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Williams (WMB) Q3 Earnings and Sales Beat on Transco Project

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Williams Companies, Inc. (WMB - Free Report) reported third-quarter 2018 adjusted earnings from continuing operations of 24 cents per share, outpacing the Zacks Consensus Estimate of 18 cents. The better-than-expected results can be attributed to an increase in service revenues on the back of higher volumes in the Northeast and Transco expansion projects. Further, the bottom line improved from the prior-year figure of 15 cents per share.

For the quarter ended Sep 30, 2018, Williams reported revenues of $2,303 million, beating the Zacks Consensus Estimate of $2,164 million. Further, revenues also increased from the year-ago figure of $1,891 million.

Williams Companies, Inc. (The) Price, Consensus and EPS Surprise


Williams Companies, Inc. (The) Price, Consensus and EPS Surprise | Williams Companies, Inc. (The) Quote

Key Takeaways

Distributable cash flows came in at $768 million, up 27.3% from the year-ago quarter. Adjusted EBITDA came in at $1,196 million in the quarter under review compared with $1,113 million in the third quarter of 2017.Cash flow from operations totaled $746 million compared with $705 million in the prior-year period. Higher revenues from Transco projects drove the cash flow in the quarter. Other expansionary projects, namely Atlantic Sunrise project and Gulf Connector, will keep up the cash flow momentum.

Segmental Analysis

Williams completed the merger with its midstream arm Williams Partners on Aug 10, following which the company reports results under four segments.

Atlantic-Gulf: This segment, comprising Williams’ Transco Pipeline and properties in the Gulf Coast region, generated adjusted EBITDA of $480 million compared with $431 million recorded in the year-ago quarter. Transco’s “Big 5” expansion projects (Gulf Trace, Hillabee Phase 1, Dalton, New York Bay and Virginia Southside II), which became functional in 2017, along with a few others that came online this year drove the results of the company.

West: The segment, including Northwest pipeline and operations in various regions such as Colorado, Mid-Continent, Haynesville Shale, among others, delivered adjusted EBITDA of $424 million, nominally lower than $426 million recorded in the year-ago quarter.

Northeast G&P: This segment engages in natural gas gathering and processing, along with NGL fractionation business in Marcellus and Utica shale regions. The segment generated adjusted EBITDA of $281 million, up 14.2% from the corresponding quarter of last year. Higher volumes from Susquehanna and Ohio River systems led to improved results.

Others: The segment posted adjusted EBITDA of 11 million compared with $10 million reported in the third quarter of 2017.

Expenses summary

Total costs and expenses increased 11.4% to $1,802 million in the reported quarter compared with $1,617 million in the prior-year quarter. The increased costs were primarily driven by higher product costs, general/administrative expenses and processing commodity charges.

Capital Expenditure & Balance Sheet

During the reported quarter, Williams’ capital expenditure was $769 million. As of Sep 30, 2018, the company had cash and cash equivalents of $42 million. Its long-term debt was $21,409 million, representing a debt-to-capitalization ratio of 57.8%.


The company reiterated its guidance for 2018 and 2019. Williams expects its adjusted EBITDA for 2018 within $4,450-$4,650 million. It expects distributable cash flow in the range of $2,600-$2,900 million. The coverage ratio is expected between 1.52 and 1.70 in 2018.

For 2019, Williams anticipates its adjusted EBITDA in the band of $4,850-$5,150 million, with distributable cash flow within $2,900-$3.300 million. The coverage ratio is expected to be around 1.68.

Zacks Rank & Key Picks

Currently, Williams has a Zacks Rank #3 (Hold).

Some better-ranked players in the energy space are Parsley Energy (PE - Free Report) , Enbridge inc. (ENB - Free Report) and Bonanza Creek Energy Inc. (BCEI - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Parsley Energy pulled off average positive earnings surprise of 30.68% in the trailing four quarters.

Enbridge posted average positive earnings surprise of 35.27% in the preceding four quarters.

Bonanza Creek delivered average positive earnings surprise of 74.88% in the last four quarters.

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