Williams Partners L.P. (NYSE:WPZ - News) has registered fourth-quarter 2011 earnings of $1.05 per limited-partner unit, beating the Zacks Consensus Estimate of $1.00. The quarter’s results also improved 38% from the year-ago profit of 76 cents per unit.
Full-year 2011 earnings also jumped nearly 39% year over year to $3.69 per unit from $2.66 per unit in 2010 and were ahead of the Zacks Consensus Estimate of $3.63.
Higher natural gas liquid (:NGL) margins in the company’s midstream business as well as higher fee-based revenue led to the significant year-over-year improvement.
Total revenue increased nearly 21% year over year to $1,806 million, but failed to meet the Zacks Consensus Estimate of $2,010 million. Full-year 2011 revenue came in at $6,729 million, up nearly 18% on an annualized basis but lagged the Zacks Consensus Estimate of $6,870 million.
Notably, Williams Partners' distributable cash flow (:DCF) attributable to partnership operations witnessed a substantial improvement to $444 million from $335 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 the DCF growth.
Importantly, the partnership’s 2011 DCF increased to $1,650 million from $1,164 million in 2010.
The partnership increased its quarterly cash distribution 8.5% year over year to 76.25 cents per unit.
Segment Performance
Consolidated adjusted segment profit was $519 million, up 21.8% from the year-ago level of $426 million.
Gas Pipeline: The segment reported profits of $176 million, showing an improvement of nearly 11% year over year. Higher transportation revenues related to expansion projects that began operations in 2010 and 2011 drove the improvement.
Midstream Gas & Liquids: The segment’s profits increased nearly 32% year over year to $341 million, owing to higher per-unit NGL prices and margins as well as fee-based revenues.
Guidance
Williams Partners has increased its 2012 and 2013 adjusted segment profit as well as capital expenditure guidance to reflect the partnership’s acquisition of the Laser Northeast Gathering System. The Laser system is expected to grow significantly from its current volume of approximately 100 million cubic feet per day (MMcf/d) to around 1.3 billion cubic feet per day (Bcf/d) by 2015.
The partnership expects its total adjusted segment profit in the range of $1,730–$2,220 million for 2012 and $1,850–$2,350 million for 2013. The capital expenditure guidance for 2012–2013 was also updated to reflect the inclusion of the Constitution pipeline. Total capital expenditure is expected around $2,750−$3,050 million for 2012 and $1,575–$1,975 million for 2013.
In Conclusion
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 new Constitution Pipeline joint venture and the completion of the Laser Northeast Gathering System acquisition are major milestones for the development of Susquehanna Supply Hub, a major natural gas supply hub in northeastern Pennsylvania.
The partnership currently holds a Zacks #3 Rank, which is equivalent to a short-term Hold rating. For the long term, we maintain a Neutral recommendation on the stock.
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. (NYSE:WMB - News).
The partnership’s peer, Kinder Morgan Energy Partners LP (NYSE:KMP - News) reported fourth quarter earnings of 55 cents per limited partner unit (excluding certain items), which fell short of the Zacks Consensus Estimate of 61 cents. However, the quarterly results were significantly above the year-ago profit of 46 cents.
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