common Unit

 

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Lower NGL Margins Drive Lower 3Q Net Income, DCF

 

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Midstream Fee-based Business Grows 12% in 3Q, Despite Hurricane-related Downtime

 

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Acquisition of Williams’ Gulf Olefins Assets to Drive Greater Certainty in Cash Flows, Mitigate Ethane Exposure

 

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Guidance Updated to Reflect Gulf Olefins Acquisition, Lower Expected Gathering Volume Growth Rate; Strong Cash Distribution Guidance Reaffirmed

 

Summary Financial Information		3Q								YTD
Amounts in millions, except per-unit amounts.		2012				2011				2012				2011
(Unaudited)
Net income		$	237			$	342			$	778			$	987
Net income per common L.P. unit		$	0.38			$	0.91			$	1.47			$	2.63
Distributable cash flow (DCF) (1)		$	316			$	368			$	1,084			$	1,206
Cash distribution coverage ratio (1)			0.80x				1.25x				0.96x				1.41x

 

(1)	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.

TULSA, Okla. – Williams Partners L.P. (NYSE: WPZ) today announced unaudited third-quarter 2012 net income of $237 million, or $0.38 per common limited-partner unit, compared with third-quarter 2011 net income of $342 million, or $0.91 per common limited-partner unit.

Year-to-date through Sept. 30, Williams Partners reported net income of $778 million, or $1.47 per common limited-partner unit, compared with $987 million, or $2.63 per common limited-partner unit, for the first nine months of 2011.

 

Williams Partners L.P. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 1 of 9

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The decline in net income during the third quarter and year-to-date 2012 periods is due to a significant decline in natural

gas liquid (NGL) margins, primarily driven by a sharp decline in NGL prices in the second quarter of 2012, which led to lower results in the partnership’s midstream business. Other factors, including higher expenses associated with developing businesses acquired earlier this year, also contributed to the lower results in 2012. An increase in fee-based revenue, including a third-quarter 2012 increase of 12 percent in the partnership’s midstream business, partially offset the negative impacts of lower NGL prices and other factors.

There is a more detailed analysis of the partnership’s businesses later in this news release.

3Q Distributable Cash Flow

For third-quarter 2012, Williams Partners generated $316 million in distributable cash flow, compared with $368 million in third-quarter 2011. For the first nine months of 2012, Williams Partners generated $1.08 billion in distributable cash flow, compared with $1.21 billion for the first nine months of 2011.

The previously noted significant decline in NGL margins was the key driver of the decline in distributable cash flow. Higher fee-based revenue in the midstream business partially offset the lower NGL margins. Although third-quarter 2012 distributable cash flow declined compared with third-quarter 2011, it increased 8 percent sequentially compared with the second-quarter 2012 amount of $293 million.

Williams Partners recently announced that it increased its quarterly cash distribution to unitholders to $0.8075 per unit, an 8 percent increase over the year-ago amount. As planned, the partnership’s previously strong cash distribution coverage enabled it to continue its cash distribution growth during a period of significantly unfavorable commodity prices. Also, the partnership has issued a significant amount of equity this year to finance numerous projects that are in the early stages of development.

Gulf Olefins Acquisition Expected to Shift Commodity Exposure to Ethylene, Drive More Certainty in Cash Flows

In a separate announcement today, Williams Partners and Williams announced an agreement for Williams Partners to acquire Williams’ 83.3-percent interest in the Geismar olefins production facility, as well as Williams’ refinery-grade propylene splitter and pipelines in the Gulf region, for approximately $2.36 billion. Williams Partners plans to fund the acquisition with the issuance to Williams of 42.8 million WPZ limited-partner units, $25 million in cash, and an increase to the general partner’s capital account to maintain Williams’ 2-percent general-partner interest.

The partnership expects the addition of olefins production to its business would bring more certainty to cash flows that

today are exposed to the market for ethane, which is projected to experience periods of volatility as feedstock demand lags new supplies from shale-gas production. Low-cost, light-NGL feedstock demand is expected to remain strong, given

 

Williams Partners L.P. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 2 of 9

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its economic advantage over higher-cost crude-oil based feedstock. Williams Partners will be responsible for the completion of the ongoing expansion of the Geismar facility. The partnership’s overall undivided ownership interest in Geismar following the ongoing expansion will be approximately 88 percent.

Please see the separate news release for more details on the acquisition.

CEO Perspective

Alan Armstrong, chief executive officer of Williams Partners’ general partner, made the following comments:

“In the third quarter, fee-based revenue in our midstream business grew 12 percent, but that growth was offset by unfavorable commodity prices and downtime in the Gulf related to Hurricane Isaac.

“The acquisition of Williams’ Gulf Olefins assets, which was announced today, should provide the partnership with some significant benefits. It will add additional scale to the business, providing greater earnings and cash flow; but more importantly, it will provide a natural hedge by neutralizing our exposure to the over-supplied ethane markets.

“We’ve updated our guidance to reflect the Gulf Olefins acquisition, as well as a near-term lowering of our gathering volume growth rate. However, our long-term focus hasn’t changed – we continue to be bullish on long-term natural gas demand growth, and we have visibility to a diverse set of attractive infrastructure projects.”

Guidance Updated to Reflect Geismar Drop-Down, Lower Expected Growth Rate in Gathered Volumes; Strong Distribution Guidance Unchanged

Williams Partners is updating its 2012-14 earnings, distributable cash flow and capital expenditure guidance to reflect the acquisition of the Geismar and Gulf Olefins assets, as well as lower expected overall rate of growth in gathering volumes.

Williams Partners’ previous guidance on cash distributions to its unitholders is unchanged. The partnership continues to expect to pay unitholders a full-year 2012 distribution of $3.14 per unit at guidance midpoint, an 8 percent increase over 2011. As well, the partnership confirmed it expects the midpoint of guidance for the full-year distribution it pays unitholders in each 2013 and 2014 to increase by 9 percent – to $3.43 and $3.75, respectively.

 

Williams Partners L.P. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 3 of 9

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The partnership’s current commodity price assumptions and the corresponding guidance for its earnings, distributable cash flow and capital expenditures are displayed in the following table:

 

Commodity Price Assumptions and Average NGL Margins		2012														2013														2014
As of Oct. 31, 2012		Low				Mid				High						Low				Mid				High						Low				Mid				High
Commodity Price Assumptions
Ethane ($ per gallon)		$	0.41			$	0.44			$	0.46					$	0.45			$	0.55			$	0.65					$	0.45			$	0.55			$	0.65
Propane ($ per gallon)		$	0.97			$	1.04			$	1.10					$	1.05			$	1.25			$	1.45					$	1.05			$	1.25			$	1.45
Natural Gas—NYMEX ($/MMBtu)		$	2.50			$	2.50			$	2.50					$	2.75			$	3.25			$	3.75					$	3.25			$	3.75			$	4.25
Ethylene Spot ($ per gallon)		$	0.53			$	0.56			$	0.58					$	0.40			$	0.50			$	0.59					$	0.53			$	0.63			$	0.73
Crude Oil—WTI ($ per barrel)		$	88			$	93			$	98					$	70			$	85			$	100					$	70			$	85			$	100
Crude to Gas Ratio			35.2x				37.2x				39.2x						25.5x				26.1x				26.7x						21.5x				22.5x				23.5x
NGL to Crude Oil Relationship (1)			41	%			41	%			41	%					54	%			52	%			49	%					54	%			52	%			49	%
Average NGL Margins ($ per gallon)		$	0.64			$	0.67			$	0.69					$	0.64			$	0.71			$	0.78					$	0.54			$	0.63			$	0.71
Composite Frac Spread ($ per gallon) (2)		$	0.65			$	0.70			$	0.74					$	0.68			$	0.78			$	0.87					$	0.63			$	0.73			$	0.83
Williams Partners Guidance
Amounts are in millions except coverage ratio.		Low				Mid				High						Low				Mid				High						Low				Mid				High
DCF attributable to partnership ops. (3)		$	1,460			$	1,500			$	1,540					$	1,925			$	2,075			$	2,225					$	2,525			$	2,700			$	2,875
Total Cash Distribution (4)		$	1,570			$	1,586			$	1,601					$	1,981			$	2,032			$	2,082					$	2,304			$	2,407			$	2,509
Cash Distribution Coverage Ratio (3)			0.93x				0.95x				0.96x						0.97x				1.02x				1.07x						1.10x				1.12x				1.15x
Adjusted Segment Profit (3):
Gas Pipeline		$	680			$	700			$	720					$	725			$	750			$	775					$	775			$	800			$	825
Midstream			975				1,025				1,075						1,225				1,400				1,575						1,800				2,000				2,200
Total Adjusted Segment Profit		$	1,655			$	1,725			$	1,795					$	1,950			$	2,150			$	2,350					$	2,575			$	2,800			$	3,025
Adjusted Segment Profit + DD&A:
Gas Pipeline		$	1,040			$	1,070			$	1,100					$	1,095			$	1,130			$	1,165					$	1,165			$	1,200			$	1,235
Midstream			1,305				1,365				1,425						1,625				1,810				1,995						2,295				2,505				2,715
Total Adjusted Segment Profit + DD&A		$	2,345			$	2,435			$	2,525					$	2,720			$	2,940			$	3,160					$	3,460			$	3,705			$	3,950
Capital Expenditures:
Maintenance		$	425			$	460			$	495					$	335			$	370			$	405					$	380			$	415			$	450
Growth			7,604				7,707				7,809						2,690				2,855				3,020						1,320				1,485				1,650
Total Capital Expenditures		$	8,029			$	8,167			$	8,304					$	3,025			$	3,225			$	3,425					$	1,700			$	1,900			$	2,100

 

(1)	This is calculated as the price of natural gas liquids as a percentage of the price of crude oil on an equal volume basis.

(2)	Composite frac spread is based on Henry Hub natural gas and Mont Belvieu NGLs.

(3)	Distributable Cash Flow, Cash Distribution Coverage Ratio and Adjusted Segment Profit are non-GAAP measures. Reconciliations to the most relevant measures included in GAAP are attached to this news release.

(4)	The cash distributions in guidance are on an accrual basis and reflect an approximate 8% (low), 9% (midpoint), and 10% (high) increase in quarterly limited partner cash distributions annually through 2014.

 

Williams Partners L.P. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 4 of 9

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Business Segment Performance

Williams Partners’ operations are reported through two business segments, Gas Pipeline and Midstream Gas & Liquids.

 

Consolidated Segment Profit		3Q								YTD
Amounts in millions		2012				2011				2012				2011
Gas Pipeline		$	155			$	170			$	482			$	497
Midstream Gas & Liquids			218				301				718				882
Total Segment Profit		$	373			$	471			$	1,200			$	1,379
Adjustments			11				6				25				9
Adjusted Segment Profit*		$	384			$	477			$	1,225			$	1,388

 

*	A schedule reconciling segment profit to adjusted segment profit is attached to this press release.

 

Key Operational Metrics
		2011																		2012
		1Q				2Q				3Q				4Q						1Q				2Q				3Q						3Q Change
																																		Year-over-year				Sequential
Fee-based Revenues (millions)
Gas Pipeline		$	361			$	359			$	368			$	384					$	384			$	366			$	372						1.1	%			1.6	%
Midstream Gas & Liquids			217				230				249				248						258				274				278						11.6	%			1.5	%
Total		$	578			$	589			$	617			$	632					$	642			$	640			$	650						5.3	%			1.6	%
NGL Margins
NGL margins (millions)		$	207			$	253			$	234			$	287					$	242			$	189			$	167						-28.6	%			-11.6	%
NGL equity volumes (gallons in millions)			289				308				274				317						308				295				301						9.9	%			2.0	%
Per-unit NGL margins ($/gallon)		$	0.71			$	0.83			$	0.85			$	0.91					$	0.79			$	0.64			$	0.55						-35.3	%			-14.1	%

Gas Pipeline

Williams Partners owns two major interstate natural gas pipeline systems – Transco and Northwest Pipeline – and owns 50 percent of Gulfstream. These systems have a combined peak day delivery capacity of more than 14 billion cubic feet per day (Bcf/d), and transport approximately 14 percent of the natural gas consumed in the United States.

Gas Pipeline reported segment profit of $155 million for third-quarter 2012, compared with $170 million for third-quarter 2011. The decline in the third quarter segment profit was primarily due to an increase in certain costs, including pipeline maintenance, employee-related, and selling, general and administrative expenses.

For the first nine months of 2012, Gas Pipeline reported segment profit of $482 million, compared with $497 million for the same time period in 2011. The previously noted higher costs, plus higher project feasibility costs were the primary drivers of the decline in segment profit in the year-to-date period. Increased transportation revenue associated with expansion projects and higher equity earnings from an increased interest in Gulfstream partially offset the negative impacts in the year-to-date period.

 

Williams Partners L.P. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 5 of 9

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Midstream Gas & Liquids

Midstream provides natural gas gathering, treating, and processing; deepwater production handling and oil transportation; and NGL fractionation, storage and transportation services.

The business reported segment profit of $218 million for third-quarter 2012, compared with segment profit of $301 million for third-quarter 2011.

Significantly lower NGL prices, partially offset by lower natural gas prices, was the primary driver of the lower segment profit in the third quarter. Higher operating costs and selling, general and administrative (SG&A) expenses, both partially attributable to developing businesses acquired earlier this year, also contributed to the lower segment profit in the third quarter.

A 12-percent increase in fee-based revenues partially offset the negative impacts described above. The increase in fee-based revenues was primarily due to higher volumes in the Marcellus Shale area including new volumes on the recently acquired Ohio Valley Midstream system and Susquehanna Supply Hub gathering assets, partially offset by unfavorable impacts related to Hurricane Isaac in the eastern Gulf of Mexico.

For the first nine months of 2012, Midstream reported segment profit of $718 million, compared with $882 million for the first nine months of 2011. The previously mentioned lower NGL prices, partially offset by lower natural gas prices, as well as lower marketing margins driven by a significant and rapid decline in NGL prices during the second quarter of 2012, were the primary drivers of the lower segment profit in the first nine months of 2012. The year-to-date period also was impacted by the previously noted higher operating and SG&A expenses.

An increase in fee-based revenues partially offset these factors in the first nine months of the year. The increase in fee revenues is primarily due to higher volumes in the Marcellus Shale, including new volumes on the recently acquired gathering and processing assets in our Ohio Valley Midstream and Susquehanna Supply Hub businesses; higher volumes in the western deepwater Gulf of Mexico, including higher volumes on the Perdido Norte natural gas and oil pipelines; and higher volumes in the Piceance Basin.

Third-Quarter Materials to be Posted Shortly, Q&A Webcast Scheduled for Tomorrow

Williams Partners’ third-quarter 2012 financial results package will be posted shortly at www.williamslp.com. The package will include the data book and analyst package, and the investor presentation with a recorded commentary from Alan Armstrong, CEO of Williams Partners’ general partner.

 

Williams Partners L.P. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 6 of 9

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The partnership will host the third-quarter Q&A live webcast on Thursday, Nov. 1 at 11 a.m. EDT. A link to the live webcast, as well as replays of the first-quarter webcast in both streaming and downloadable podcast formats following the event, will be available at www.williamslp.com. A limited number of phone lines will be available at (800) 768-6569. International callers should dial (785) 830-7992.

Definitions of Non-GAAP Financial Measures

This press release includes certain financial measures – distributable cash flow, cash distribution coverage ratio, and adjusted segment profit – that are non-GAAP financial measures as defined under the rules of the SEC.

For Williams Partners L.P., adjusted segment profit excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Management believes adjusted segment profit provides investors meaningful insight into Williams Partners L.P.’s results from ongoing operations.

For Williams Partners L.P. we define distributable cash flow as net income plus depreciation and amortization and cash distributions from our equity investments less our earnings from our equity investments, distributions to noncontrolling interests and maintenance capital expenditures. We also adjust for payments and/or reimbursements under omnibus agreements with Williams and certain other items.

For Williams Partners L.P. 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 calculated using the most directly comparable GAAP measure, net income.

This press 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 segment profit 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. 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. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 7 of 9

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About Williams Partners L.P. (NYSE: WPZ)

Williams Partners L.P. is a leading diversified master limited partnership focused on natural gas transportation; gathering, treating, and processing; storage; natural gas liquid (NGL) fractionation; and oil transportation. The partnership owns interests in three major interstate natural gas pipelines that, combined, deliver 14 percent of the natural gas consumed in the United States. The partnership’s gathering and processing assets include large-scale operations in the U.S. Rocky Mountains and both onshore and offshore along the Gulf of Mexico. Williams (NYSE: WMB) owns approximately 66 percent of Williams Partners, including the general-partner interest. More information is available at www.williamslp.com, where the partnership routinely posts important information.

# # #

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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You typically can identify forward-looking statements by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “assumes,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “guidance,” “outlook,” “in service date,” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

 

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Amounts and nature of future capital expenditures;

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Expansion and growth of our business and operations;

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Financial condition and liquidity;

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Business strategy;

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Cash flow from operations or results of operations;

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The levels of cash distributions to unitholders;

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Seasonality of certain business components; and

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Natural gas, natural gas liquids, and crude oil prices and demand.

Forward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or results to be materially different from those stated or implied in this announcement. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:

 

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Whether we have sufficient cash from operations to enable us to pay current and expected levels of cash distributions following establishment of cash reserves and payment of fees and expenses, including payments to our general partner;

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Availability of supplies, market demand, volatility of prices, and the availability and cost of capital;

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Inflation, interest rates and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers);

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The strength and financial resources of our competitors;

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Ability to acquire new businesses and assets and integrate those operations and assets into our existing businesses, as well as expand our facilities;

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Development of alternative energy sources;

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The impact of operational and development hazards;

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Costs of, changes in, or the results of laws, government regulations (including safety and climate change regulation and changes in natural gas production from exploration and production areas that we serve), environmental liabilities, litigation and rate proceedings;

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Our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates;

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Changes in maintenance and construction costs;

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Changes in the current geopolitical situation;

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Our exposure to the credit risk of our customers and counterparties;

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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;

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Risks associated with future weather conditions;

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Acts of terrorism, including cybersecurity threats and related disruptions; and

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Additional risks described in our filings with the Securities and Exchange Commission (SEC).

 

Williams Partners L.P. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 8 of 9

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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. We disclaim any obligations to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this announcement. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, 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 SEC on February 28, 2012, and our quarterly reports on Form 10-Q available from our offices or from our website.

 

Williams Partners L.P. (NYSE:WPZ)  ·  3Q 2012 Financial Results  ·  Oct. 31, 2012					Page 9 of 9

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Financial Highlights and Operating Statistics

(UNAUDITED)

Final

September 30, 2012

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Reconciliation of Non-GAAP Measures

(UNAUDITED)

 

 

		2011																				2012
(Dollars in millions, except coverage ratios)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				3rd Qtr				Year
Williams Partners L.P.
Reconciliation of Non-GAAP “Distributable cash flow” to GAAP “Net income”
Net income		$	307			$	338			$	342			$	391			$	1,378			$	348			$	193			$	237			$	778
Depreciation and amortization			150				154				155				152				611				156				168				179				503
Non-cash amortization of debt issuance costs included in interest expense			5				5				3				4				17				4				3				4				11
Equity earnings from investments			(25	)			(36	)			(40	)			(41	)			(142	)			(30	)			(27	)			(30	)			(87	)
Gain on sale of assets			—				—				—				—				—				—				(6	)			—				(6	)
Acquisition and transition-related costs			—				—				—				—				—				—				19				4				23
Allocated reorganization-related costs			—				—				—				—				—				—				7				6				13
Impairment of certain gathering assets			—				—				—				—				—				—				—				6				6
Net reimbursements from Williams under omnibus agreements			8				2				6				15				31				6				1				4				11
Maintenance capital expenditures			(34	)			(106	)			(148	)			(126	)			(414	)			(61	)			(111	)			(128	)			(300	)
Distributable cash flow excluding equity investments			411				357				318				395				1,481				423				247				282				952
Plus: Equity investments cash distributions to Williams Partners L.P.			30				40				50				49				169				52				46				34				132
Distributable cash flow		$	441			$	397			$	368			$	444			$	1,650			$	475			$	293			$	316			$	1,084
Total cash distributed:		$	276			$	286			$	294			$	311			$	1,167			$	362			$	373			$	394			$	1,129
Coverage ratios:
Distributable cash flow divided by Total cash distributed			1.60				1.39				1.25				1.43				1.41				1.31				0.79				0.80				0.96
Net income divided by Total cash distributed			1.11				1.18				1.16				1.26				1.18				0.96				0.52				0.60				0.69

 

1

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Reconciliation of GAAP “Segment Profit” to Non-GAAP “Adjusted Segment Profit”

(UNAUDITED)

 

		2011																				2012
(Dollars in millions)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				3rd Qtr				Year
Gas Pipeline		$	175			$	152			$	170			$	176			$	673			$	180			$	147			$	155			$	482
Midstream Gas & Liquids			262				319				301				341				1,223				308				192				218				718
Segment Profit		$	437			$	471			$	471			$	517			$	1,896			$	488			$	339			$	373			$	1,200
Adjustments:
Gas Pipeline
Loss related to Eminence storage facility leak			4				3				6				2				15				1				—				1				2
Gain on sale of base gas from Hester storage field			(4	)			—				—				—				(4	)			—				—				—				—
Total Gas Pipeline adjustments			—				3				6				2				11				1				—				1				2
Midstream Gas & Liquids
Acquisition and transition-related costs			—				—				—				—				—				—				19				4				23
Gain on sale of certain assets			—				—				—				—				—				—				(6	)			—				(6	)
Impairment of certain assets			—				—				—				—				—				—				—				6				6
Total Midstream Gas & Liquids adjustments			—				—				—				—				—				—				13				10				23
Total adjustments included in segment profit			—				3				6				2				11				1				13				11				25
Adjusted segment profit		$	437			$	474			$	477			$	519			$	1,907			$	489			$	352			$	384			$	1,225

 

2

---

Consolidated Statement of Income

(UNAUDITED)

 

		2011																				2012
(Dollars in millions, except per-share amounts)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				3rd Qtr				Year
Revenues:
Gas Pipeline		$	416			$	407			$	429			$	426			$	1,678			$	422			$	399			$	412			$	1,233
Midstream Gas & Liquids			1,163				1,264				1,244				1,380				5,051				1,263				1,184				1,115				3,562
Total revenues			1,579				1,671				1,673				1,806				6,729				1,685				1,583				1,527				4,795
Segment costs and expenses:
Costs and operating expenses			1,107				1,167				1,172				1,240				4,686				1,137				1,163				1,089				3,389
Selling, general, and administrative expenses			71				70				66				69				276				85				95				86				266
Other (income) expense - net			(11	)			(1	)			4				21				13				5				13				9				27
Total segment costs and expenses			1,167				1,236				1,242				1,330				4,975				1,227				1,271				1,184				3,682
General corporate expenses			30				27				29				26				112				36				46				41				123
Operating income:
Gas Pipeline			166				138				153				158				615				163				131				136				430
Midstream Gas & Liquids			246				297				278				318				1,139				295				181				207				683
General corporate expenses			(30	)			(27	)			(29	)			(26	)			(112	)			(36	)			(46	)			(41	)			(123	)
Total operating income			382				408				402				450				1,642				422				266				302				990
Equity earnings			25				36				40				41				142				30				27				30				87
Interest accrued			(108	)			(107	)			(105	)			(106	)			(426	)			(110	)			(110	)			(109	)			(329	)
Interest capitalized			2				3				3				3				11				3				5				8				16
Interest income			1				—				—				1				2				1				—				1				2
Other income (expense) - net			5				(2	)			2				2				7				2				5				5				12
Net income		$	307			$	338			$	342			$	391			$	1,378			$	348			$	193			$	237			$	778
Allocation of net income for calculation of earnings per common unit:
Net income		$	307			$	338			$	342			$	391			$	1,378			$	348			$	193			$	237			$	778
Allocation of net income to general partner			71				74				79				84				308				94				96				104				294
Allocation of net income to common units		$	236			$	264			$	263			$	307			$	1,070			$	254			$	97			$	133			$	484
Net income, per common unit		$	0.81			$	0.91			$	0.91			$	1.05			$	3.69			$	0.85			$	0.29			$	0.38			$	1.47
Weighted-average number of common units outstanding (thousands)			289,845				290,213				290,477				290,477				290,255				299,269				335,920				350,519				328,649
Cash distributions per common unit		$	0.7175			$	0.7325			$	0.7475			$	0.7625			$	2.9600			$	0.7775			$	0.7925			$	0.8075			$	2.3775

 

Note:

The sum of net income per common unit for the quarters may not equal the total income per common unit for the year due to changes in the weighted-average number of common units outstanding.

 

3

---

Gas Pipeline

(UNAUDITED)

 

		2011																				2012
(Dollars in millions)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				3rd Qtr				Year
Revenues:
Northwest Pipeline GP		$	110			$	106			$	107			$	111			$	434			$	111			$	106			$	108			$	325
Transcontinental Gas Pipe Line			305				301				322				315				1,243				310				293				304				907
Other			1				—				—				—				1				1				—				—				1
Total revenues			416				407				429				426				1,678				422				399				412				1,233
Segment costs and expenses:
Costs and operating expenses			221				229				240				218			$	908				208				218				230			$	656
Selling, general and administrative expenses			39				36				32				34				141				43				35				38				116
Other (income) expense - net			(10	)			4				4				16				14				8				15				8				31
Total segment costs and expenses			250				269				276				268				1,063				259				268				276				803
Equity earnings			9				14				17				18				58				17				16				19				52
Reported segment profit:
Northwest Pipeline GP			56				51				50				58				215				55				50				48				153
Transcontinental Gas Pipe Line			111				89				102				104				406				109				84				89				282
Other			8				12				18				14				52				16				13				18				47
Total reported segment profit			175				152				170				176				673				180				147				155				482
Adjustments:
Transcontinental Gas Pipe Line			—				3				6				2				11				1				—				1				2
Total adjustments			—				3				6				2				11				1				—				1				2
Adjusted segment profit:
Northwest Pipeline GP			56				51				50				58				215				55				50				48				153
Transcontinental Gas Pipe Line			111				92				108				106				417				110				84				90				284
Other			8				12				18				14				52				16				13				18				47
Total adjusted segment profit		$	175			$	155			$	176			$	178			$	684			$	181			$	147			$	156			$	484
Operating statistics (Tbtu)
Northwest Pipeline GP
Throughput			176.8				142.3				132.6				186.1				637.8				191.4				140.1				145.8				477.3
Avg. daily transportation volumes			2.0				1.6				1.4				2.0				1.7				2.1				1.5				1.6				1.7
Avg. daily firm reserved capacity			2.9				2.9				2.9				2.9				2.9				2.9				2.9				2.9				2.9
Transcontinental Gas Pipe Line
Throughput			652.2				535.2				583.9				636.5				2,407.8				735.6				639.4				672.8				2,047.8
Avg. daily transportation volumes			7.2				5.9				6.3				6.9				6.6				8.1				7.0				7.3				7.5
Avg. daily firm reserved capacity			7.7				7.8				8.0				8.7				8.0				8.8				8.7				8.8				8.8

 

4

---

Midstream Gas & Liquids

(UNAUDITED)

 

		2011																				2012
(Dollars in millions)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				3rd Qtr				Year
Revenues:
Fee-based revenues:
Gathering & processing		$	163			$	172			$	182			$	186			$	703			$	197			$	207			$	214			$	618
Production handling and transportation			25				26				32				29				112				30				32				31				93
Other fee-based revenues			29				32				35				33				129				31				35				33				99
Commodity-based revenues:
NGL sales from gas processing			306				360				331				384				1,381				313				242				232				787
Marketing sales			1,122				1,233				1,201				1,361				4,917				1,186				1,089				1,026				3,301
Other sales			13				15				10				14				52				21				10				7				38
			1,658				1,838				1,791				2,007				7,294				1,778				1,615				1,543				4,936
Intrasegment eliminations			(495	)			(574	)			(547	)			(627	)			(2,243	)			(515	)			(431	)			(428	)			(1,374	)
Total revenues			1,163				1,264				1,244				1,380				5,051				1,263				1,184				1,115				3,562
Segment costs and expenses:
NGL cost of goods sold			99				107				97				97				400				71				53				65				189
Marketing cost of goods sold			1,109				1,221				1,193				1,359				4,882				1,195				1,110				1,013				3,318
Other cost of goods sold			7				9				5				11				32				13				5				4				22
Operating costs			166				176				181				184				707				165				208				205				578
Selling, general, and administrative expenses			32				34				33				36				135				42				60				48				150
Other (income) expense - net			(1	)			(6	)			4				2				(1	)			(3	)			(2	)			1				(4	)
Intrasegment eliminations			(495	)			(574	)			(547	)			(627	)			(2,243	)			(515	)			(431	)			(428	)			(1,374	)
Total segment costs and expenses			917				967				966				1,062				3,912				968				1,003				908				2,879
Equity earnings			16				22				23				23				84				13				11				11				35
Reported segment profit			262				319				301				341				1,223				308				192				218				718
Adjustments			—				—				—				—				—				—				13				10				23
Adjusted segment profit		$	262			$	319			$	301			$	341			$	1,223			$	308			$	205			$	228			$	741
Operating statistics
Gathering and Processing
Gathering volumes (Tbtu)			321				337				345				374				1,377				382				402				413				1,197
Plant inlet natural gas volumes (Tbtu)			387				398				399				408				1,592				402				400				417				1,219
NGL equity sales (million gallons) *			289				308				274				317				1,188				308				295				301				904
NGL margin ($/gallon)		$	0.71			$	0.83			$	0.85			$	0.91			$	0.83			$	0.79			$	0.64			$	0.55			$	0.66
NGL production (million gallons) *			683				729				693				788				2,893				804				775				802				2,381
Discovery Producer Services LLC (equity investment) - 100%
NGL equity sales (million gallons)			20				19				21				19				79				20				16				17				53
NGL production (million gallons)			83				80				76				68				307				71				62				58				191
Laurel Mountain Midstream, LLC (equity investment) - 100%
Gathering volumes (Tbtu)			12				13				12				15				52				15				16				22				53
Overland Pass Pipeline Company LLC (equity investment) - 100%
NGL Transportation volumes (Mbbls)			10,483				11,836				12,132				13,696				48,147				13,968				12,843				12,527				39,338

 

*	Excludes volumes associated with partially owned assets that are not consolidated for financial reporting purposes.

 

5

---

Capital Expenditures and Investments

(UNAUDITED)

 

		2011																				2012
(Dollars in millions)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				3rd Qtr				Year
Capital expenditures:
Gas Pipeline:
Northwest Pipeline GP		$	14			$	22			$	36			$	43			$	115			$	21			$	26			$	44			$	91
Transcontinental Gas Pipe Line			84				77				107				118				386				62				130				135				327
Other			—				—				—				—				—				—				2				8				10
Total			98				99				143				161				501				83				158				187				428
Midstream Gas & Liquids			58				54				146				232				490				173				327				360				860
Total*		$	156			$	153			$	289			$	393			$	991			$	256			$	485			$	547			$	1,288
Purchase of businesses:
Gas Pipeline		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	—
Midstream Gas & Liquids			—				—				31				—				31				(7	)			—				—				(7	)
Corporate			—				—				—				—				—				332				1,724				—				2,056
Total		$	—			$	—			$	31			$	—			$	31			$	325			$	1,724			$	—			$	2,049
Purchase of investments:
Gas Pipeline**		$	8			$	179			$	2			$	2			$	191			$	4			$	2			$	—			$	6
Midstream Gas & Liquids			28				60				37				55				180				44				134				98				276
Total		$	36			$	239			$	39			$	57			$	371			$	48			$	136			$	98			$	282
Summary:
Gas Pipeline		$	106			$	278			$	145			$	163			$	692			$	87			$	160			$	187			$	434
Midstream Gas & Liquids			86				114				214				287				701				210				461				458				1,129
Corporate			—				—				—				—				—				332				1,724				—				2,056
Total		$	192			$	392			$	359			$	450			$	1,393			$	629			$	2,345			$	645			$	3,619
Cumulative summary:
Gas Pipeline		$	106			$	384			$	529			$	692			$	692			$	87			$	247			$	434			$	434
Midstream Gas & Liquids			86				200				414				701				701				210				671				1,129				1,129
Corporate			—				—				—				—				—				332				2,056				2,056				2,056
Total		$	192			$	584			$	943			$	1,393			$	1,393			$	629			$	2,974			$	3,619			$	3,619
Capital expenditures incurred and purchase of investments:
Increases to property, plant, and equipment		$	142			$	174			$	332			$	408			$	1,056			$	282			$	522			$	595			$	1,399
Purchase of businesses			—				—				31				—				31				325				1,724				—				2,049
Purchase of investments			36				239				39				57				371				48				136				98				282
Total		$	178			$	413			$	402			$	465			$	1,458			$	655			$	2,382			$	693			$	3,730
*Increases to property, plant, and equipment		$	142			$	174			$	332			$	408			$	1,056			$	282			$	522			$	595			$	1,399
Changes in related accounts payable and accrued liabilities			14				(21	)			(43	)			(15	)			(65	)			(26	)			(37	)			(48	)			(111	)
Capital expenditures		$	156			$	153			$	289			$	393			$	991			$	256			$	485			$	547			$	1,288

 

**	The second quarter of 2011 includes the acquisition of a 24.5 percent interest in Gulfstream Natural Gas System, L.L.C. from a subsidiary of Williams.

 

6

---

Depreciation and Amortization

(UNAUDITED)

 

		2011																				2012
(Dollars in millions)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				3rd Qtr				Year
Depreciation and amortization:
Gas Pipeline:
Northwest Pipeline GP		$	23			$	22			$	23			$	23			$	91			$	23			$	23			$	24			$	70
Transcontinental Gas Pipe Line			64				67				65				64				260				66				67				66				199
Total			87				89				88				87				351				89				90				90				269
Midstream Gas & Liquids			63				65				67				65				260				67				78				89				234
Total		$	150			$	154			$	155			$	152			$	611			$	156			$	168			$	179			$	503

 

7

---

Williams Partners L.P.

 

		2012 Guidance												2013 Guidance												2014 Guidance
(Dollars in millions, except coverage ratios)		Low				Midpoint				High				Low				Midpoint				High				Low				Midpoint				High
Reconciliation of Non-GAAP “Distributable Cash Flow” to GAAP “Net income”
Net income		$	1,080			$	1,130			$	1,180			$	1,440			$	1,605			$	1,770			$	1,950			$	2,140			$	2,330
Depreciation and amortization			690				710				730				770				790				810				885				905				925
Maintenance capital expenditures			(425	)			(460	)			(495	)			(335	)			(370	)			(405	)			(380	)			(415	)			(450	)
Gain on sale of assets			(6	)			(6	)			(6	)			—				—				—				—				—				—
Impairment of certain assets			6				6				6				—				—				—				—				—				—
Acquisition and transition-related costs			23				23				23				—				—				—				—				—				—
Allocated reorganization-related costs			13				13				13				—				—				—				—				—				—
Other / Rounding			79				84				89				50				50				50				70				70				70
Distributable cash flow		$	1,460			$	1,500			$	1,540			$	1,925			$	2,075			$	2,225			$	2,525			$	2,700			$	2,875
Total cash to be distributed *		$	1,570			$	1,586			$	1,601			$	1,981			$	2,032			$	2,082			$	2,304			$	2,407			$	2,509
Coverage ratios:
Distributable cash flow divided by Total cash to be distributed*			0.93				0.95				0.96				0.97				1.02				1.07				1.10				1.12				1.15
Net income divided by Total cash to be distributed *			0.69				0.71				0.74				0.73				0.79				0.85				0.85				0.89				0.93

*

Distributions paid in 2012 reflect quarterly increases of $0.01 in the low case, $0.015 in the midpoint case and $0.02 in the high case. In 2013 and 2014, distributions paid reflect quarterly increases of $0.015 in the low case, $0.02 in the midpoint case, and $0.025 in the high case. Distributions are paid in the quarter following the period in which they are earned. Cash distributions earned in 4Q 2012 reflect the $0.02 (midpoint) increase paid in 1Q 2013.

Reconciliation of Non-GAAP “Adjusted Segment Profit” to GAAP “Segment Profit”
Segment Profit:
Midstream		$	952			$	1,002			$	1,052			$	1,225			$	1,400			$	1,575			$	1,800			$	2,000			$	2,200
Gas Pipeline			678				698				718				725				750				775				775				800				825
Total Segment Profit			1,630				1,700				1,770				1,950				2,150				2,350				2,575				2,800				3,025
Adjustments:
Midstream - Acquisition and transition-related costs			23				23				23				—				—				—				—				—				—
Midstream - Gain on sale of certain assets			(6	)			(6	)			(6	)			—				—				—				—				—				—
Midstream - Impairment of certain assets			6				6				6				—				—				—				—				—				—
Gas Pipeline - Loss related to Eminence storage facility leak			2				2				2				—				—				—				—				—				—
Adjusted segment profit		$	1,655			$	1,725			$	1,795			$	1,950			$	2,150			$	2,350			$	2,575			$	2,800			$	3,025

 

Note:

Amounts reflect acquisition of Geismar in November 2012.

 

8

---

Segment Revenues

(UNAUDITED)

 

		2011																				2012
(Dollars in millions)		1st Qtr				2nd Qtr				3rd Qtr				4th Qtr				Year				1st Qtr				2nd Qtr				3rd Qtr				Year
Gas Pipeline revenues:
Fee-based revenues		$	361			$	359			$	368			$	384			$	1,472			$	384			$	366			$	372			$	1,122
Tracked revenues			50				48				61				42				201				38				33				40				111
Other revenues			5				—				—				—				5				—				—				—				—
Total Gas Pipeline revenues		$	416			$	407			$	429			$	426			$	1,678			$	422			$	399			$	412			$	1,233
Midstream Gas & Liquids revenues:
Fee-based revenues		$	217			$	230			$	249			$	248			$	944			$	258			$	274			$	278			$	810
Commodity-based revenues			1,441				1,608				1,542				1,759				6,350				1,520				1,341				1,265				4,126
Other/Elims			(495	)			(574	)			(547	)			(627	)			(2,243	)			(515	)			(431	)			(428	)			(1,374	)
Total Midstream Gas & Liquids revenues		$	1,163			$	1,264			$	1,244			$	1,380			$	5,051			$	1,263			$	1,184			$	1,115			$	3,562

 

9