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

Williams Companies (WMB)

Q1 2012 Earnings Call

April 26, 2012 9:30 am ET

Executives

Unknown Executive -

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

Rory L. Miller - Senior Vice President of Midstream

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

Randall L. Barnard - Senior Vice President of Gas Pipeline

Analysts

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

Stephen J. Maresca - Morgan Stanley, Research Division

Craig Shere - Tuohy Brothers Investment Research, Inc.

Brad Olsen - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Sharon Lui - Wells Fargo Securities, LLC, Research Division

Theodore Durbin - Goldman Sachs Group Inc., Research Division

Faisel Khan - Citigroup Inc, Research Division

Jeremy Tonet - JP Morgan Chase & Co, Research Division

Presentation

Operator

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

Unknown Executive

Thank you, Corina. Good morning and welcome. As always we thank you for your interest in Williams. As you know yesterday afternoon, we released our financial results and posted several important items on our website, williams.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 our President and CEO, Alan Armstrong and an update to our quarterly data book which contain the detailed information regarding various aspects of the 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 Barnard is here from our gas pipeline business. Additionally, our CFO, Don Chappel is 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'll turn it over to Alan.

Alan S. Armstrong

Great. Thank you, John, and good morning to everybody. Thanks for joining us. I know it's a busy day for earnings releases.

Certainly, you've have all seen the strong financial results for the quarter, so this morning I hope to provide just some color around the business fundamentals that provide great transparency around the projects and the business growth that is supports our confidence in a sustainable high-growth dividend for WMB.

First of all, our quarter came out to about 8% above consensus due to I believe a combination of mild weather and continued growth in revenues from our recent capital investments that continue to ramp up. And then as well, the high ethylene margins in the first quarter as well. I think we're higher than most people expected. So let me hit on just a few of these things real quickly.

First of all, the mild weather, how that impact this -- drove lower natural gas prices which of course improved our NGL margins despite some lower NGL prices. The very low natural gas prices actually helped prop up our key pulse margins.

Secondly, and probably less obvious is the fact that we had great operating performance during the quarter. Because normally in the first quarter, we have a lot of freeze offs of production from our producers and so forth. So in this period, we did not experience very much of that at all. So we've enjoyed the mild weather in those 2 ways.

Secondly, as I mentioned, the projects that we continue to bring online continue to grow our fee-based revenues and actually, in the midstream the fee-based revenues were up 19%. And really this was due to a combination of issues.

First of all, as I mentioned, projects that we've been investing in over the last couple of years continue to ramp up, namely, the Perdido Norte volumes continuing to come up, the Echo Springs -- fourth train at Echo Springs continue to enjoy more and more volumes from the Piceance. And the Northeast Pennsylvania assets were up and certainly the volumes there grew actually by a little over 160%. As well at our Markham, our new expansion at Markham, that also experienced new fee-based volumes from the Eagle Ford as well. So really across the board. A lot of the investments we've been making for the last several years really starting to pan out in terms of driving our fee-based revenues, particularly within midstream.

These 2 factors also drove strong operating statistics, the mild weather and the new projects online. Our NGL production was actually up 18%. Our gathering volumes were up 19%.

Of course, most of our capital expansion in our processing business has been fee-based so our equity gallons were only up 7% and I think probably the main driver for that is the fact that our, again as I mentioned, our plants were up and running more during the first quarter than we saw in the first quarter of '11.

Certainly the lower -- sorry, the higher ethylene prices were driven by the lower ethane prices during the quarter. And we continue to see strong demand for ethylene in that area, particularly there was a lot of outages and it drove the ethylene demand even higher in the area. So, pretty excited about the way that business is hoping to support our overall combined MD revenue.

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