Williams Partners' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Williams Partners L.P. (WPZ)

Q1 2012 Earnings Conference Call

April 26, 2012 11:00 ET

Executives

John Porter – Head of Investor Relations

Alan Armstrong – Chief Executive Officer

Don Chappel – Chief Financial Officer

Analysts

Helen Ryoo – Barclays

Presentation

Operator

Good day, everyone and welcome to the Williams Partners First Quarter 2012 Earnings Release Conference Call. At this time for opening remarks and introductions, I'd like to turn the call over to John Porter, Head of Investor Relations. Please go ahead, sir.

John Porter – Head of Investor Relations

Thank you, (Matt). Good morning and welcome. As always, we thank you for your interest in Williams Partners. As you know yesterday afternoon, we released our financial results and posted several important items on our website, williamslp.com. These items include the press release of our results with related schedules and our analyst package; a presentation on our results and growth opportunities with related audio commentary from Williams Partners' CEO, Alan Armstrong and an update to our quarterly data book, which contains detailed information regarding various aspects of our business.

This morning Alan will make a few brief comments and then we will open the discussion up for Q&A. Rory Miller is here from our Midstream business and Randy Bernard is here from our Gas Pipeline business. Additionally, our CEO – our CFO, Don Chappel was also available to respond to any questions.

In yesterday's presentation and also in the quarterly data book, you will find an important disclaimer related to forward-looking statements. This disclaimer is important and integral to all of our remarks and you should review it. Also included in our presentation materials are various non-GAAP measures that have been reconciled back to generally accepted accounting principles. Those reconciliation schedules appear at the back of the presentation materials.

So, with that, I will turn it over to Alan.

Alan Armstrong – Chief Executive Officer

Great, thank you, John, and good morning everyone. First of all, of this I had a few headlines here for WPZ very quickly and then we'll turn it over to questions. Certainly, WPZ had a very exciting quarter of both performance and positioning for growth well into our future.

Three quick points here on this quarter and then I will quickly list out some of the operational matters that drove the quarter from our perspective as well. And finally, some quick thoughts on the slew of major projects that we have on our plate.

First of all, we did hit a record in distributable cash flow of $475 million despite NPL used margins slipping down from the fourth quarter of 2011 and segment profit was up 12% over the same quarter of last year.

Second, our stated goal of growing our fee-based business is showing up in our results in a big way, 19% growth in our fee-based revenues in our Midstream sector. And so a lot of the previous CapEx projects that we've been investing in for last several years are really starting to pay off namely Perdido, some of our processing capacity that’s on a fee basis out west and certainly the Northeast Pennsylvanian top volumes as they continue to grow very rapidly. Then as well in our Gas Pipeline group will continue to grow fee-based revenues there. Those were up 6% over first quarter of '11 as well.

And then third, our stated goal of growing the WPZ distribution by 8% to 10% remains extremely well supported, despite an internal forecast of declining NGL margins through our guidance period. As we continue to execute on the new fee-based investments that continued to propel our growth and through the guidance period and well beyond the guidance period.

Now, a few quick comments about the variances for the quarter, first of all, the segment profit as we mentioned was up 12% and this was driven by mild – really driven by the mild winter that we had to a very large degree really in two ways. First, the low natural gas prices certainly helped our NGL margin, despite a declining NGL prices through the quarter. And then two of our – most of our operating volumes were much better than we expected due to lack of production freeze-offs that we often encounter in the first quarter. So, overall, we actually benefited from the mild weather for the results in the first quarter.

Next, DCF or distributable cash flow was up 8%, but this was somewhat negatively impacted relative to our segment profit due to higher maintenance CapEx and certainly our maintenance CapEx, in the quarter was double what we had in the first quarter of 2011. Usually, we are not able to do a whole lot of our maintenance work in the first quarter due to severe weather, but obviously this has not been the case in most of our operating areas this winter. We do still have a lot of maintenance to do during the second and third quarter however, so I don't think you should read that our maintenance CapEx is going to be lower for the entire year. It’s just that we were able to move a little bit of that forward.

So, anyway, great progress going on really across the Board in terms of operating on the growth side. The opportunity just continue to come at us. We are very excited to be in the positions we're in. We think we're extremely well-suited for the demand that we think is going to continue to build on the natural gas side. We are certainly seeing a lot of strong signs of that on our pipelines. And we continue to have a lot of demands for infrastructure at the far ends of – upstream ends of our systems and as well on the downstream end, even in through the petchem infrastructure, we are seeing some very interesting opportunities to invest in and around the NGL infrastructure that will serve the growth in the petchem space as well. So, a lot going on across the Board, but our team is doing tremendous job of keeping up with all the growth and we are continuing to execute both in terms of running the business and as well the continued build out of the growth projects that we have on our plate.

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