Williams and Williams Partners First Quarter Earnings Call May 5, 2016

Transcription

1 Williams and Williams Partners First Quarter Earnings Call May 5, 2016

2 First Quarter 2016 Summary WPZ adjusted EBITDA of $1.06 billion, up 16% vs 1Q 2015 Fee-based revenue continues to grow, up 5% WPZ Q adjusted EBITDA shows strength of broad based natural gas portfolio Atlantic-Gulf EBITDA of $399 million driven by growing Transco demand charges, proportional EBITDA of Discovery Central EBITDA of $226 million represents 100% fee-based business with essential infrastructure for large-scale natural gas production NGL-Petchem EBITDA of $57 million driven primarily by strong operating performance at Geismar olefins plant Q1 16 Geismar ethylene margin of $0.13/lb, up from Q4 15 on March ethylene prices Volumes from Horizon Offgas expansion support additional growth for balance of year Northeast G&P EBITDA of $219 million driven by significant midstream footprint across Marcellus and Utica acreage Price-related shut-ins average 900MMcfd; ~$50 million Q1 impact Infrastructure in-place to handle significant production capability in prolific hydrocarbon producing acreages West EBITDA of $159 million reflects shift to predominantly fee-based business West stability despite lower margins driven by slow production declines and cost savings focus Remaining commodity exposure represents significant upside; historic low NGL prices WPZ DCF of $739 million, coverage ratio 1.02x LP distribution maintained at $0.85 per unit or $3.40 annualized Cash distribution fully covered by strength of DCF Excludes benefits of IDR waiver Note: This slide contains non-gaap financial measures. A reconciliation of all non-gaap financial measures used in this presentation to their nearest GAAP financial measures is included on slides

3 Key Project Milestones RECENT DEVELOPMENTS Transco: Garden State: FERC approval received for ~180 MMcf/d expansion project for local distribution to New Jersey Transco: New York Bay: FERC issued Environmental Assessment for ~115 MMcf/d expansion serving with expected 4Q 2017 in-service date Transco: Dalton: FERC issued Environmental Assessment for ~448 MMcf/d expansion with expected 2017 in-service date Northwest Pipeline: Kalama Lateral: FERC approval received for ~320 MMcf/d project to serve proposed methanol production facility Transco: Hillabee: FERC approval received, construction begins soon Gulf East: Reached agreement with Shell and Nexen to provide deep-water gas gathering services to the Appomattox development Canadian Offgas Processing: Horizon offgas project fully placed in-service March 2016 COMING SOON Atlantic Sunrise: Draft EIS target May 2016 Rock Springs: Commissioning soon, in-service Q Kodiak tieback: Fourth tieback to Devil s Tower s achieved first oil on schedule in Q1 2016; production currently shut-in, restart expected late May Gunflint tieback: Expect first Gulfstar One tieback to commission in June; Contributing significant cash flow growth relative to capital investment 3

4 Structural Growth Drivers In Place 2016 vs. 2015: Significant new fee-based assets to be placed in-service in 2016 in addition to large-scale assets in-service for less than full year 2015 Full year contribution for 2015 assets: Leidy SE, Virginia Southside, NE Connector, Rockaway, Geismar expansion, KCC, Gulfstar One Partial contribution for new assets: Rock Springs, Gunflint, Kodiak, CNRL-Horizon 2017 vs. 2016: Additional fully-contracted assets to be placed in service in 2017 along with full-year contribution from mid-year 2016 assets Full year contribution for 2016 assets: Rock Springs, Gunflint, Kodiak, CNRL-Horizon Partial contribution for new assets: Dalton, Hillabee, Gulf Trace, various G&P expansions 2018 vs 2017: Continued development focused on interstate projects as well as midstream systems serving growth in northeast takeaway capacity Full year contribution for 2017 assets: Atlantic Sunrise, Dalton, Hillabee, Gulf Trace, Virginia Southside II, NY Bay Expansion Partial Contribution for new assets: Constitution assuming successful and prompt resolution of issues, St. James Supply; significant G&P volume increases Beyond 2018: Continued demand side growth with fully-contracted, large-scale Transco expansions and related G&P growth 4

5 Resilient Natural Gas-based Strategy Reflected in Results and 2016 Business Plan First quarter results demonstrate resilience of business across commodity price cycles Approximately 93% of WPZ YTD gross margin from fee-based revenues Continued growth in Atlantic-Gulf segment driven by Transco expansions Sequential growth in Marcellus/Utica volumes; constrained by market access Significant new assets support cash flow growth, while demand-based investment cycle continues Large-scale assets fully contributing cash flow Fully-contracted interstate pipeline project opportunities position WPZ for continued growth Strategic balance of demand-pull business in growing markets and significant supply-basin exposure; well-positioned to capitalize on expanding natural gas market 5

6 Forward Looking Statements

7 Forward Looking Statements The reports, filings, and other public announcements of The Williams Companies, Inc. (Williams) and Williams Partners L.P. (WPZ) 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. These forward-looking statements relate to anticipated financial performance, management s plans and objections 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 All statements, other than statements of historical facts, included in this document that address activities, events or developments that we expect, believe or anticipate will exist or may occur in the future, as 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, 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 status, expected timing and expected outcome of the proposed merger between Williams and Energy Transfer Corp LP (ETC Merger); Statements regarding the proposed ETC Merger; Our beliefs relating to value creation as a result of the proposed ETC Merger; Benefits and synergies of the proposed ETC Merger; Future opportunities for the combined company; Other statements regarding Williams and Energy Transfer Equity, L.P. and its affiliates (collectively, Energy Transfer) future beliefs, expectations, plans, intentions, financial condition or performance; Events which may occur subsequent to the proposed ETC Merger including events which directly impact WPZ s business; Expected levels of cash distributions by WPZ with respect to general partner interests, incentive distribution rights and limited partner interests; Levels of dividends to Williams stockholders; Future credit ratings of Williams, WPZ and their affiliates; 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; Seasonality of certain business components; Natural gas, natural gas liquids, and olefins prices, supply, and demand; and 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 document. 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: Satisfaction of the conditions to the completion of the proposed ETC Merger, including receipt of the approval of Williams stockholders; The timing and likelihood of completion of the proposed ETC Merger, including the timing, receipt and terms and conditions of any required governmental and regulatory approvals for the proposed merger that could reduce anticipated benefits or cause the parties to abandon the proposed transaction; Energy Transfer s plans for WPZ, as well as the other master limited partnerships it currently controls, following the completion of the proposed ETC Merger; The possibility that the expected synergies and value creation from the proposed ETC Merger will not be realized or will not be realized within the expected time period; The risk that the businesses of Williams and Energy Transfer will not be integrated successfully; 7

8 Forward Looking Statements (cont d) Disruption from the proposed ETC Merger making it more difficult to maintain business and operational relationships; The risk that unexpected costs will be incurred in connection with the proposed ETC Merger; The possibility that the proposed ETC Merger does not close, including due to the failure to satisfy the closing conditions; Whether WPZ will produce sufficient cash flows to provide the level of cash distributions we expect; Whether Williams is able to pay current and expected levels of dividends; 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 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; Our 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 developmental 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; Williams costs and funding obligations for defined benefit pension plans and other postretirement benefit plans; WPZ s allocated costs for defined benefit pension plans and other postretirements benefit plans sponsored by its affiliates; 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 financing, including restrictions stemming from debt agreements, future changes in credit ratings as determined by nationally-recognized credit rating agencies 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; and 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 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 and referred to below may cause our intentions to change from those statements of intention set forth in this document. 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. Because forward-looking statements involve risks and uncertainties, we caution that there are important factors, in addition to those listed above, that may cause actual results to differ materially from those contained in the forward-looking statements. For a detailed discussion of those factors, see Part I, Item 1A. Risk Factors in Williams and WPZ s Annual Reports on Form 10-K filed with the SEC on February 26, 2016 and in Part II, Item 1A. Risk Factors in our Quarterly Reports on Form 10-Q available from our offices or from our website at 8

9 WPZ Non-GAAP Reconciliations

10 WPZ Non-GAAP Reconciliations WPZ Non-GAAP Disclaimer This presentation includes certain financial measures adjusted EBITDA, distributable cash flow, and cash distribution coverage ratio that are non-gaap financial measures as defined under the rules of the Securities and Exchange Commission. Our segment performance measure, modified EBITDA, is defined as net income (loss) before income tax expense, net interest expense, equity earnings from equity-method investments, other net investing income, impairment of equity investments, depreciation and amortization expense, and accretion expense associated with asset retirement obligations for nonregulated operations. We also add our proportional ownership share (based on ownership interest) of modified EBITDA of equity investments. Adjusted EBITDA further excludes items of income or loss that we characterize as unrepresentative of our ongoing operations and may include assumed business interruption insurance related to the Geismar plant. Management believes this measure provides investors meaningful insight into results from ongoing operations. We define distributable cash flow as adjusted EBITDA less maintenance capital expenditures, cash portion of interest expense, income attributable to noncontrolling interests and cash income taxes plus WPZ restricted stock unit non-cash compensations and certain other adjustments that management believes affects the comparability of results. Adjustments for maintenance capital expenditures and cash portion of interest expense include our proportionate share of these items of our equity-method investments. 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 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 adjusted EBITDA, 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. 10

11 WPZ Non-GAAP Reconciliations Reconciliation of Non-GAAP distributable cash flow to GAAP net income 11

12 WPZ Non-GAAP Reconciliations Reconciliation of Non-GAAP distributable cash flow to GAAP net income cont d 12

13 WPZ Non-GAAP Reconciliations Reconciliation of Modified EBITDA to Non-GAAP Adjusted EBITDA 13

14 WPZ Non-GAAP Reconciliations Adjustments to Modified EBITDA by Segment 14