Williams Partners L.P. (WPZ) has registered third-quarter 2011 earnings of 91 cents per limited-partner unit, which came in line with the Zacks Consensus Estimate. The quarter’s results also improved 44% from the year-ago profit of 63 cents per unit.
Higher natural gas liquid (NGL) margins in its midstream business and higher fee-based revenue led to the significant year-over-year improvement.
Total revenue increased 26% year over year to $1,673 million, but failed to meet the Zacks Consensus Estimate of $1,755 million.
Notably, Williams Partners' distributable cash flow (DCF) attributable to partnership operations witnessed a substantial improvement to $368 million from $240 million recorded in the year-ago quarter. Superior results in the midstream business as well as the growth of the partnership through asset acquisitions in the second half of 2010 led to DCF growth.
The partnership increased its quarterly cash distribution 9% year over year to 74.75 cents per unit.
Segment Performance
Consolidated adjusted segment profit was $477 million, up 35.5% from the year-ago level of $352 million.
Gas Pipeline: The segment reported profits of $170 million, showing a modest improvement of nearly 6% year over year. Higher transportation revenues associated with expansion projects which started operations in 2010 and 2011 as well as higher equity earnings related to the Gulf Stream acquisition drove the improvement.
Midstream Gas & Liquids: The segment’s profits increased 43% year over year to $301 million, owing to higher per-unit NGL prices and margins and fee-based revenues.
Guidance
Williams Partners cut its 2011 and 2012 adjusted segment profit guidance due to lower expected crude oil and natural gas prices. The partnership now expects its total adjusted segment profit in the range of $1,820–$1,960 million for 2011 and $1,730–$2,170 million for 2012. The company also gave a preliminary estimate of adjusted segment profit in the range of $1,800–$2,300 million for 2013.
Capital expenditure guidance for 2011 was lowered while that of 2012 and 2013 was raised to reflect timing changes in capital spending. The capital expenditure guidance for 2012–13 was increased to reflect the inclusion of the proposed Keathley Canyon project in the deepwater Gulf of Mexico as well. Total capital expenditure is expected around $1,415−$1,740 million for 2011, $1,905−$2,205 million for 2012 and $1,450-$1,850 million for 2013.
Outlook
We believe William Partners is well positioned for future growth owing to its geographically diverse assets, a sizable project backlog as well as a sound distribution history.
Moreover, its gas pipeline and midstream businesses continue to progress on a number of ongoing organic expansion projects, along with major growth projects in the Gulf of Mexico, Marcellus Shale and Piceance Basin. The partnership currently holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating.
Williams Partners is an energy master limited partnership engaged in gathering, transportation, treating, and processing of natural gas as well as the fractionation and storage of NGLs. The general partner of the partnership is owned and managed by Williams Companies Inc. (WMB).
The partnership’s peer, Kinder Morgan Energy Partners LP (KMP) reported third quarter earnings of 44 cents per limited partner unit (excluding certain items) fell short of the Zacks Consensus Estimate of 46 cents. However, the quarterly results were significantly above the year-ago profit of 23 cents.
KINDER MORG ENG (KMP): Free Stock Analysis Report
WILLIAMS COS (WMB): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis Report
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