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William Partners Lags on Lower NGL

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Williams Partners L.P. (WPZ - Free Report) registered fourth-quarter 2012 earnings of 42 cents per limited-partner unit, missing the Zacks Consensus Estimate of 52 cents. Earnings also deteriorated 60% from the year-ago profit level of $1.05.

Full-year 2012 earnings decreased 48.8% year over year to $1.89 per unit and lagged the Zacks Consensus Estimate of $2.03.

Lower natural gas liquid (NGL) margins in the partnership’s business during the fourth quarter of 2012 led to the year-over-year deterioration. Higher costs related to developing new businesses purchased earlier in the year were also responsible for the fall in earnings.

Quarterly total revenue decreased 9.6% year over year to $1,849.0 million and failed to meet the Zacks Consensus Estimate of $1,872.0 million. Full-year 2012 revenue came in at $7,351 million, down 4.7% on an annualized basis. The results surpassed the Zacks Consensus Estimate of $6,607 million.

(The reported figures have been recast to include the results of the olefins business, which was acquired from Williams Companies Inc. (WMB - Free Report) in the fourth quarter of 2012.)

Notably, Williams Partners' distributable cash flow (DCF) attributable to partnership operations in 2012 was $1.49 billion against $1.65 billion recorded in the year-ago period. Recently, the partnership increased its quarterly cash distribution by 8.5% year over year to 82.75 cents per unit.

Segment Performance

Consolidated adjusted segment profit was $449.0 million, down approximately 17.2% from the year-ago level of $542.0 million.

Gas Pipeline: The segment reported profits of $195.0 million, up 10.8% year over year. The reversal of project feasibility costs of 3 expansion projects from expense to capital, as well as higher revenue from expansion projects led to the growth.

Midstream Gas & Liquids: The segment’s profits decreased 32.4% year over year to $246.0 million. The underperformance was mainly due to the rapid decline in NGL prices that lowered the NGL as well as marketing margins. Again, higher expenses associated with its recent acquisitions also contributed to the downside.

However, the segment’s fee-based revenues grew 5% year over year on higher volumes in the partnership’s Susquehanna Supply Hub area and Ohio Valley Midstream area of the Marcellus Shale.


Recently, Williams Partners lowered its outlook for adjusted segment profit and distributable cash flow in 2013 and 2014 to reflect the significantly lower commodity margin assumptions.

Williams Partners has adjusted its 2013 DCF expectations to $1.8 billion for 2013 and $2.5 billion for 2014.

Total adjusted segment profit will likely be in the range of $1,625–$2,050 million for 2013 and $2,300–$2,850 million for 2014.

The capital expenditure is estimated at $3,550 million to $3,950 million for 2013 and $1,950 million to $2,350 million for 2014.
In Conclusion

Williams Partners is an energy master limited partnership engaged in gathering, transportation, treating and processing of natural gas as well as fractionation and storage of NGLs. The general partner of the partnership is owned and managed by Williams Companies Inc.

Williams Partners retains a Zacks Rank #3, which is equivalent to a short-term Hold rating. However, there are other stocks in the oil and gas sector – Access Midstream Partners, L.P. and Lehigh Gas Partners LP – which hold a Zacks Rank #1 (Strong Buy) and are expected to perform better.

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