Williams (NYSE: WMB) today announced its financial results for the three
and six months ended June 30, 2018.
Second-Quarter 2018 Highlights
(1) Schedules reconciling adjusted income from continuing
operations, adjusted EBITDA, Cash Available for Dividends and
Dividend Coverage Ratio (non-GAAP measures) are available at www.williams.com
and as an attachment to this news release.
Second-Quarter 2018 Financial Results
Williams reported unaudited second-quarter 2018 net income attributable
to Williams of $135 million, an increase of $54 million from
second-quarter 2017. The favorable change was driven primarily by a $32
million increase in operating income due primarily to an increase in
service revenues and NGL margins partially offset by the absence of $25
million of operating income earned in second-quarter 2017 by our former
olefins operations. Other Investing Income for the quarter was favorably
impacted by a $62 million gain on the deconsolidation of Williams
Partners’ interests in the Jackalope Gas Gathering System. Partially
offsetting the improvements were $66 million of impairments of certain
assets in second-quarter 2018 and a $33 million decrease in equity
earnings primarily driven by lower earnings at Discovery Producer
Services.
Year to date, Williams reported unaudited net income attributable to
Williams of $287 million, an unfavorable change of $167 million over the
same period in 2017. The decrease was driven primarily by a $202 million
unfavorable change in Other Investing Income due largely to the absence
of a $269 million gain in first-quarter 2017 associated with a
transaction involving certain joint-venture interests in the Permian
Basin and Marcellus Shale, partially offset by a $62 million gain on
Williams Partners’ interests in the Jackalope Gas Gathering System. The
unfavorable change also reflects a $58 million decrease in equity
earnings primarily driven by lower earnings at Discovery Producer
Services and $66 million of impairments of certain assets in
second-quarter 2018. Partially offsetting the decrease was a $93 million
improvement in operating income, due primarily to an increase in service
revenues and NGL margins overcoming the absence of $57 million of
operating income earned in the first half of 2017 by our former olefins
operations.
Williams reported second-quarter 2018 Adjusted income per share of
$0.17, a 31 percent increase over second-quarter 2017 Adjusted income
per share of $0.13. The improvement was driven by the same factors
affecting net income attributable to Williams, adjusted primarily for
excluding the gain on the deconsolidation of the Jackalope Gas Gathering
System and impairments of certain assets. Year-to-date, Adjusted income
per share was $0.36, a 33 percent improvement over the first-half 2017
result of $0.27.
Williams reported second-quarter 2018 Adjusted EBITDA of $1.11 billion,
a $3 million decrease from second-quarter 2017. The modest change was
driven by a $37 million decrease in proportional EBITDA from joint
ventures due primarily to less production on the Discovery system, the
absence of $23 million Adjusted EBITDA earned in second-quarter 2017
from the NGL & Petchem Services business primarily as a result of the
sale of the Geismar olefins facility, and $26 million increased
operating & maintenance (O&M) expenses at Williams Partners’ businesses
primarily due to increased reliability and integrity costs at Transco.
Partially offsetting these decreases was a $46 million increase in
service revenues, driven primarily by expansion projects brought online
by Transco in 2017 and 2018. Second-quarter 2018 service revenues would
have increased by $67 million over second-quarter 2017 if
revenue-recognition standards adopted in 2018 had been applied to
second-quarter 2017 results. Additionally, NGL and Marketing margins
improved by $35 million.
Year-to-date, Williams reported Adjusted EBITDA of $2.245 billion, a
decrease of $13 million from the same six-month reporting period in
2017. The unfavorable change was driven by the absence of $72 million
Adjusted EBITDA earned in 2017 from the NGL & Petchem Services business
primarily as a result of the sale of the Geismar olefins facility, a $60
million decrease in proportional EBITDA from joint ventures due
primarily to less production on the Discovery system, $38 million
increased O&M expenses at Williams Partners’ businesses primarily due to
increased reliability and integrity costs at Transco, and a $12 million
regulatory charge per approved pipeline transportation rates associated
with the Tax Reform Act. Partially offsetting these decreases was a $125
million increase in service revenues, driven primarily by expansion
projects brought online by Transco in 2017 and 2018. Service revenue
would have increased by $165 million over first half of 2017 if
revenue-recognition standards adopted in 2018 had been applied to
first-half 2017 results. Additionally, NGL and Marketing margins
improved by $49 million.
CEO Perspective
Alan Armstrong, president and chief executive officer, made the
following comments:
“Our consistent strategy of connecting growing natural gas demand to
growing low-cost gas production delivered results which slightly
exceeded our business plan for second quarter, and we look forward to an
even stronger second half of the year as the Atlantic Sunrise project
nears completion and producer activity on our systems in the Northeast
and Wyoming is ramping up. We are also excited about the transactions
announced earlier this week. Selling assets in a maturing basin at
attractive multiples, and redeploying that capital to higher growth
basins enhances our position to capitalize on future growth
opportunities and follows our strategy to connect the best supplies to
the best markets.
“It is clear that our focus on natural gas volume growth combined with
our advantaged infrastructure and the continued confidence in low-price
natural gas continues to drive demand for services on our systems.
Placing the Transco expansion projects into service in 2017 and 2018 is
now delivering exceptional fee-based revenue growth – a $50 million
increase for second-quarter 2018 over second-quarter 2017 for Transco
transportation revenues thanks to those expansion projects coming
online. Our growth was not limited to Transco as Williams Partners’
current business segments posted year-over-year increases in Adjusted
EBITDA for the quarter and year-to-date.
“I’m pleased our teams were able to complete so much maintenance work
this quarter, especially in our high-growth areas where we accelerated
inspections and other key maintenance needs into this quarter to take
advantage of the timing of outages associated with expansion
construction work and project work – particularly important in
association with a project like Atlantic Sunrise, which is preparing to
bring additional loads on to that system. I’m proud of our team’s
exceptional focus on safety and environmental compliance throughout the
construction and commissioning process on this large and complex project.
“We are also making great progress on several other projects. In
Wyoming, we just announced an expansion on our Jackalope Gas Gathering
System and associated Bucking Horse gas processing facility in the
Powder River Basin, Niobrara Shale play that will increase processing
capacity to 345 million cubic feet per day (‘MMcf/d’) by the end of 2019
to meet growing customer demand in this underserved growth basin. We
also completed major modifications to our Mobile Bay processing plant to
enable the handling of large volumes of gas liquids from Shell’s
Norphlet fields in the Eastern Gulf of Mexico. Additionally, a major
expansion of our Oak Grove gas-processing facility in West Virginia is
also underway. Construction is going well on Transco’s Gulf Connector
project, and we realized great progress on the permitting of several
other Transco projects in the Northeast and Northwest Pipeline in
Seattle.”
Business Segment Results
Williams’ business segments for financial reporting are Williams
Partners and Other.
EBITDA
EBITDA
EBITDA
EBITDA
EBITDA
EBITDA
EBITDA
Williams uses Modified EBITDA for its segment reporting.
Definitions of Modified EBITDA and Adjusted EBITDA and schedules
reconciling to net income are included in this news release.
Williams Partners Segment
Comprised of our consolidated master limited partnership, WPZ, Williams
Partners segment includes gas pipeline and midstream businesses. The gas
pipeline business includes interstate natural gas pipelines and pipeline
joint project investments. The midstream business provides natural gas
gathering, treating, processing and compression services; NGL
production, fractionation, storage, marketing and transportation;
deepwater production handling and crude oil transportation services; and
is comprised of several wholly owned and partially owned subsidiaries
and joint project investments.
Williams Partners reported second-quarter 2018 Modified EBITDA of $1.115
billion, an increase of $39 million from second-quarter 2017. Adjusted
EBITDA decreased by $7 million to $1.097 billion. The change in Adjusted
EBITDA was driven by a $37 million decrease in proportional EBITDA from
joint ventures due primarily to less production on the Discovery system,
the absence of $23 million Adjusted EBITDA earned in second-quarter 2017
from the NGL & Petchem Services business primarily as a result of the
sale of the Geismar olefins facility, and $26 million increased O&M
expenses at Williams Partners’ businesses primarily due to increased
reliability and integrity costs at Transco. Partially offsetting these
decreases was a $46 million increase in service revenues, driven
primarily by expansion projects brought online by Transco in 2017 and
2018. Second-quarter 2018 service revenues would have increased by $67
million over second-quarter 2017 if revenue-recognition standards
adopted in 2018 had been applied to second-quarter 2017 results.
Additionally, NGL and Marketing margins improved by $35 million.
Year-to-date, the Williams Partners segment reported Modified EBITDA of
$2.222 billion, an improvement of $14 million over the same six-month
reporting period in 2017. Adjusted EBITDA decreased by $2 million to
$2.219 billion. The slight change was driven by the absence of $72
million Adjusted EBITDA earned in 2017 from the NGL & Petchem Services
business primarily as a result of the sale of the Geismar olefins
facility, a $60 million decrease in proportional EBITDA from joint
ventures due primarily to less production on the Discovery system, $38
million increased O&M expenses at Williams Partners’ businesses
primarily due to increased reliability and integrity costs at Transco,
and a $12 million regulatory charge per approved pipeline transportation
rates associated with the Tax Reform Act. Partially offsetting these
decreases was a $125 million increase in service revenues, driven
primarily by expansion projects brought online by Transco in 2017 and
2018. Service revenue would have increased by $165 million over first
half of 2017 if revenue-recognition standards adopted in 2018 had been
applied to first-half 2017 results. Additionally, NGL and Marketing
margins improved by $49 million.
Williams Partners’ complete financial results for second-quarter 2018
are provided in the earnings news release issued today by Williams
Partners.
Other Segment
Williams’ Other segment reported second-quarter 2018 Modified EBITDA of
($57) million, a decrease of $40 million from second-quarter 2017. The
unfavorable change primarily reflects the impact of $66 million of
impairments of certain assets in second-quarter 2018. Adjusted EBITDA
increased by $4 million to $13 million.
Year-to-date, Williams’ Other segment reported Modified EBITDA of ($44)
million, a decrease of $45 million over the same six-month reporting
period in 2017. The unfavorable change primarily reflects the impact of
$66 million of impairments of certain assets in second-quarter 2018.
Adjusted EBITDA decreased by $11 million to $26 million.
Guidance
After consideration of the effects of the recently-announced purchase of
Discovery DJ Services and the divestiture of the Four Corners Area as
well as various other forecast updates, current guidance from Analyst
Day on May 17, 2018, remains unchanged except for Growth Capital
Expenditures, which have been revised for 2018 and 2019 for the
inclusion of the purchase of Discovery DJ Services and other projects
including 2019 planned expansions in the West (Niobrara) and Northeast
G&P segments. As a result, total growth capital expenditures for WMB
have been updated in the following table:
Growth Capex
2018 Guidance
2019 Guidance
Williams and Williams Partners Announce Meeting and Record Dates for
Williams Special Meeting
On July 12, 2018, Williams and Williams Partners announced that, in
connection with the previously announced merger transaction between
Williams and Williams Partners (the “Merger”), the registration
statement on Form S-4 (the “Registration Statement”) has been declared
“effective” by the U.S. Securities and Exchange Commission (“SEC”). The
closing of the Merger remains subject to customary closing conditions,
including approval by the Williams stockholders. On July 12, 2018,
Williams also announced that it has scheduled a special meeting of
Williams stockholders to vote on the proposed Merger and related
amendment of Williams Amended and Restated Certificate of Incorporation
to increase the number of shares of Williams common stock. The special
meeting of stockholders will be held on Aug. 9, 2018, at 10:00 a.m.
(Central Daylight Time) at the Williams Resource Center Theater, One
Williams Center, Tulsa, Oklahoma. Williams’ stockholders of record as of
the close of business on July 9, 2018, are entitled to vote at the
meeting.
On May 16, 2018, the board of directors of Williams (the “Williams
Board”) determined that the Merger Agreement and the transactions
contemplated thereby, including the Merger, and in connection with the
Merger, the Charter Amendment and the Stock Issuance, are in the best
interests of Williams and its stockholders, approved and declared
advisable the Merger Agreement, the Charter Amendment, and the Stock
Issuance, and resolved to submit the Charter Amendment and Stock
Issuance to a vote of Williams’ stockholders and recommend approval of
the adoption of the Charter Amendment and approval of the Stock Issuance
(the “Williams Board Recommendation”).
Williams’ Second-Quarter 2018 Materials to be Posted Shortly; Q&A
Webcast Scheduled for Tomorrow
Williams’ second-quarter 2018 financial results package will be posted
shortly at www.williams.com.
The materials will include the analyst package.
Williams and Williams Partners will host a joint Q&A live webcast on
Thursday, Aug. 2, 2018, at 9:30 a.m. Eastern Time (8:30 a.m. Central
Time). A limited number of phone lines will be available at (877)
260-1479. International callers should dial (334) 323-0522. The
conference ID is 1766230. The link to the webcast, as well as replays of
the webcast, will be available for at least 90 days following the event
at www.williams.com.
Form 10-Q
The company plans to file its second-quarter 2018 Form 10-Q with the
Securities and Exchange Commission (SEC) this week. Once filed, the
document will be available on both the SEC and Williams websites.
Non-GAAP Measures
This news release and accompanying materials may include certain
financial measures – Adjusted EBITDA, adjusted income (“earnings”),
adjusted earnings per share, cash available for dividends and other
uses, dividend coverage ratio, distributable cash flow and cash
distribution coverage ratio – that are non-GAAP financial measures as
defined under the rules of the SEC.
Our segment performance measure, Modified EBITDA, is defined as net
income (loss) before income (loss) from discontinued operations, income
tax expense, net interest expense, equity earnings from equity-method
investments, other net investing income, impairments of equity
investments and goodwill, depreciation and amortization expense, and
accretion expense associated with asset retirement obligations for
nonregulated operations. We also add our proportional ownership share
(based on ownership interest) of Modified EBITDA of equity-method
investments.
Adjusted EBITDA further excludes items of income or loss that we
characterize as unrepresentative of our ongoing operations. Management
believes these measures provide investors meaningful insight into
results from ongoing operations.
Cash available for dividends and other uses is defined as cash received
from our ownership in WPZ and Adjusted EBITDA from our Other segment,
less interest, taxes and maintenance capital expenditures associated
with our Other segment. We also calculate the ratio of cash available
for dividends to the total cash dividends paid (dividend coverage
ratio). This measure reflects our cash available for dividends relative
to actual cash dividends paid.
This news release is accompanied by a reconciliation of these non-GAAP
financial measures to their nearest GAAP financial measures. Management
uses these financial measures because they are accepted financial
indicators used by investors to compare company performance. In
addition, management believes that these measures provide investors an
enhanced perspective of the operating performance of the Company’s
assets and the cash that the business is generating.
Neither Adjusted EBITDA, adjusted income, cash available for dividends
and other uses or distributable cash flow are intended to represent cash
flows for the period, nor are they presented as an alternative to net
income or cash flow from operations. They should not be considered in
isolation or as substitutes for a measure of performance prepared in
accordance with United States generally accepted accounting principles.
About Williams
Williams (NYSE: WMB) is a premier provider of large-scale infrastructure
connecting U.S. natural gas and natural gas products to growing demand
for cleaner fuel and feedstocks. Headquartered in Tulsa, Okla., Williams
owns approximately 74 percent of Williams Partners L.P. (NYSE: WPZ).
Williams Partners is an industry-leading, large-cap master limited
partnership with operations across the natural gas value chain including
gathering, processing and interstate transportation of natural gas and
natural gas liquids. With major positions in top U.S. supply basins,
Williams Partners owns and operates more than 33,000 miles of pipelines
system wide – including the nation’s largest volume and fastest growing
pipeline – providing natural gas for clean-power generation, heating and
industrial use. Williams Partners’ operations touch approximately 30
percent of U.S. natural gas. www.williams.com
Forward-Looking Statements
The reports, filings, and other public announcements of The Williams
Companies, Inc. (Williams) may contain or incorporate by reference
statements that do not directly or exclusively relate to historical
facts. Such statements are “forward-looking statements” within the
meaning of Section 27A of the Securities Act of 1933, as amended
(Securities Act), and Section 21E of the Securities Exchange Act of
1934, as amended (Exchange Act). These forward-looking statements relate
to anticipated financial performance, management’s plans and objectives
for future operations, business prospects, outcome of regulatory
proceedings, market conditions, and other matters. We make these
forward-looking statements in reliance on the safe harbor protections
provided under the Private Securities Litigation Reform Act of 1995.
All statements, other than statements of historical facts, included
herein that address activities, events or developments that we expect,
believe or anticipate will exist or may occur in the future, are
forward-looking statements. Forward-looking statements can be identified
by various forms of words such as “anticipates,” “believes,” “seeks,”
“could,” “may,” “should,” “continues,” “estimates,” “expects,”
“forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,”
“planned,” “potential,” “projects,” “scheduled,” “will,” “assumes,”
“guidance,” “outlook,” “in-service date” or other similar expressions.
These forward-looking statements are based on management’s beliefs and
assumptions and on information currently available to management and
include, among others, statements regarding:
Forward-looking statements are based on numerous assumptions,
uncertainties and risks that could cause future events or results to be
materially different from those stated or implied herein. Many of the
factors that will determine these results are beyond our ability to
control or predict. Specific factors that could cause actual results to
differ from results contemplated by the forward-looking statements
include, among others, the following:
Given the uncertainties and risk factors that could cause our actual
results to differ materially from those contained in any forward-looking
statement, we caution investors not to unduly rely on our
forward-looking statements. We disclaim any obligations to and do not
intend to update the above list or announce publicly the result of any
revisions to any of the forward-looking statements to reflect future
events or developments.
In addition to causing our actual results to differ, the factors
listed above may cause our intentions to change from those statements of
intention set forth herein. Such changes in our intentions may also
cause our results to differ. We may change our intentions, at any time
and without notice, based upon changes in such factors, our assumptions,
or otherwise.
Because forward-looking statements involve risks and uncertainties,
we caution that there are important factors, in addition to those listed
above, that may cause actual results to differ materially from those
contained in the forward-looking statements. For a detailed discussion
of those factors, see Part I, Item 1A. Risk Factors in our Annual Report
on Form 10-K filed with the SEC on February 22, 2018 and in Part II,
Item 1A. Risk Factors in our Quarterly Reports on Form 10-Q.
Williams Partners
Total Williams Partners adjustments
Other
Adjustments below Modified EBITDA
Adjusted diluted earnings per common share (2)
(1) The first quarter of 2017 includes an unfavorable adjustment
related to the release of a valuation allowance. The fourth
quarter of 2017 includes an unfavorable adjustment to reverse the
tax benefit associated with remeasuring our deferred tax balances
at a lower corporate rate resulting from Tax Reform.
(2) The sum of earnings per share for the quarters may not equal
the total earnings per share for the year due to changes in the
weighted-average number of common shares outstanding.
Total Adjustments included in Modified EBITDA
(1) Adjustments by segment are detailed in the “Reconciliation of
Income (Loss) Attributable to The Williams Companies, Inc. to
Adjusted Income,” which is also included in these materials.
(1) Effective with the first quarter of 2018, Williams increased
its regular dividend from $0.30 per share to $0.34 per share.
(2) WMB cash available for dividends and other uses / WMB
dividends paid.
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