Williams Partners L.P. (WPZ)

Q2 2010 Earnings Call

July 29, 2010 11:00 a.m. ET


Sharna Reingold - IR

Steve Malcolm - CEO

Alan Armstrong - SVP, Midstream

Phil Wright - SVP, Gas Pipeline

Don Chappel - CFO


Steve Maresca - Morgan Stanley

Ted Durbin - Goldman Sachs

Yves Seagal - Credit Suisse

Sharon Lui - Wells Fargo

Craig Shere - Tuohy Brothers Investment Research

Andrew Gundlach - ASB

Darren Horowitz - Raymond James

Mark Easterbrook - RBC Capital Markets



Good day, everyone and welcome to the Williams Partners L.P.'s Second-Quarter 2010 Earnings Release Conference Call. At this time, for opening remarks and introductions, I would like to turn the call over to Sharna Reingold, Manager of Investor Relations. Please go ahead, ma'am.

Sharna Reingold

Thanks, Becky, and good morning. Welcome to the Williams Partners second-quarter 2010 earnings call, and thanks as always for your interest in the Company. And we do have a few slides to go over in our presentation. Steve Malcolm will be going through those in just a minute. After Steve's remarks, we will open the line for questions. Be aware that Alan Armstrong, Don Chappel, and Phil Wright are available for questions.

Before I turn it over to Steve for his remarks, please note that all the slides are available in a PDF format on our website williamslp.com. Please read slides two and three within the presentation, they are forward-looking statements about future expectations and operations that are subject to various risks and uncertainties, which are disclosed on those slides.

And also included in this presentation today are various non-GAAP numbers that have been reconciled back to measures included in Generally Accepted Accounting Principles. Those reconciliation schedules and related information are included in the slides available on our website, williamslp.com. And with that, I'll turn it over to Steve.

Steve Malcolm

Thank you, Sharna, and welcome to our call, and thanks for your continuing interest in our Company. Let's just dive into the slides, the slide on page four, please. Very strong quarter, higher NGL margins drove a 38% increase in our second-quarter net income per common units. We saw distributions grow to $0.6725 per unit. A very strong cash distribution coverage ratio of 1.43 times. Balanced growth in Midstream and Gas Pipe. A significant number of business development opportunities, well, probably, I would characterize it as extraordinary in nature in terms of the opportunities that we have to invest and that's underlined really by what's happening in the Marcellus. And I'll go into that in more detail in a minute.

Slide five, certainly the central thesis around the WPZ story has been organic growth and that's shown here in this slide, which is one that we've used before, which investors appreciate and which simply shows by -- for each of the three years of our guidance, where we're spending our money to maintain facilities, to maintain volumes and to grow our business, and this shows that we have about $2 billion in growth over that time frame and we've divided it up between Midstream and Gas Pipeline. Drilling down on those wonderful growth projects, if you'd look on slide six, which shows the Midstream capital-spending outlook and we've used the pie-chart approach in the past and the slices of the pie show where we will likely be spending our capital.

And on the far right-hand side, you see how we're going to spend our capital in terms of the projects that are in guidance and I would point out that the Overland Pass and Parachute projects again, which I'll talk more about in a minute, are now in guidance.

You see the potential spending associated with projects that we have under negotiation and then those that we have under negotiation and potential and you see the significant spending opportunity that we have here. So, the business development activity continues to be very robust and particularly in the Marcellus, but as well we're continuing to grow around our already significant position out west and we continue to believe that the deepwater Gulf represents a wonderful expansion opportunity for us.

The next page, page seven is a slide that you've seen, which demonstrates our [base kit] approach to investing in our Gas Pipeline space. These projects are all backed by long-term commitments with creditworthy customers. And you see the projects, they're bite-sized, but nevertheless some of them are fairly large, you've got the Northeast Supply Link project, which the capital for that is in excess of $300 million. You've got the Mid-South Expansion in excess of $200 million. So, some of these projects are fairly sizable.

Let me just go through a quick update on some of these. Projects that we've placed into service, 85 North Phase I and Mobile Bay South; projects under construction; Sundance Trail; FERC certificates received, Pascagoula Expansion and the Mobile Bay South II project; precedent agreements executed on the Mid-South Expansion on the remaining capacity and then with respect to the Cardinal Expansion project. And then we have an open season on the Opal Market Link project.

So, a lot of activity here and we all appreciate this stable, steady cash flow business represented by Gas Pipes. Let me now spend a few slides talking about and trying to respond to some questions that we've been getting from investors about various aspects of our business. I'm now looking at slide eight, which gives you kind of an outlook on what's happening in the Marcellus.

A lot of activity in the Marcellus, a lot of wonderful opportunities and that we certainly intend to take advantage of these opportunities over time. The opportunities in the Midstream space are special. We have the huge JV of course with Atlas. I think the recent deal that Atlas did with Reliance is clearly going to allocate more capital dollars for near-term drilling.

Read the rest of this transcript for free on seekingalpha.com

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