Williams Reports First-Quarter 2012 Financial Results

  • First-Quarter 2012 Net Income is $423 Million, $0.70 per Share
  • Adjusted Income from Continuing Operations is $0.39 per Share in 1Q, Up 39%
  • Fee-based Business Growth at Williams Partners, Strong Margins Drive Improved 1Q Adjusted Results
  • Earnings Guidance Slightly Increased, Dividend Guidance Reaffirmed
  • Annual Analyst Day Scheduled for May 22

TULSA, Okla.--()--Williams (NYSE: WMB) announced first-quarter 2012 unaudited net income attributable to Williams of $423 million, or $0.70 per share on a diluted basis, compared with net income of $321 million, or $0.54 per share on a diluted basis for first-quarter 2011.

Quarterly Summary Financial Information   1Q 2012   1Q 2011
Per share amounts are reported on a diluted basis. All amounts are attributable to The Williams Companies, Inc.

millions

 

per share

millions

 

per share

 
Income from continuing operations $ 287 $ 0.47 $ 300 $ 0.50
Income from discontinued operations   136   0.23   21   0.04
Net income $ 423 $ 0.70 $ 321 $ 0.54
                 
Adjusted income from continuing operations* $ 236 $ 0.39 $ 169 $ 0.28

* A schedule reconciling income (loss) from continuing operations to adjusted income from continuing operations (non-GAAP measures) is available at www.williams.com and as an attachment to this press release.

On a continuing basis, improved results in the Williams Partners and Midstream Canada & Olefins segments were more than offset by the absence of a $124 million income tax benefit primarily associated with a federal settlement that was recorded during first-quarter 2011. The absence of the tax benefit drove the slight decline in income from continuing operations in first-quarter 2012.

The increase in first-quarter 2012 net income is primarily due to gains in discontinued operations associated with the sale of Williams’ former assets in Venezuela. The agreement to sell those assets was announced on March 26.

Prior-period results throughout this release have been recast to reflect the separation of Williams’ former exploration and production business on Dec. 31, 2011. The results of the former exploration and production business are reported in discontinued operations for first-quarter 2011.

Adjusted Income from Continuing Operations

Adjusted income from continuing operations was $236 million, or $0.39 per share, for first-quarter 2012, compared with $169 million, or $0.28 per share for first-quarter 2011.

The increase in the adjusted income from continuing operations for first-quarter 2012 was due to improved results in both the Williams Partners and Midstream Canada & Olefins segments. Higher fee-based revenues and natural gas liquid (NGL) margins at Williams Partners and higher ethylene margins at Midstream Canada & Olefins drove the improved results. There is a more detailed description of the business results later in this press release.

Adjusted income from continuing operations reflects the removal of items considered unrepresentative of ongoing operations and are non-GAAP measures. Reconciliations to the most relevant GAAP measures are attached to this news release.

CEO Comment

Alan Armstrong, Williams’ president and chief executive officer, made the following comments:

“We’ve made a strong start to 2012, with our businesses performing well and driving a 39 percent increase in our adjusted earnings per share.

“Expansion projects at Williams Partners drove strong increases in fee-based revenues, while Midstream Canada & Olefins continues to perform well.

“Growth projects across our businesses are ongoing; we completed the financing transactions and are poised to complete Williams Partners’ Caiman acquisition – a major milestone in our goal to be the leading gathering, processing and transportation solution provider for producers in the Marcellus Shale.

“We’re also continuing to work on projects that will serve the booming petrochemical industry in North America. The expansion of our Geismar olefins production facility is under way and we expect to place our Boreal pipeline in Canada into service in May, slightly ahead of schedule.”

Business Segment Results

Williams’ business segments for financial reporting are Williams Partners, Midstream Canada & Olefins, and Other. The Williams Partners segment includes the consolidated results of Williams Partners L.P. (NYSE:WPZ), and Midstream Canada & Olefins includes the results of Williams’ Canadian midstream and domestic olefins business.

Consolidated Segment Profit   1Q
Amounts in millions 2012   2011
 
Williams Partners $ 488 $ 437
Midstream Canada & Olefins 103 74
Other   59   20
 
Consolidated Segment Profit $ 650 $ 531
 
 
Adjusted Consolidated Segment Profit* 1Q
Amounts in millions 2012 2011
 
Williams Partners $ 489 $ 437
Midstream Canada & Olefins 103 74
Other   6   9
 
Adjusted Consolidated Segment Profit $ 598 $ 520

* A schedule reconciling segment profit to adjusted segment profit (non-GAAP measures) is available at www.williams.com and as an attachment to this press release.

Williams Partners

Williams Partners is focused on natural gas transportation, gathering, treating, processing and storage; NGL fractionation; and oil transportation.

For first-quarter 2012, Williams Partners reported segment profit of $488 million, compared with $437 million for first-quarter 2011.

Higher fee-based revenues and NGL margins in the partnership’s midstream business, as well as improved results in the gas pipeline business, drove the improvement in the first quarter. A decline in margins related to the marketing of NGLs for the partnership and third parties, together with higher selling, general and administrative expenses partially offset these improvements.

The improvement in Williams Partners’ gas pipeline business was primarily due to increased revenue from expansion projects placed into service in 2011.

Williams Partners          
Key Operational Metrics 2011 2012

1Q

2Q

3Q

4Q

1Q

Fee-based Revenues* (millions)
Gas pipeline business $ 361 $ 359 $ 368 $ 384 $ 384
Midstream business   217     230     249     248   258
Williams Partners Total $ 578 $ 589 $ 617 $ 632 $ 642
 
NGL Margins
NGL margins (millions) $ 207 $ 253 $ 234 $ 287 $ 242
NGL equity volumes (gallons in millions) 289 308 274 317 308
Per-unit NGL margins ($/gallon) $ 0.71 $ 0.83 $ 0.85 $ 0.91 $ 0.79

* Fee-based revenue is a non-GAAP measure. A reconciliation to the most relevant measure included in GAAP is attached to this news release.

Fee-based revenues in the partnership’s midstream business increased by 19 percent in first-quarter 2012. The increase was driven by higher volumes in the partnership’s Susquehanna Supply Hub area of the Marcellus Shale, as well as higher volumes on the Perdido Norte gas and oil pipelines in the deepwater Gulf of Mexico. Also, gathering volumes in the West were higher than first-quarter 2011 when severe winter weather conditions in the Rockies reduced gas production volumes.

Lower average natural gas prices, partially offset by lower ethane prices, as well as an increase in NGL equity volumes sold, drove the 17-percent increase in Williams Partners’ NGL margins in the first quarter. The decline in NGL margins from fourth-quarter 2011 to first-quarter 2012 was due to significantly lower ethane prices. A large number of ethane cracker turnarounds was the primary driver of the lower ethane prices.

There is a more detailed description of Williams Partners’ interstate gas pipeline and midstream business results in the partnership’s first-quarter 2012 financial results news release, which is also being issued today.

Midstream Canada & Olefins

Midstream Canada & Olefins includes Williams’ operations in the United States and Canada focused on recovering and producing ethylene, propylene, NGLs and other related products.

Midstream Canada & Olefins reported segment profit of $103 million for first-quarter 2012, compared with $74 million for first-quarter 2011.

Higher per-unit Geismar ethylene production margins, as well as higher volumes, were the primary driver of the improved segment profit in first-quarter 2012.

Other

The Other segment benefited from gains related to the 2010 sale of the company’s Accroven investment in Venezuela of $53 million in 2012 and $11 million in 2011.

Earnings Guidance Slightly Increased, Dividend Guidance Reaffirmed

Williams’ 2012 and 2014 adjusted earnings per share guidance, issued on March 19 in conjunction with Williams Partners’ Caiman acquisition, is being slightly increased. Previous adjusted earnings per share guidance for 2013 is unchanged.

Williams’ guidance midpoints for expected adjusted earnings per share are $1.40 in 2012, $1.55 in 2013 and $1.83 in 2014. The projected adjusted earnings per share amount of $1.83 in 2014 is a 49-percent increase over Williams’ 2011 adjusted earnings per share of $1.23.

The company’s capital expenditure outlook for 2012 and 2014 is unchanged from the guidance issued on March 19. Capital expenditure guidance for 2013 is being increased by $75 million at the midpoint, primarily to reflect Williams Partners’ Virginia Southside expansion project on the Transco system.

The company also continues to expect a full-year 2012 dividend to shareholders of $1.20 per share. The planned 2012 dividend is a 55 percent increase over the full-year 2011 dividend to shareholders of $0.775 per share. The company also continues to expect an increase of its dividend by 20 percent in both 2013 and 2014.

Williams’ 2012-14 commodity price assumptions and guidance data is available in today’s earnings presentation that will be posted shortly at www.williams.com/investors.

Annual Analyst Day Meeting Set for May 22

Williams plans to host its annual Analyst Day on Tuesday, May 22. The event will feature in-depth presentations on Williams Partners’ midstream and gas pipeline businesses, as well as Williams’ midstream Canada and olefins business.

Presenters will include Alan Armstrong, president and chief executive officer; Don Chappel, chief financial officer; Randy Barnard, president of the gas pipeline business; Rory Miller, president of the midstream business; and other key members of Williams’ management team.

Williams’ Analyst Day will be broadcast live via webcast beginning on May 22 at 8:45 a.m. EDT. Participants can access the webcast at www.williams.com or www.williamslp.com. Slides will be available on the morning of the event on both web sites for viewing, downloading and printing. A replay of the Analyst Day webcast will be available for two weeks following the event at the web sites listed above.

First-Quarter Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow

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

The company will host the first-quarter Q&A live webcast on Thursday, April 26 at 9:30 a.m. EDT. A link to the live webcast of the event, as well as replays in both streaming and downloadable podcast formats, will be available at www.williams.com. A limited number of phone lines will be available at (888) 428-9498. International callers should dial (719) 325-2425.

Non-GAAP Measures

This press release includes certain financial measures – adjusted segment profit, fee-based revenues, adjusted income from continuing operations (“earnings”) and adjusted earnings per share – that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission. Adjusted segment profit, adjusted earnings and adjusted earnings per share measures exclude items of income or loss that the company characterizes as unrepresentative of its ongoing operations. Management believes these measures provide investors meaningful insight into the company's results from ongoing operations. Fee-based revenues includes total revenues less commodity-based and tracked revenue. Such excluded items can be volatile due to changing market conditions, which are largely beyond our management’s control. Fee-based revenues provides investors with information about the growth of our revenues that are not subject to this volatility.

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 widely accepted financial indicators used by investors to compare a company’s performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the company and aid investor understanding. Neither adjusted segment profit, fee-based revenues, adjusted earnings, nor adjusted earnings per share measures are intended to represent an alternative to revenues, segment profit, net income or earnings per share. 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.

About Williams (NYSE: WMB)

Williams is one of the leading energy infrastructure companies in North America. It owns interests in or operates 15,000 miles of interstate gas pipelines, 1,000 miles of NGL transportation pipelines, and more than 10,000 miles of oil and gas gathering pipelines. The company’s facilities have daily gas processing capacity of 6.6 billion cubic feet of natural gas and NGL production of more than 200,000 barrels per day. Williams owns a 69-percent ownership interest in Williams Partners L.P. (NYSE: WPZ), one of the largest diversified energy master limited partnerships. Williams Partners owns most of Williams’ interstate gas pipeline and domestic midstream assets. The company’s headquarters is in Tulsa, Okla.

Our reports, filings, and other public announcements may include “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. These forward-looking statements relate to anticipated financial performance, management’s plans and objectives for future operations, business prospects, outcome of regulatory proceedings, market conditions and other matters. We make these forward-looking statements in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995.

All statements, other than statements of historical facts, included in this report that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, are forward-looking statements. Forward-looking statements can be identified by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will” 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:

  • Amounts and nature of future capital expenditures;
  • Expansion and growth of our business and operations;
  • Financial condition and liquidity;
  • Business strategy;
  • Cash flow from operations or results of operations;
  • The levels of dividends to stockholders;
  • Seasonality of certain business components;
  • 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 report. 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:

  • Whether we have sufficient cash to enable us to pay current and expected levels of dividends;
  • Availability of supplies, market demand, volatility of prices, and the availability and cost of capital;
  • Inflation, interest rates, fluctuation in foreign exchange, 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);
  • The strength and financial resources of our competitors;
  • Ability to acquire new businesses and assets and integrate those operations and assets into our existing businesses, as well as expand our facilities;
  • Development of alternative energy sources;
  • The impact of operational and development hazards;
  • 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;
  • Our costs and funding obligations for defined benefit pension plans and other postretirement benefit plans;
  • Changes in maintenance and construction costs;
  • Changes in the current geopolitical situation;
  • Our exposure to the credit risk of our customers and counterparties;
  • 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, including cybersecurity threats and related disruptions;
  • 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. 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.

Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the SEC on Feb. 28, 2012, and our quarterly reports on Form 10-Q available from our offices or from our website at www.williams.com.

Reconciliation of Income (Loss) from Continuing Operations Attributable to The Williams Companies, Inc. to Adjusted Income
(UNAUDITED)            
 
 
2011 2012
(Dollars in millions, except per-share amounts)   1st Qtr   2nd Qtr   3rd Qtr   4th Qtr   Year 1st Qtr
 
Income (loss) from continuing operations attributable to The Williams
Companies, Inc. available to common stockholders $ 300     $ 171     $ 253     $ 79     $ 803   $ 287  
 
Income (loss) from continuing operations - diluted earnings per common share $ 0.50     $ 0.29     $ 0.43     $ 0.13     $ 1.34   $ 0.47  
 
Adjustments:
 

Williams Partners

Gain on sale of base gas from Hester storage field $ (4 ) $ - $ - $ - $ (4 ) $ -
Loss related to Eminence storage facility leak 4 3 6 2 15 1
                   
Total Williams Partners adjustments - 3 6 2 11 1
 

Midstream Canada & Olefins (MC&O)

Gulf Liquids litigation contingency accrual reduction - - - (19 ) (19 ) -
                   
Total Midstream Canada & Olefins adjustments - - - (19 ) (19 ) -
 

Other

Gain from Venezuela investment (11 ) - - - (11 ) (53 )
                   
Total Other adjustments (11 ) - - - (11 ) (53 )
                   
Adjustments included in segment profit (loss) (11 ) 3 6 (17 ) (19 ) (52 )
 

Adjustments below segment profit (loss)

Early debt retirement costs - Corporate - - - 271 271 -
Gulf Liquids litigation contingency interest accural reduction - MC&O - - - (14 ) (14 ) -
Gain from Venezuela investment - related interest - Other - - - - - (10 )
Allocation of Williams Partners' adjustments to noncontrolling interests - (1 ) (1 ) (1 ) (3 ) -
                   
- (1 ) (1 ) 256 254 (10 )
 
Total adjustments (11 ) 2 5 239 235 (62 )
Less tax effect for above items 4 (1 ) (2 ) (89 ) (88 ) 11
 
Adjustments for tax-related items [1]   (124 )     -       (77 )     (15 )     (216 )   -  
 
Adjusted income from continuing operations available to common stockholders $ 169     $ 172     $ 179     $ 214     $ 734   $ 236  
 
Adjusted diluted earnings per common share [2] $ 0.28     $ 0.29     $ 0.30     $ 0.36     $ 1.23   $ 0.39  
 
Weighted-average shares - diluted (thousands) 596,567 597,633 597,550 600,921 598,175 600,520
[1]   The first, third and fourth quarters of 2011 include federal settlements and an international revised assessment. The third quarter of 2011 includes an adjustment to reverse taxes on undistributed earnings of certain foreign operations that are now considered permanently reinvested.
 
[2] Interest expense, net of tax, associated with our convertible debentures has been added back to adjusted income from continuing operations available to common stockholders to calculate adjusted diluted earnings per common share.
 
Note: The sum of earnings per share for the quarters may not equal the total earnings per share for the year due to changes in the weighted-average number of common shares outstanding.
 
 
2012 Forecast Guidance—Reported to Adjusted
             
April 26 Guidance
Reported Adjustment Adjusted
(Dollars in millions, except earnings per share) Low     High Items Low     High
 
Segment profit $ 2,077 $ 2,702 $ (2 ) $ 2,075 $ 2,700
Net interest expense (480 ) (500 ) (480 ) (500 )
General corporate/other/rounding   (140 )       (165 )   (10 )   (150 )       (175 )
Pretax income 1,457 2,037 (12 ) 1,445 2,025
Provision for income tax   (421 )       (581 )   (4 )   (425 )       (585 )
Income from continuing operations $ 1,036 $ 1,456 $ (16 ) $ 1,020 $ 1,440
Net income attributable to noncontrolling interests   (245 )       (410 )   (10 )   (255 )       (420 )
 
Amounts attributable to Williams:
Income from continuing operations $ 791 $ 1,046 $ (26 ) $ 765 $ 1,020
 
Adjusted diluted EPS $ 1.24       $ 1.64   $ 1.20       $ 1.60  
 
 
Reconciliation of Forecasted Reported Income from Continuing Operations to Adjusted Income from Continuing Operations
                 
2012 Guidance 2013 Guidance 2014 Guidance
(Dollars in millions, except earnings per share) Low   Midpoint   High Low   Midpoint   High Low   Midpoint   High
 
Reported income from continuing operations $ 791 $ 919 $ 1,046 $ 865 $ 993 $ 1,120 $ 1,000 $ 1,178 $ 1,355
Adjustments—pretax (22 ) (22 ) (22 ) - - - - - -
Less taxes   (4 )     (4 )     (4 )   -     -     -   -     -     -
Adjustments—after tax (26 ) (26 ) (26 ) - - - - - -
Adjusted income from continuing ops $ 765 $ 893 $ 1,020 $ 865 $ 993 $ 1,120 $ 1,000 $ 1,178 $ 1,355
Adjusted diluted EPS $ 1.20 $ 1.40 $ 1.60 $ 1.35 $ 1.55 $ 1.75 $ 1.55 $ 1.83 $ 2.10
Note: All amounts attributable to Williams
 
 
Non-GAAP Reconciliation of Fee Revenues to Total Segment Revenues
(UNAUDITED)
           
 
2011 2012
(Dollars in millions)   1st Qtr   2nd Qtr   3rd Qtr   4th Qtr   Year 1st Qtr
 
Revenues
 
Fee revenues from gas pipeline business $ 361 $ 359 $ 368 $ 384 $ 1,472 $ 384
Fee revenues from midstream business 217 230 249 248 944 258
Tracked revenues from gas pipeline business 50 48 61 42 201 38
Commodity-based revenues from midstream business 1,441 1,608 1,542 1,759 6,350 1,520
Other/Elims   (490 )     (574 )     (547 )     (627 )     (2,238 )   (515 )
Total Williams Partners revenue $ 1,579     $ 1,671     $ 1,673     $ 1,806     $ 6,729   $ 1,685  

Contacts

Williams
Media Contact:
Jeff Pounds, 918-573-3332
or
Investor Contacts:
John Porter, 918-573-0797
or
Sharna Reingold, 918-573-2078

Release Summary

Williams (NYSE:WMB) reports first-quarter 2012 financial results.

Sharing

Contacts

Williams
Media Contact:
Jeff Pounds, 918-573-3332
or
Investor Contacts:
John Porter, 918-573-0797
or
Sharna Reingold, 918-573-2078