Williams Partners reports 2017 financial results

Fourth-Quarter and Full-Year 2017 Financial Results

Williams Partners reported unaudited 4Q17 net income loss attributable to controlling interests of US$342 million, a US$487 million decrease from 4Q16. The unfavourable change was driven primarily by the impact of US$713 million of non-cash charges at Transco and Northwest Pipeline primarily related to regulatory liabilities established as a result of the recently enacted Tax Cuts and Jobs Act of 2017 (‘Tax Reform Act’). Some of the rates charged to customers of our regulated natural gas pipelines are subject to periodic FERC rate case filings, which permit the recovery of an income tax allowance that includes a deferred income tax component in our recourse rates. As a result of the reduced income tax rate from the Tax Reform Act and the resulting regulatory liabilities, the company expects that any future rate case settlements or proceedings before the FERC will be impacted by this lower income tax allowance. However, the actual amount and timing of any return of this regulatory liability to customers will be subject to negotiations in future rate proceedings. The company expects that the amortisation of the regulatory liability will be over an extended period of time (as much as 20 years or more). Considering all of these recourse rate-making elements, Transco still expects to file for increased cost-of-service rates in its upcoming initial rate filing in 2018. 4Q17 results were positively impacted by the absence of an impairment on equity method investments in 4Q16.

For the year, Williams Partners reported unaudited net income attributable to controlling interests of US$871 million, a US$440 million improvement compared to full-year 2016 results. The favourable change was driven primarily by gains on the sale of assets, the absence of impairments of equity-method investments, and higher revenues for the Atlantic-Gulf segment. Partially offsetting the increases was the impact of the non-cash charges related to the Tax Reform Act as described in the previous paragraph, a net increase in impairments of certain assets, and the absence of results associated with the Geismar olefins facility, which was sold 6 July 2017.

Williams Partners reported 4Q17 Adjusted EBITDA of US$1.150 billion, a US$37 million increase over 4Q16. Williams Partners' current businesses increased Adjusted EBITDA by US$84 million in 4Q17 vs. 4Q16, driven by US$117 million increased fee-based revenues, due primarily to the growth in fee-based revenues in the Atlantic-Gulf and West segments partially offset by US$30 million in higher operating and maintenance (O&M) expenses. The US$84 million improvement from the current businesses was partially offset by the absence of US$47 million Adjusted EBITDA earned in 4Q16 from the NGL & Petchem Services segment primarily as a result of the sale of the Geismar olefins facility on 6 July 2017.

For the year, Williams Partners reported Adjusted EBITDA of US$4.472 billion, a US$45 million increase over FY16 results. Williams Partners' current businesses increased Adjusted EBITDA by US$202 million in 2017 compared to 2016. The improvement was due primarily to a US$147 million increase in fee-based revenues driven primarily from new assets brought online by the Atlantic-Gulf segment. The partnership's full-year 2017 results also benefited from US$51 million increased commodity margins and US$28 million higher EBITDA from joint ventures, partially offset by US$63 million higher O&M expenses. The US$202 million improvement from the current businesses was partially offset by the absence of US$157 million Adjusted EBITDA earned in 2016 from the NGL & Petchem Services segment primarily as a result of the sale of the Geismar olefins facility on 6 July 2017.

Distributable Cash Flow and Distributions

For 4Q17, Williams Partners generated US$702 million in distributable cash flow (DCF) attributable to partnership operations, compared with US$699 million in DCF attributable to partnership operations for fourth-quarter 2016. DCF was favourably impacted by the partnership's change in Adjusted EBITDA and a US$31 million decrease in interest expense. DCF for 4Q17 was reduced by US$58 million for the removal of deferred revenue amortisation associated with the 4Q16 contract restructurings and prepayments in the Barnett Shale and Mid-Continent region. For 4Q17, the cash distribution coverage ratio was 1.22x.

For the year, Williams Partners generated US$2.821 billion in DCF attributable to partnership operations, an unfavourable change of US$149 million compared with FY16 DCF results. For 2017, DCF was reduced by US$233 million for the deferred revenue amortisation associated with the previously described contract restructurings and prepayments. Also impacting DCF for FY17 was US$42 million increased maintenance capital expenditures. Partially offsetting these unfavourable changes were a US$114 million decrease in interest expense and a US$45 million improvement in Adjusted EBITDA. As described above, the partnership's Adjusted EBITDA from current businesses increased US$202 million, but was partially offset by US$157 million lower Adjusted EBITDA from assets sold. For FY17, the cash distribution coverage was 1.23x. Both DCF and coverage exceeded the midpoint of financial guidance provided in January 2017.

Williams Partners recently announced a regular quarterly cash distribution of US$0.60 per unit, payable 9 February 2018, to its common unitholders of record at the close of business on 2 February 2018.

CEO Perspective

Alan Armstrong, CEO of Williams Partners’ general partner, said: "I am pleased with the organisation's strong execution in 2017. Our organisation has been working hard to keep its promises to our customers, shareholders, and other stakeholders with timely and safe delivery of our projects, including Transco’s ‘Big 5’ projects (Gulf Trace, Hillabee Phase 1, Dalton, New York Bay and Virginia Southside II). This is reflected in our financial results where we exceeded the midpoint of our guidance range for Adjusted EBITDA, DCF and Cash Coverage ratios.

"We achieved these impressive results, which include improvement in year-over-year Adjusted EBITDA for both 4Q17 and FY17, in spite of the impact of multiple hurricanes and more than US$3 billion in asset sales since September 2016. Our stable foundation of demand-driven expansions continues to grow our business. In 2018, we look forward to a full year of revenue from our ‘Big 5’ as well as contributions from our Atlantic Sunrise project later this year and the associated growth in Northeast gathering volumes.

"We also carried out our financial repositioning in January of 2017 in a way that positioned the company to fund an attractive slate of large-scale expansion projects without accessing public equity markets, strengthened distribution coverage, enhanced our credit profile, improved our cost of capital and underpinned our growth outlook. As a result of a full year of executing on the key aspects of our plan, we reduced WPZ Net Debt for the year by 15% and also dramatically reduced our commodity exposure.

"As the Atlantic Sunrise project construction continues, the debottlenecking of the Northeast is starting to occur as other pipelines in the Northeast have also been placed in service recently or will be brought online in the near future. We are beginning to see some of the key fundamentals of our strategy take shape in the Northeast where we have a leading market share and a path to deliver long-term sustainable shareholder value. Volumes are increasing and our focus on executing the company’s natural gas-focused business strategy is producing predictable fee-based revenue growth backed by long-term commitments."

Read the article online at: https://www.worldpipelines.com/business-news/16022018/williams-partners-reports-2017-financial-results/