Williams Reports 2017 Financial Results
TULSA, Okla.–(BUSINESS WIRE)–Williams (NYSE: WMB) today announced its financial results for the three
and 12 months ended Dec. 31, 2017.
Fourth-Quarter and Full-Year 2017 Highlights
-
4Q 2017 Net Income of $1.687 Billion – Positively Impacted by Tax Cuts
and Jobs Act of 2017; Cash Tax Deferral Extended & Lower Future Tax
Payments Expected -
Increased 4Q & Full-Year 2017 Adjusted EBITDA to $1.160 Billion and
$4.531 Billion, Respectively, Despite over $3 Billion in Asset Sales
Since September 2016 -
Williams Partners Placed Transco Expansions New York Bay and Virginia
Southside II into Service in 4Q 2017 – Completing Transco's 2017 "Big
5" Expansion Projects -
Williams Improved Credit Profile; Consolidated Net Debt Reduced by
$3.3 Billion from Jan. 1, 2017 through Dec. 31, 2017 -
Williams Partners Exceeded Midpoint of Financial Guidance Targets for
2017, Guidance for 2018 DCF, Distribution Growth (5 to 7%) and
Coverage Remain on Target -
Williams' Guidance for 2018, Dividend Growth (10 to 15%) and Coverage
Remain on Target
|
Williams Summary Financial Information
Amounts in millions, except per-share amounts. Per share |
||||||
| 4Q | Full Year | |||||
| 2017 | 2016 | 2017 | 2016 | |||
| GAAP Measures | ||||||
| Cash Flow from Operations (1) | $719 | $1,583 | $2,556 | $3,680 | ||
| Net income (loss) | $1,687 | ($15 | ) | $2,174 | ($424 | ) |
| Net income (loss) per share | $2.03 | ($0.02 | ) | $2.62 | ($0.57 | ) |
| Non-GAAP Measures (2) | ||||||
| Adjusted income from continuing operations | $170 | $130 | $521 | $450 | ||
| Adjusted income from continuing operations per share | $0.20 | $0.17 | $0.63 | $0.60 | ||
| Adjusted EBITDA | $1,160 | $1,123 | $4,531 | $4,436 | ||
| Cash Flow available for Dividends and other uses | $349 | $518 | $1,444 | $1,821 | ||
| Dividend Coverage Ratio | 1.41x | 3.45x | 1.46x | 1.44x | ||
|
(1) Cash Flow from Operations was higher in 2016, due primarily to the receipt of $820 million in cash in the fourth quarter of 2016 associated with certain contract restructurings and prepayments. |
|
(2) Schedules reconciling adjusted income from continuing |
Fourth-Quarter and Full-Year 2017 Financial Results
Williams reported unaudited fourth-quarter 2017 net income attributable
to Williams of $1.687 billion, an improvement of $1.702 billion from
fourth-quarter 2016. The favorable change was driven primarily by the
remeasurement of Williams' deferred tax liabilities to reflect lower
future tax payments expected due to the Tax Cuts and Jobs Act of 2017
("Tax Reform Act"). This resulted in the recognition of an income tax
provision benefit of $1.9 billion for the year ended Dec. 31, 2017. In
addition, the absence of a $318 million impairment of equity method
investments from fourth-quarter 2016 is also reflected in the
improvement. Partially offsetting the increase was the impact of $713
million of non-cash charges at Williams Partners' Transco and Northwest
Pipeline primarily related to regulatory liabilities resulting from the
Tax Reform Act.
For the year, Williams reported unaudited net income of $2.174 billion,
a favorable change of $2.598 billion over the corresponding 12-month
reporting period in 2016. The improvement was driven primarily by the
net impact of the Tax Reform Act as described in the previous paragraph,
a $1.095 billion gain associated with the sale of our ownership interest
in the Geismar olefins facility, the absence of impairments of
equity-method investments and higher revenues from Williams Partners'
Atlantic-Gulf business. Partially offsetting the improvement was a net
increase in impairments of certain assets and the absence of results
associated with the Geismar olefins facility, which was sold July 6,
2017.
Williams reported fourth-quarter 2017 Adjusted EBITDA of $1.160 billion,
a $37 million increase from fourth-quarter 2016. Williams Partners'
current businesses increased Adjusted EBITDA by $84 million in
fourth-quarter 2017 vs. fourth-quarter 2016, driven in large part by
$117 million increased fee-based revenues, due primarily to the growth
in fee-based revenues in Williams Partners' Atlantic-Gulf and West
businesses partially offset by $30 million in higher operating and
maintenance (O&M) expenses. The $84 million improvement from Williams
Partners' current businesses was partially offset by the absence of $47
million Adjusted EBITDA earned in fourth-quarter 2016 from the NGL &
Petchem Services business primarily as a result of the sale of the
Geismar olefins facility on July 6, 2017.
For the year, Williams reported Adjusted EBITDA of $4.531 billion, an
increase of $95 million over fiscal 2016. The current businesses in the
Williams Partners segment increased Adjusted EBITDA by $202 million in
2017 compared to 2016. The improvement was driven primarily by $147
million increased fee-based revenues driven primarily from new assets
brought online by the Atlantic-Gulf business in the Williams Partners
segment. Full-year 2017 results for the Williams Partners segment also
benefited from $51 million increased commodity margins and $28 million
from higher EBITDA from joint ventures, partially offset by $63 million
higher O&M expenses. The $202 million improvement from Williams
Partners' current businesses was partially offset by the absence of $157
million Adjusted EBITDA earned in 2016 from the NGL & Petchem Services
business primarily as a result of the sale of the Geismar olefins
facility on July 6, 2017.
CEO Perspective
Alan Armstrong, president and chief executive officer, made the
following comments:
"I am pleased with the organization's strong execution in 2017. Our
organization has been working hard to keep its promises to our
customers, shareholders, and other stakeholders with timely and safe
delivery of our projects, including Transco’s ‘Big 5’ projects (Gulf
Trace, Hillabee Phase 1, Dalton, New York Bay and Virginia Southside
II). This is reflected in our financial results where we exceeded the
midpoint of our guidance range for Adjusted EBITDA, DCF and Cash
Coverage ratios.
"We achieved these impressive results, which include improvement in
year-over-year Adjusted EBITDA for both fourth-quarter and full-year
2017, in spite of the impact of multiple hurricanes and more than $3
billion in asset sales since September 2016. Our stable foundation of
demand-driven expansions continues to grow our business. In 2018, we
look forward to a full year of revenue from our ‘Big 5’ as well as
contributions from our Atlantic Sunrise project later this year and the
associated growth in Northeast gathering volumes.
"We also carried out our financial repositioning in January of 2017 in a
way that positioned the company to fund an attractive slate of
large-scale expansion projects without accessing public equity markets,
strengthened distribution coverage, enhanced our credit profile,
improved our cost of capital and underpinned our growth outlook. As a
result of a full year of executing on the key aspects of our plan, we
reduced Williams consolidated debt for the year by $3.3 billion and
dramatically reduced our commodity exposure.
"As the Atlantic Sunrise project construction continues, the
debottlenecking of the Northeast is starting to occur as other pipelines
in the Northeast have also been placed in service recently or will be
brought online in the near future. We are beginning to see some of the
key fundamentals of our strategy take shape in the Northeast where we
have a leading market share and a path to deliver long-term sustainable
shareholder value. Volumes are increasing and our focus on executing the
company’s natural gas-focused business strategy is producing predictable
fee-based revenue growth backed by long-term commitments."
Business Segment Results
Williams’ business segments for financial reporting are Williams
Partners and Other.
| Williams | Modified and Adjusted EBITDA | |||||||||||||||||||||||
| Amounts in millions | 4Q 2017 | 4Q 2016 | YTD 2017 | YTD 2016 | ||||||||||||||||||||
|
Modified |
Adjust. |
Adjusted EBITDA |
Modified |
Adjust. |
Adjusted |
Modified |
Adjust. |
Adjusted |
Modified |
Adjust. |
Adjusted |
|||||||||||||
| Williams Partners | $ | 408 | $ | 742 | $ | 1,150 | $ | 1,235 | ($122 | ) | $ | 1,113 | $ | 3,616 | $ | 856 | $ | 4,472 | $ | 3,864 | $ | 563 | $ | 4,427 |
| Other | (90 | ) | 100 | 10 | (8 | ) | 18 | 10 | (150 | ) | 209 | 59 | (542 | ) | 551 | 9 | ||||||||
| Totals | $ | 318 | $ | 842 | $ | 1,160 | $ | 1,227 | ($104 | ) | $ | 1,123 | $ | 3,466 | $ | 1,065 | $ | 4,531 | $ | 3,322 | $ | 1,114 | $ | 4,436 |
|
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 fourth-quarter 2017 Modified EBITDA of $408
million, a decrease of $827 million from fourth-quarter 2016. The
unfavorable change in Modified EBITDA was driven primarily by the impact
of $713 million of non-cash charges at the segment's Transco and
Northwest Pipeline primarily related to regulatory liabilities
established as a result of the recently enacted Tax Reform Act. Some of
the rates charged to customers of our regulated natural gas pipelines
are subject to periodic FERC rate case filings, which permit the
recovery of an income tax allowance that includes a deferred income tax
component in our recourse rates. As a result of the reduced income tax
rate from the Tax Reform Act and the resulting regulatory liabilities,
we expect that any future rate case settlements or proceedings before
the FERC will be impacted by this lower income tax allowance. However,
the actual amount and timing of any return of this regulatory liability
to customers will be subject to negotiations in future rate proceedings.
We expect that the amortization of the regulatory liability will be over
an extended period of time (as much as 20 years or more). Considering
all of these recourse rate-making elements, Transco still expects to
file for increased cost-of-service rates in its upcoming initial rate
filing in 2018.
Adjusted EBITDA increased by $37 million to $1.150 billion. The non-cash
charges associated with the Tax Reform Act did not impact 2017 Adjusted
EBITDA. Williams Partners' current businesses increased Adjusted EBITDA
by $84 million in fourth-quarter 2017 vs. fourth-quarter 2016, driven by
$117 million increased fee-based revenues, due primarily to the growth
in fee-based revenues in Williams Partners' Atlantic-Gulf and West
businesses, partially offset by $30 million in higher O&M and selling,
general and administrative (SG&A) expenses. The $84 million improvement
from Williams Partners' current businesses was partially offset by the
absence of $47 million Adjusted EBITDA earned in fourth-quarter 2016
from the NGL & Petchem Services business primarily as a result of the
sale of the Geismar olefins facility on July 6, 2017.
For the year, Williams Partners reported Modified EBITDA of $3.616
billion, a decrease of $248 million compared to results for full-year
2016. Adjusted EBITDA was $4.472 billion, a $45 million increase over
the corresponding 12-month reporting period. The unfavorable change in
Modified EBITDA was driven primarily by the non-cash charges resulting
from the Tax Reform Act as described in the previous paragraph. Results
were also negatively impacted by impairments of assets, largely offset
by the gain related to the sale of the Geismar facility. The non-cash
charges associated with the Tax Reform Act did not impact 2017 Adjusted
EBITDA. Williams Partners' current businesses increased Adjusted EBITDA
by $202 million in 2017 compared to 2016. The improvement was driven
primarily by $147 million increased fee-based revenues driven largely by
new assets brought online by the Atlantic-Gulf segment. Williams
Partners' full-year 2017 results also benefited from $51 million
increased commodity margins and $28 million higher EBITDA from joint
ventures, partially offset by $63 million higher O&M expenses. The $202
million improvement from Williams Partners' current businesses was
partially offset by the absence of $157 million Adjusted EBITDA earned
in 2016 from the NGL & Petchem Services business primarily as a result
of the sale of the Geismar olefins facility on July 6, 2017.
Williams Partners’ complete financial results for fourth-quarter and
full-year 2017 are provided in the earnings news release issued today by
Williams Partners.
Other Segment
Williams’ Other segment reported fourth-quarter 2017 Modified EBITDA of
($90) million, a decrease of $82 million from fourth-quarter 2016,
driven by a $63 million regulatory charge associated with the Tax Reform
Act. Adjusted EBITDA remained stable at $10 million.
For the year, Williams’ Other segment reported Modified EBITDA of ($150)
million, an increase of $392 million due primarily to the absence of a
second-quarter 2016, $406 million impairment charge associated with the
company's former Canadian business that was sold in September
2016. Adjusted EBITDA realized a $50 million improvement to $59 million.
Both measures benefited from $29 million of higher income associated
with a regulatory asset, and was primarily driven by our increased
ownership in WPZ.
Notable Accomplishments
On Dec. 5, 2017, the Williams Partners segment announced that it had
successfully placed into service its Virginia Southside II expansion
project, the fifth of Transco’s “Big 5” expansions to be placed into
service in 2017. These five, fully-contracted expansion projects (Gulf
Trace, Hillabee Phase 1, Dalton, New York Bay and Virginia Southside II)
combined to add more than 2.8 million dekatherms per day (Dth/d) of firm
transportation capacity to the Transco pipeline system in 2017,
contributing to the increase of Transco’s design capacity by
approximately 25 percent.
Williams' Credit Profile Update
The company strengthened its balance sheet and credit profile during the
year with an over $500 million reduction of the Williams Companies'
corporate-level debt in addition to the nearly $2.1 billion debt
reduction at Williams Partners and more than $700 million increase in
consolidated cash. As of the end of 2017, Williams had corporate level
debt of $4.4 billion, in addition to Williams Partners' debt of $16.5
billion and consolidated cash and cash equivalents of $899 million,
which the company intends to use primarily to fund growth capital
expenditures and long-term investments at Williams Partners.
2018 Guidance
Current guidance for 2018 is set out in the following table. As noted in
the table below, Williams Partners' Adjusted EBITDA and Distributable
Cash Flow estimates for 2018 have recently been impacted by non-cash
adjustments related to the new GAAP revenue recognition standard and Tax
Reform Act. For Williams Partners' Adjusted EBITDA, the unfavorable
non-cash impacts of these two items were approximately $120 million for
the new GAAP revenue recognition standard and approximately $30 million
for tax reform primarily due to Northwest Pipeline even though rates on
Northwest Pipeline remain unchanged until the next rate case cycle
expected to occur in 2021.
The main effect of the new GAAP revenue recognition standard was to
extend the amortization of deferred revenue associated with certain 2016
contract restructurings and pre-payments by approximately 10 years
resulting in lower 2018 and 2019 revenue and then higher revenue amounts
through 2029. Furthermore, as a result of the extended revenue
amortization period under the new GAAP revenue standard, we have
prospectively discontinued the adjustment which removed the DCF
associated with these 2016 contract restructuring prepayments.
Consequently, DCF is expected to be approximately $140 million higher in
2018 than it otherwise would have been absent this prospective change.
For Williams, the above-described 2018 guidance for Williams Partners
will support 10 to 15 percent dividend growth and at least 1.35x
dividend-coverage ratio.
|
Amounts in billions, except per-unit cash distribution, cash |
|
| Williams Partners | 2018 |
| Net income (1) | $1.5-$1.7 |
| Adjusted EBITDA (1)(2)(3) | $4.45-$4.65 |
| Distributable Cash Flow (1)(2)(4) | $2.9-$3.2 |
| Cash Distribution Coverage Ratio (1)(2)(4) | ~1.2x (midpoint of guidance) |
|
Distribution Growth Rate (3)
(Quarterly Distribution Increases) |
5-7% annual growth for 2018 and 2019 |
| Total Growth Capital Expenditures | $2.7 |
| Transco Growth Capital Expenditures | $1.7 |
| Leverage (5) | < 4.5x |
|
(1) |
Assumes 2018 WTI oil price of approximately $59.00 per barrel and |
|
(2) |
For Williams Partners, Adjusted EBITDA, Distributable Cash Flow |
|
(3) |
Includes $0.15 billion unfavorable effects of new revenue |
|
(4) |
Includes $0.14 billion favorable effects associated with changes |
|
(5) |
Estimated rating agency adjusted Debt to EBITDA |
| Williams | 2018 |
|
Dividend Growth Rate
(Annual Dividend Increases) |
10-15% annual growth for 2018 and 2019 |
| Dividend Coverage Ratio (1) | ~1.35x (midpoint of guidance) |
| Consolidated Leverage (2) | < 5.25x |
| Economic Coverage Ratio (1) | ~1.75x (midpoint of guidance) |
|
(1) |
For Williams, Dividend Coverage Ratio is a non-GAAP measure; |
|
(2) |
Estimated rating agency adjusted Debt to EBITDA |
Williams’ Year-End 2017 Materials to be Posted Shortly; Q&A Webcast
Scheduled for Tomorrow
Williams’ fourth-quarter and full-year 2017 financial results package
will be posted shortly at www.williams.com.
Williams and Williams Partners will host a joint Q&A live webcast on
Thursday, Feb. 15, at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). A
limited number of phone lines will be available at (888) 468-2440.
International callers should dial (719) 325-4790. The conference ID is
2010872. 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-K
The company plans to file its 2017 Form 10-K with the Securities and
Exchange Commission (SEC) next 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, WMB economic DCF, dividend coverage ratio, economic 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. We further adjust these metrics to
include Williams’ proportional share of WPZ’s distributable cash flow in
excess of distributions, resulting in WMB economic DCF and economic
coverage ratio.
For Williams Partners L.P., we define distributable cash flow as
Adjusted EBITDA less maintenance capital expenditures, cash portion of
interest expense, income attributable to noncontrolling interests and
cash income taxes, plus WPZ restricted stock unit non-cash compensation
expense and certain other adjustments that management believes affects
the comparability of results. Adjustments for maintenance capital
expenditures and cash portion of interest expense include our
proportionate share of these items of our equity-method investments.
We also calculate the ratio of distributable cash flow to the total cash
distributed (cash distribution coverage ratio). This measure reflects
the amount of distributable cash flow relative to our cash distribution.
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.
Contacts
Williams
Media Contact:
Keith Isbell, 918-573-7308
or
Investor
Contact:
Brett Krieg, 918-573-4614
