Williams Partners Advises Unitholders to Reference News Today From Its General Partner, Williams (NYSE:WMB); Updates 2014 Financial Guidance

TULSA, Okla.--()--Williams Partners L.P. (NYSE:WPZ) advised its unitholders to reference news issued today by its general partner Williams (NYSE:WMB). The partnership’s general partner, Williams, today announced a proposal for Williams Partners to merge with and into Access Midstream Partners L.P. (NYSE:ACMP). As well, Williams Partners today updated its 2014 financial guidance.

The proposed merger terms will be subject to negotiation, review and approval by the conflicts committees of each Williams Partners’ and Access Midstream Partners’ board of directors. The conflicts committees, comprised solely of independent board members, are expected to retain legal and financial advisors. Williams Partners expects the proposed merger to be subject to approval by its unitholders.

In addition, Williams today announced it plans to accelerate its transition to a pure-play general-partner holding company via the dropdown of its remaining NGL & Petchem Services assets and projects to Williams Partners or its then-merged successor in late 2014 or early 2015. Williams said it expects to have invested approximately $600 million in the drop-down assets by year-end 2014. The drop-down transaction will be subject to approval by the conflicts committee of Williams Partners’ (or its successor’s) board of directors.

Financial Guidance and Geismar Update

Williams Partners is lowering its financial guidance for 2014; financial guidance for 2015 and 2016 are unchanged. The 2014 change is primarily the result of delays in Geismar’s expected in-service date and increased construction spending. The updated guidance also reflects various other changes since the partnership issued guidance in October 2013.

“The strength of Williams Partners’ ongoing business allows us to preserve the growth reflected in its 2015 and 2016 financial guidance,” said Alan Armstrong, chief executive officer of Williams Partners’ general partner. “We are lowering the 2014 guidance primarily as a result of delays and cost increases specific to work to bring the expanded, rebuilt Geismar facility back into service. We are now targeting late July for initiation of the startup process.”

The partnership’s updated guidance for its 2014 earnings, distributable cash flow and capital expenditures are displayed in the following table:

Williams Partners Guidance   2014
Amounts are in millions except coverage ratio.   Low   Mid   High
DCF attributable to partnership ops. (1)   $2,000   $2,100   $2,200
 
Total Cash Distribution (2) $2,340 $2,370 $2,400
 
Cash Distribution Coverage Ratio (1) .85x .89x .92x
 
Adjusted Segment Profit (1): $2,050 $2,150 $2,250
 
Adjusted Segment Profit + DD&A (1): $2,945 $3,070 $3,195
 
Growth Capital Expenditures   $3,370   $3,655   $3,940

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

(2) The cash distributions in guidance are on an accrual basis and reflect an approximate
annual growth rate in limited partner distributions of 5-7% for 2014.

 

The Geismar plant rebuild and expansion projects are targeted for initiation of startup in late July. Williams Partners’ financial guidance assumes ethylene sales commencing in mid-August. The delay from the previous expectation of startup initiation in late June resulted from lower than planned construction labor productivity and other factors on both the rebuild and expansion projects. The Geismar expansion project capital spending is expected to increase to $715 million, up $65 million from previous guidance, primarily as a result of such delays.

Additionally, risks associated with the expected full recovery of $500 million in insurance proceeds related to the Geismar incident could result in full-year 2014 distributable cash flow that is below the new guidance range. In May, the insurers approved $50 million of the most recent claim-payment request of $200 million. Upon receipt of such $50 million, expected in June, the total insurance receipts to date will be $225 million. The insurers continue to evaluate Williams Partners’ claims and have recently raised questions around key assumptions involving our business-interruption claim. As a result, the insurers have elected to make a partial payment pending further assessment of these issues. Williams Partners continues to work with insurers in support of all claims, as submitted, and is vigorously pursuing full payment.

Non-GAAP Measures

This press release refers to the financial measures – adjusted segment profit, adjusted segment profit + DD&A, distributable cash flow and cash distribution coverage ratio – 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. Adjusted segment profit + DD&A is further adjusted to add back depreciation and amortization expense. Management believes these measures provide 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, income attributable 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, adjusted segment profit + DD&A 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.

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, both onshore and offshore along the Gulf of Mexico, and Canada. 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.

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. We make these forward-looking statements in reliance on the safe harbor protections provided under the private Securities Litigation Reform Act of 1995.

You typically can identify forward-looking statements 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," "assumes," "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:

  • The completion of the proposed merger of Access Midstream Partners, L.P. and Williams Partners L.P., including approval by the conflicts committees of each partnership;
  • The timing of the drop-down of Williams' remaining NGL & Petchem Services assets and projects;
  • The expected timing for the restart of the Geismar, Louisiana, olefins plant;
  • The expected timing of receipt and amounts of proceeds from insurance claims related to the Geismar plant;
  • 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 cash distributions to unitholders;
  • Natural gas, natural gas liquids, and olefins prices, supply and demand;
  • Demand for our services.

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:

  • Approval of the proposed merger, including by the conflicts committees of Access Midstream Partners, L.P. and Williams Partners L.P.
  • Our ability to recover expected insurance proceeds related to the Geismar plant;
  • Whether we have sufficient cash from operations to enable us to pay current and expected levels of cash distributions, if any, following establishment of cash reserves and payment of fees and expenses, including payments to our general partner;
  • Availability of supplies, market demand and volatility of prices;
  • Inflation, interest rates, fluctuation in foreign exchange 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);
  • The strength and financial resources of our competitors and the effects of competition;
  • Whether we are able to successfully identify, evaluate and execute investment opportunities;
  • Ability to acquire new businesses and assets and successfully integrate those operations and assets into our existing businesses, as well as successfully expand our facilities;
  • Development of alternative energy sources;
  • The impact of operational and development hazards and unforeseen interruptions;
  • Costs of, changes in, or the results of laws, government regulations (including safety and environmental regulations), environmental liabilities, litigation and rate proceedings;
  • Our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates;
  • Changes in maintenance and construction costs;
  • Changes in the current geopolitical situation;
  • Our exposure to the credit risks of our customers and counterparties;
  • Risks related financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the availability and cost of capital;
  • The amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate;
  • Risks associated with weather and natural phenomena, including climate conditions;
  • Acts of terrorism, including cybersecurity threats and related disruptions;
  • Additional risks described in our filings with the Securities and Exchange Commission (SEC).

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 26, 2014, and each of our quarterly reports on Form 10-Q available from our offices or from our website at www.williamslp.com.

Williams Partners L.P. - segment profit guidance – reported to adjusted and adjusted segment profit + DD&A
Dollars in millions     2014 Guidance
Low   Midpoint High
Total reported segment profit $ 2,160 $ 2,260 $ 2,360

Adjustments:

Loss related to compressor station fire   6   6   6
Total adjustments - Northeast G&P 6 6 6
 
Geismar incident adjustment for insurance and timing   (116)   (116)   (116)
Total adjustments - NGL & Petchem Services (116) (116) (116)
     
Total segment profit adjustments (110) (110) (110)
 

Adjusted segment profit:

     
Total adjusted segment profit 2,050 2,150 2,250
 
Total DD&A   895   920   945
Total adjusted segment profit + DD&A $ 2,945 $ 3,070 $ 3,195
 
Williams Partners L.P. - Distributable cash flow and cash distribution coverage ratio
Dollars in millions     2014 Guidance
Low   Midpoint   High
Net Income $1,558 1,668 $1,778
DD&A 895 920 945
Maintenance Capex (305) (340) (375)
Attributable to Noncontrolling Interests (40) (45) (50)
Geismar incident adjustment for insurance and timing (116) (116) (116)
Other / Rounding 31 36 41
Distributable Cash Flow 2,023 2,123 2,223
Less: Pre-Partnership Distributable Cash Flow 23 23 23
Distributable Cash Flow Attributable to Partnership Operations $2,000 $2,100 $2,200
 
Cash Distributions 1 $2,340 $2,370 $2,400
 
Cash Distribution Coverage Ratio 0.85x 0.89x 0.92x
 
Net Income / Cash Distributions 0.67x 0.70x 0.74x
Note 1: Distributions reflect per-unit increases of 5%-7% annually.
 

Contacts

Williams
Media:
Tom Droege, 918-573-4034
or
Investor:
John Porter, 918-573-0797
or
Sharna Reingold, 918-573-2078

Release Summary

Williams Partners Advises Unitholders to Reference News Today From Its General Partner, Williams (NYSE:WMB); Updates 2014 Financial Guidance

Contacts

Williams
Media:
Tom Droege, 918-573-4034
or
Investor:
John Porter, 918-573-0797
or
Sharna Reingold, 918-573-2078