Williams Companies, Inc. (The) (WMB)

WMB 
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Williams Companies (WMB)

Q1 2013 Earnings Call

May 08, 2013 9:30 am ET

Executives

John Porter

Alan S. Armstrong - Chief Executive Officer, President, Director, Chairman of Williams Partners GP LLC and Chief Executive Officer of Williams Partners GP LLC

Francis E. Billings - Senior Vice President of Northeastern G&P Operations

Frank Billings

James E. Scheel - Senior Vice President of Corporate Strategic Development

Rory Lee Miller - Senior Vice President of Gulf & Atlantic Operations

Donald R. Chappel - Chief Financial Officer and Senior Vice President

Allison G. Bridges - Vice President

Randy M. Newcomer - Executive Officer

Analysts

Bradley Olsen - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division

Faisel Khan - Citigroup Inc, Research Division

Stephen J. Maresca - Morgan Stanley, Research Division

Theodore Durbin - Goldman Sachs Group Inc., Research Division

Sharon Lui - Wells Fargo Securities, LLC, Research Division

Craig Shere - Tuohy Brothers Investment Research, Inc.

Brett Reilly - Crédit Suisse AG, Research Division

Rebecca Followill - U.S. Capital Advisors LLC, Research Division

Carl L. Kirst - BMO Capital Markets U.S.

Selman Akyol - Stifel, Nicolaus & Co., Inc., Research Division

Heejung Ryoo - Barclays Capital, Research Division

Presentation

Operator

Good day, everyone, and welcome to the Williams and Williams Partners First Quarter Earnings Release Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Mr. John Porter, Head of Investor Relations. Please go ahead, sir.

John Porter

Thank you, Lisa. Good morning, and welcome. As always, we thank you for your interest in Williams and Williams Partners.

Yesterday afternoon, we released our financial results and posted several important items on our website, williams.com and williamslp.com. These items include yesterday's press releases with related schedules and the accompanying analyst packages; a presentation discussing these results; guidance updates and growth opportunities with related audio commentary from our President and CEO, Alan Armstrong; and an update to our data books, which contain detailed information regarding various aspects of our business. This morning, Alan will make a few comments and then we will open the discussion up for Q&A.

We also have the 4 leaders of our operating areas present with us: Frank Billings leads our Northeastern G&P operating area, Allison Bridges leads our Western operating area, Rory Miller leads our Atlantic-Gulf area and Randy Newcomer is here from our NGL & Petchem Services operating area. Additionally, our CFO, Don Chappel, is available to respond to any questions.

In yesterday's presentation and also in our data books, you will find an important disclaimer related to forward-looking statements. This disclaimer is important and integral to all of our remarks and you should review it. Also included in our presentation materials are various non-GAAP measures that we've reconciled to generally accepted accounting principles. Those reconciliation schedules appear at the back of the presentation materials.

So with that, I'll turn it over to Alan Armstrong.

Alan S. Armstrong

Great. Good morning. Thank you, John. Well, first of all, our cash flow metrics for the first quarter remained strong and in line with our expectations despite a continued decline in NGLs. Earnings at WMB, however, for the quarter were impacted by higher DD&A, including an additional $17 million of non-cash amortization related to the ACMP acquisition, but we were pleased with the 1.05 covered WPZ despite another 21% step down in NGL margins from the fourth quarter of '12 and now a 50% decline from the first quarter of 2012.

Looking forward, we see some short-term painful but long-term healthy cross-currents as both the NGL markets and the natural gas markets continue to expand on the backs of low-cost supplies relative to global alternatives. The natural gas market right now is ahead as the demand decisions have already been made in response to an extended low gas price period. But the NGL demand side will also begin to respond but perhaps not as quickly and certainly to more limited options for market expansions. As a result, we see a couple of years where NGLs will be oversupplied and producer's response to natural gas price signals will be more -- or will be met by most people -- be slower than most people's expectations just because of the time it takes to set the flywheel rolling in these large-scale operations. Areas like the Marcellus and the Utica will be advantaged by the benefits of large-scale development because those major programs are already in place. For Williams, this results in great infrastructure investment alternatives to expand in the market, access for these large-scale NGL and natural gas values that still will be ready to deliver quickly against the positive market signals. So in the short term, the higher natural gas prices will be negatively impact -- will negatively impact our margins. But longer term, this will drive even more investment alternatives.

So while our 62% growth in DCF from 2013 to 2015 is certainly impressive, we could see this improve even more if the forecasted pricing environment holds up long enough to spur more supplies and more demand because after all, our strategy is built around the volume throughput that will come with expanded markets with these great low-cost resources being developed here in North America.

We're excited this quarter to announce the continuation of our 20% dividend growth at WMB through the 2015 guidance, and we look forward to sharing more about our large platform of growth capital projects that supports this continued growth in 2015 and beyond with our Analyst Day coming up here on May 21.

And with that, we'll turn it over for questions.

Read the rest of this transcript for free on seekingalpha.com