Williams Companies, Inc., 2012 Guidance/Update Call, Mar 20, 2012

Williams Companies Inc (WMB)

March 20, 2012 9:00 am ET

Executives

Travis N. Campbell - Head of Investor Relations

Alan S. Armstrong - Chief Executive Officer, President, Director , Chairman of Williams Partners Gp Llc and Chief Executive Officer of Williams Partners Gp Llc

Donald R. Chappel - Chief Financial Officer and Senior Vice President

Analysts

Andrew Stephen Gundlach - First Eagle Investment Management, LLC

Carl L. Kirst - BMO Capital Markets U.S.

Rebecca Followill - U.S. Capital Advisors LLC, Research Division

Heejung Ryoo - Barclays Capital, Research Division

Unknown Analyst

Presentation

Operator

Good day, everyone, and welcome to the Williams Companies Inc. Conference Call. At this time for opening remarks and introductions, I would like to turn the conference over to Mr. Travis Campbell. Please go ahead, sir.

Travis N. Campbell

Thank you, and as always, thanks for your interest in the company. Today, we're here to discuss the exciting acquisition we announced at the close of business yesterday. As you for sure noticed, we also accelerated the WMB dividend and gave updated guidance for '11 -- for '12 and '13, as well as provided 2014 guidance for the first time. Alan Armstrong, Don Chappel and Rory Miller are here with me this morning. And in a minute, Don and Allen will quickly go through these exciting developments, and then we'll take your questions.

Before I turn it over to Alan, let me remind you that a few of the slides today in today's presentation -- that the few slides in today's presentation are available on the web at williams.com or on williamslp.com. Also, you can find there more detailed schedules with the 2012 through '14 guidance. Also, you can find where any non-GAAP numbers have been reconciled back to GAAP numbers. On Slide 2 and 3 of today's presentation is our disclaimer on any forward-looking statements. You should review those pages.

So with that, I'll turn it over to Alan.

Alan S. Armstrong

Great. Good morning, and I'm going to start here on Slide 4. First of all, we have very exciting news we're going to talk about today on the Caiman acquisition. As well, we'll talk about the financing details around that. And then finally, Don will provide some detail on our guidance raise and another very substantial dividend raise that we're announcing. So first of all, on the deal, very excited about this location. We've been very clear with folks all along that we intend to be the #1 and #2 player in the very large Marcellus basin, and we think this moves us another step in that direction. And we'll talk about the overall scale with that, what this brings to us. But certainly this Caiman acquisition exciting just from the existing cash flows from this business, but as you'll see that our sites are aimed quite a bit higher than that in terms of the overall NGL infrastructure solutions and gas takeaway infrastructure solutions for this area. And we think this provides us a great platform for that.

Turning onto Slide 5. Here now, I'll get into a little bit of details on the Caiman acquisition. First of all to just tell you, this area, we, of course, continually study the various areas and figure out where the best locations are for us to be from which basins we want to enter. This is absolutely the best we think right now in the U.S. from a gas drilling location. Wells in this area 4.5 to 7.5 EURs and about 1,350 MMBtus in this area. The liquids production from this just from the NGLs is about 70 to 160 barrels per million cubic feet and so very excited about what this brings to us. In terms of the drilling net backs, which is really key to how attractive this area is from our standpoint, today even at the lower prices we're seeing today on the natural gas and without any ethane advantage, this gets us to about a net back to produce or about $5.70 at 230 gas. And that is without any uplift from ethane, which we think ultimately will be.

So next moving on here to the acreage dedications and what comes to us in this area. This is the, as I said, the rich-gas area in the Marcellus, and we think the wells produced here will produce about a 75 -- an IRR of a about 75% here for producers in this area. And on this -- looking here to the center column then, we can see the acreage dedications. We'll talk a little more about this, a little more detail here on this. But about 236,000 acres are dedicated to us in this area from 10 producers, and in addition to that, we have about another 100 million cubic feet a day of additional commitments that are not dedicated acreage but are by contracts, so very exciting area that's already heavily contracted in this area. And then moving to the right-hand column here on Slide 5, talk a little bit about the system as it sits today. This is going to be a very large-scale system for us. And first of all, the processing capacity here by the end of 2013 will be nearly 1 Bcf a day in this area. So as we've been very clear in the past, we're really only focused on being a large-scale infrastructure provider, and we certainly think that gets us here. On the fractionation capacity, by the end of 2013, we'll be up to almost 73,000 barrels a day of C3-plus fractionation and another 30,000 to 45,000 barrels a day of ethane -- de-ethanizing capacity in this area. So just clearly this area, we think, is going to positioned to attract both new NGL infrastructure solutions for the area, and we think it's going to position these assets to be the place for producers to be bringing their gas, as it attracts the best markets for both gas takeaway infrastructure and as well as NGL infrastructure solutions out of the area. As well, this asset is positioned right next to the Utica, does include 2 river crossings and as well ethane pipelines in the area as well. And so we -- in terms of Utica JV, we're not going to provide a lot of detail on that today, but we're very excited about the way we're positioned with Caiman to have first-mover advantage on serving the Utica JV in this area.

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