OREANDA-NEWS.  Williams Partners L.P. (NYSE: WPZ) announced unaudited first-quarter 2014 net income of USD 352 million, or USD 0.36 per common limited-partner unit, compared with net income of USD 344 million, or USD 0.50 per common limited-partner unit for first-quarter 2013. Prior-period results throughout this release have been recast to include the results of the assets acquired in the Canadian asset dropdown in February 2014.

The increase in net income during first-quarter 2014 is primarily due to USD 63 million, or 9 percent, increase in fee-based revenues, partially offset by USD 38 million, or 26 percent, lower natural gas liquid (NGL) margins and USD 18 million higher operating costs (primarily depreciation) associated with ongoing growth in our Northeast G&P segment.

Distributable Cash Flow & Distributions

For first-quarter 2014, Williams Partners generated USD 582 million in DCF attributable to partnership operations, compared with USD 497 million in DCF attributable to partnership operations in first-quarter 2013.

The USD 85 million increase in DCF for the quarter was driven by USD 63 million, or 9 percent, growth in fee-based revenues, as well as USD 63 million in higher Geismar results (including the benefit of expected business interruption insurance recoveries and planned plant expansion), partially offset by USD 38 million lower NGL margins and other changes.

Williams Partners recently announced that it increased its quarterly cash distribution to unitholders to USD 0.9045 per unit, a 6.7-percent increase over the year-ago amount.

CEO Perspective

Alan Armstrong, chief executive officer of Williams Partners' general partner, made the following comments:

"Williams Partners' performance was strong in the first quarter. Our operations performed well during the harsh winter, as we continued our trend of posting significant quarterly increases in fee-based revenues.

"From an execution perspective, we completed or made significant progress on several large-scale projects in the first quarter. We added a second fractionator to our Moundsville, West Virginia facility, substantially completed the Keathley Canyon deepwater pipeline and prepared Gulfstar One for commissioning. Additionally, the Geismar olefins plant is expected to begin the startup of its expanded production in June.

"We're excited about the accelerating pace of expansion projects at Transco, including Atlantic Sunrise, Dalton Lateral and our newly announced Gulf Trace project. The Atlantic Sunrise and Gulf Trace projects will serve as important infrastructure for future LNG export facilities at Cove Point and Sabine Pass.

"Our strong performance, steadfast execution and constantly growing business opportunities give us confidence in our continued expectation of 50 percent DCF growth in 2015 versus 2013 with minimal equity issuances in 2014 and none planned for 2015. Growing cash flows are shifting financing toward debt while we continue to maintain investment grade credit metrics."
                               
Northeast G&P

Northeast G&P includes the partnership's midstream gathering and processing business in the Marcellus and Utica shale regions, including Susquehanna Supply Hub and Ohio Valley Midstream, as well as its 51-percent equity investment in Laurel Mountain Midstream, and its 58.4-percent equity investment in Caiman Energy II. Caiman Energy II owns a 50 percent interest in Blue Racer Midstream. This segment is in the early stages of developing large-scale energy infrastructure solutions for the Marcellus and Utica shale regions.

Northeast G&P reported segment profit of USD 6 million for first-quarter 2014, compared with segment loss of USD 9 million for first-quarter 2013.

The improved results are primarily due to a USD 36 million increase in fee revenues driven by 41 percent higher volumes and improved Laurel Mountain Midstream equity earnings. Results also reflect higher operating costs, primarily driven by increased depreciation associated with this rapidly growing segment.

Atlantic-Gulf

Atlantic-Gulf includes the Transco interstate gas pipeline and a 41 percent interest in the Constitution interstate gas pipeline development project, which we consolidate. The segment also includes the partnership's significant natural gas gathering and processing and crude production handling and transportation in the Gulf Coast region. These operations include a 51 percent interest in the Gulfstar project, a 50 percent interest in Gulfstream and a 60 percent interest in Discovery.

Atlantic-Gulf reported segment profit of USD 165 million for first-quarter 2014, compared with USD 159 million for first-quarter 2013.

Segment profit for the quarter increased primarily due to higher transportation fee revenues associated with expansion projects and new transportation rates effective in March 2013 for Transco, partially offset by lower NGL margins.

West

West includes the partnership's Northwest Pipeline interstate gas pipeline system, as well as gathering, processing and treating operations in Wyoming, the Piceance Basin and the Four Corners area.

West reported segment profit of USD 165 million for first-quarter 2014, compared with USD 186 million for first-quarter 2013.

Lower segment profit for the quarter was due to USD 33 million lower NGL margins, primarily driven by the expiration of a natural gas processing contract in September 2013. This decrease was partially offset by USD 13 million lower operating expenses.

NGL & Petchem Services

NGL & Petchem Services includes an 83.3 percent interest in an olefins production facility in Geismar, La., along with a refinery grade propylene splitter and pipelines in the Gulf Coast region. Following the completion in February 2014 of the dropdown of Williams' Canadian operations, this segment now includes midstream operations in Alberta, Canada, including an oil sands offgas processing plant near Fort McMurray, 260 miles of NGL and olefins pipelines and an NGL/olefins fractionation facility and butylene/butane splitter facility at Redwater. This segment also includes the partnership's energy commodities marketing business, an NGL fractionator and storage facilities near Conway, Kan. and a 50 percent interest in Overland Pass Pipeline.

NGL & Petchem Services reported segment profit of USD 167 million for first-quarter 2014, compared with USD 158 million for first-quarter 2013. First-quarter 2013 results have been recast to include the results of the assets acquired in the Canadian asset dropdown in February 2014.

Segment profit for the quarter increased USD 9 million, which primarily includes the net effect of insurance recoveries related to last year's Geismar incident offsetting the impact of lost production.

Williams Partners – Operational Achievements

Northeast G&P

Williams Partners steadily increased the Northeast gathered volumes in first-quarter 2014 despite difficult winter weather conditions, reaching a new monthly average record of 2.3 billion cubic feet per day in the Utica-Marcellus. Average daily gathered volumes increased 38 percent in first quarter 2014 versus first quarter 2013. The Susquehanna Supply Hub grew volumes by 37 percent, Ohio Valley Midstream grew volumes by 63 percent and Laurel Mountain Midstream grew volumes by 29 percent during the quarter.

Williams Partners completed installation of additional fractionation capacity and is on track to install a de-ethanizer and stabilizer in the first half of 2014 at Ohio Valley Midstream to keep pace with producer demand.

Atlantic-Gulf

In the deepwater Gulf of Mexico, Williams Partners positioned the floating spar and completed the installation of the platform of Gulfstar One, the first-of-its-kind floating production spar, on schedule to start serving our deepwater customers in the third quarter of 2014. The turn-key product, which is part of the partnership's offshore field development program, combines production handling services with export pipeline, oil and gas gathering and processing services.

In the Gulf of Mexico, Williams Partners completed installation of the 215-mile Keathley Canyon Connector 20-inch deepwater pipeline. The USD 460 million project, which includes a new shelf platform and an onshore methanol extraction plant, is due to be completed and ready to receive production within the fourth quarter of 2014.

Timely expansions to the Transco pipeline system drove record-breaking volume deliveries in areas stretching from Mississippi to New York City. Transco set a three-day delivery record Jan. 6-8, 2014 when it delivered an average of 11.12 million dekatherms per day.

Williams Partners announced that the Atlantic Sunrise expansion project received binding commitments from nine shippers for 100 percent of the 1.7 million dekatherms of daily firm transportation capacity. The project includes 15-year shipper commitments from producers, local distribution companies and power generators. Williams Partners expects to bring Atlantic Sunrise into service in the second half of 2017, assuming all necessary regulatory approvals are received in a timely manner.

West

The Willow Creek processing plant in the Piceance Basin achieved a new quarterly average daily inlet volume throughput record of 479 million cubic feet per day in the first quarter.

NGL & Petchem Services

Williams Partners continues to rebuild, turnaround and expand the Geismar Olefins plant, which is expected to begin startup in the latter half of June 2014. The expansion will increase the ethylene production capacity by 600 million pounds per year to a total capacity of 1.95 billion pounds per year. Williams Partners' share of the total capacity is approximately 1.7 billion pounds per year.

Guidance

Williams Partners' consolidated profitability and cash flow guidance ranges are unchanged from guidance issued on February 19, 2014.

Williams Partners is reaffirming its guidance for cash distribution per limited partner unit growth of 6 percent in each of 2014 and 2015. Williams Partners continues to expect DCF for 2015 versus 2013 to increase within a range of USD 800 million to USD 1.2 billion. Several key drivers and assumptions are embedded in this estimate. The largest risks to achieving this growth in 2014 are:

a. Natural gas and natural gas liquids prices that drive assumed NGL margins and drilling activities, as well as olefins prices and margins.

b. Recovery of business interruption insurance proceeds offsetting the majority of the Geismar plant outage in 2014, which assumes a June startup.

c. The timely project completion and producer startup of the Gulfstar One project and Discovery's Keathley Canyon System.

d. The delivery of new facilities in the Marcellus producing region along with expected volume growth.

e. The in-service date for Transco's Rockaway Lateral.

Williams Partners has USD 500 million of combined business interruption and property damage insurance related to the Geismar incident (subject to deductibles and other limitations) that is expected to significantly mitigate the financial loss. Based on commodity pricing assumptions and property damage estimates, the partnership estimates approximately USD 430 million of cash recoveries from insurers related to business interruption losses and approximately USD 70 million related to property damage. In first quarter 2014, the insurers paid a second installment of USD 125 million and the total amount received to date is USD 175 million.

The assumed expanded plant restart date and repair cost estimate are subject to various uncertainties and risks that could cause the actual results to be materially different from these assumptions. The assumed property damage and business interruption insurance proceeds are also subject to various uncertainties and risks that could cause the actual results to be materially different from these assumptions.

Capital expenditures included in guidance for 2014 and 2015 have been increased by approximately USD 250 million. The increase includes capital expenditures related to new projects, including the Gulf Trace project in the Atlantic-Gulf, timing shifts between years and other various adjustments.