Williams Companies, Inc. (The) (WMB)

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Williams Companies (WMB)

Q2 2013 Earnings Call

August 01, 2013 9:30 am ET


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

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

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

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

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

Fred Pace

John R. Dearborn - Senior Vice President of NGL & Petchem Services

Allison G. Bridges - Principal Executive Officer and Senior Vice President of West


Stephen J. Maresca - Morgan Stanley, Research Division

Christine Cho - Barclays Capital, Research Division

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

Craig Shere - Tuohy Brothers Investment Research, Inc.

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

Sharon Lui - Wells Fargo Securities, LLC, Research Division

Theodore Durbin - Goldman Sachs Group Inc., Research Division

Jeremy Tonet - JP Morgan Chase & Co, Research Division



Good day, everyone, and welcome to the Williams and Williams Partners Second Quarter Earnings Release Conference Call. Today's conference is being recorded. And 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.

John Porter

Thank you, Mary. 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 websites, williams.com and williamslp.com. These items include yesterday's press releases with related schedules and the accompanying analyst packages, the slide deck that our President and CEO, Alan Armstrong, will speak to momentarily and an update to our data books, which contain detailed information regarding various aspects of our business. In addition to Alan 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 Atlantic Gulf; and John Dearborn 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 reconcile 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. Thanks, John. We are excited to talk to you about our second quarter, as well as the continued progress on executing our strategy. We remain very confident that our strategy is well positioned to benefit over the long haul as we continue to see this market emerge and tremendous demand for infrastructure to take advantage of the low cost natural gas and natural resources continue to be developed in North America.

Just to level set before we get into the presentation. I want to run down a few key points that are key to our strategy and this is starting here on Slide 4. First of all, this -- the strategy really does frame our growth investments, our dividend and distribution growth strategy as we continue to use that as direction for how we manage the business. So we remain very disciplined around the strategy and it really is a very strong compass for us in the decisions we make. So it's important for you to understand it.

First of all, in the competitive advantage. Competitive advantage is created by large scale and the resulting market access and low-cost that we offer to our customers continue to be a guiding light for us. You won't find us making investments without those characteristics in our sites. Our Transco system and our West operating areas are great examples of what that looks like to us. And if you look at the Northeast, the moves we're continuing to make in this area really are all focused on getting to that scale of #1 or #2 position in that area. And certainly, we are convinced beyond a shadow of a doubt that over the long haul, this creates great opportunity and value for both our customers and our investors.

On looking to the growth side, I'm not sure it's possible really at this point to overemphasize the growth opportunities that we have available to us right now. Our Williams Partners Transco system is another great example as it relates to the growth opportunities that are in front of us. This is the nation's premier natural gas pipeline system. It's connected to the right supply and certainly the right market areas and the growth opportunities that continue to come at us day after day on this -- continue to build our confidence about the growth, not just in the supply side as we've seen around natural gas, but a strong movement towards the demand side. And as we expect, the overall market continue to expand.

The position we're in there is very enviable and we really are in a position to select not just any growth opportunity, but the very best growth opportunities available in the industry right now. Simply put, you'll see us focusing on the top layer of cream in this opportunity set and with Transco is in other areas, we're realizing our strategy and we are ensuring these benefits translate into value for our investors.

On the high dividend growth side. This is central to our value creation strategy. We've taken steps to ensure that even during a period of high investment in all these great growth opportunities that we are rewarding investors right now. We are building in the components to see this strategy run full-out as we bring on significant growth investments, many of which come online in 2015 and just beyond our current guidance period. We are investing to connect the best supply areas with the best markets, but we're also investing in ways that focus on fee-based that is largely resilient to commodity market fluctuation businesses. This is the foundation of our strategy to reward our investors with growing cash dividends and distributions, and we believe those characteristics also will produce high-value growth. It certainly, from our vantage point, is the best opportunity we have to deliver great shareholder value both now and in the future.

So let's get into the meat of the presentation today. Following a few comments from me as I go through these slides, I, along with the management team that John introduced earlier, look forward to hearing from you.

Moving on to Slide 5 here, which covers the key headline for today's earnings and guidance discussion. The big stories here.

First, the growth in our fee-based business at Williams Partners was a major driver in our second quarter results. Keep in mind that strong performance was up against even less favorable NGL margins in this quarter and the unexpected impact of our Geismar olefins plant, which was down for about 20% of the period, and obviously, related to the tragic incident that we experienced there in June.

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