Williams Partners L.P. (WPZ) has registered first-quarter 2012 earnings of 85 cents per limited-partner unit, showing an improvement from the year-ago profit level of 81 cents by 4.9%. However, the results were below the Zacks Consensus Estimate of 90 cents.
Higher natural gas liquid (NGL) margins in the partnership’s midstream business as well as higher fee-based revenue in both the midstream and gas pipeline businesses led to the significant year-over-year improvement.
Total revenue increased nearly 7% year over year to $1,685.0 million, but failed to meet the Zacks Consensus Estimate of $2,006.0 million.
Notably, Williams Partners’ distributable cash flow (DCF) attributable to partnership operations witnessed an improvement to $475 million from $441 million recorded in the year-ago quarter. Superior results in the midstream and gas pipeline operations led to an 8% DCF growth.
Recently, the partnership increased its quarterly cash distribution 8.4% year over year to 77.75 cents per unit.
Segment Performance
Consolidated adjusted segment profit was $489.0 million, up almost 12% from the year-ago level of $437.0 million.
Gas Pipeline: The segment reported profits of $180.0 million, showing an improvement of nearly 3% year over year. Higher transportation revenues related to expansion projects that began operations in 2011 drove the improvement.
Midstream Gas & Liquids: The segment’s profits increased 17.6% year over year to $308.0 million, owing to higher NGL margins as well as a 19% improvement in fee-based revenues.
The segment’s fee-based revenues experienced a major boost on higher volumes in the partnership’s Susquehanna Supply Hub area of the Marcellus Shale. The acquisition of the Laser Northeast Gathering System in Marcellus Shale from Delphi Midstream Partners, LLC for approximately $750 million also contributed to the results. Again, higher volumes on the Perdido Norte gas and oil pipelines in the deepwater Gulf of Mexico, gathering volumes in the West also added to this.
Guidance
Williams Partners has reaffirmed its 2012 and 2013 adjusted segment profit as well as capital expenditure guidance that reflect the partnership’s Caiman acquisition.
Taking into account potential contributions from the Caiman acquisition, Williams Partners had earlier boosted its expectation for its regular cash distribution to limited-partner unit holders for 2013. It expects to deliver about 8% annual growth for 2012 and 8-10% for 2013 and 2014.
The partnership expects its total adjusted segment profit in the range of $1,780-$2,270 million for 2012, $2,025-$2,525 million for 2013 and $2,125-$2,675 million for 2014. The capital expenditure for 2012 and 2013 is expected around $2,770 million and $3,270 million, respectively. However, Williams Partners boosted its 2013 capital expenditure guidance by $75 million to $3,150 million at guidance midpoint, to reflect the inclusion of Virginia Southside expansion project on Transco.
In Conclusion
We believe William Partners is well positioned for future growth owing to its geographically diverse assets, a sizable project backlog as well as a sound distribution history.
Moreover, its gas pipeline and midstream businesses continue to progress on a number of ongoing organic expansion projects, along with major growth projects in the Gulf of Mexico, Marcellus Shale and Piceance Basin. The new Constitution Pipeline joint venture and the completion of the Laser Northeast Gathering System acquisition are major milestones for the development of Susquehanna Supply Hub, a major natural gas supply hub in northeastern Pennsylvania.
In March, Williams Partners agreed to buy a midstream unit – Caiman Eastern Midstream LLC – of Caiman Energy for $2.5 billion in cash and equity. The deal will significantly increase Williams Partners’ footprint in the Marcellus Shale region. The transaction will entitle the partnership to collect more than 2 billion cubic feet of natural gas per day (Bcf/d) and produce about 300,000 barrels per day (bbl/d) of natural gas liquids by 2020 from the Caiman pipeline system. The partnership also highlighted that it intends to join Caiman in developing processing facilities in the Utica Shale, in Ohio and northwestern Pennsylvania.
The partnership currently holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating.
Williams Partners is an energy master limited partnership engaged in gathering, transportation, treating and processing of natural gas as well as fractionation and storage of NGLs. The general partner of the partnership is owned and managed by Williams Companies Inc. (WMB).
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