- Plan to Simplify Structure, Strengthen
WPZ Distribution Coverage, Enhance Credit Profile, Improve WPZ Cost
of Capital, Remove WPZ Need to Access Public Equity Markets and
Optimize Asset Portfolio
- Williams to permanently waive incentive
distribution rights and convert its economic general partner
interest to a non-economic general partner interest for 289 million
Williams Partners common units, increasing Williams’ ownership in
Williams Partners to approximately 72%
- Williams and Williams Partners to reset
payouts; improve coverage at Williams Partners
- Williams Partners’ quarterly
distribution for the quarter ending March 31, 2017 expected to be
reduced to $0.60 per unit ($2.40 per unit on an annualized basis),
representing a 29% reduction to the current payout, and targeting
5-7% annual growth over the next several years, with expected cash
distribution coverage ratio of 1.2x or more in 2017, and
maintenance of strong coverage in excess of 1.1x thereafter
- Williams’ quarterly dividend to be paid
in March 2017 expected to be increased to $0.30 per share ($1.20 on
an annualized basis), representing a 50% increase to the current
payout, and targeting 10-15% annual growth over the next several
years, with expected dividend coverage ratio of 1.3x in 2017 and
coverage in excess of 1.1x thereafter; excess coverage will be used
to reduce holding company debt over time
- Williams expects to purchase additional
newly issued units of Williams Partners in a private placement
- Williams expects to fund unit purchase
with equity
- Williams expects to discontinue
participation in Williams Partners’ DRIP program, upon successful
completion of the transactions and asset monetizations
- Proceeds to be invested in Williams
Partners to reduce debt and fund extensive growth portfolio of
fully contracted, regulated expansion projects
- Williams Partners to continue focusing
its capital resources on large-scale competitively advantaged
positions in the very best natural gas markets and supply
basins
- Williams Partners targeting after-tax
proceeds of over $2.0Bn from asset monetizations
- In addition to the previously announced
Geismar monetization process, we have identified other select
assets that do not support the company’s clear strategy, ensuring
focus on those assets that are core to Williams’ operations and
growth
- For WPZ, this series of transactions
will improve its cost of capital, remove its need to access the
public equity markets for the next several years, enhance growth,
and provide for immediate deleveraging
- This series of transactions solidifies
WPZ as an attractive financing vehicle, facilitates a reduction of
Williams’ consolidated debt using excess coverage and provides for
dividend growth flexibility, while retaining the strategic and
financing flexibility afforded by a dual-C-corp/MLP business
model
- Williams plans to host an investor
conference call today at 3:10PM CT (4:10PM ET)
Williams (NYSE: WMB) (“Williams”) and Williams Partners L.P.
(NYSE: WPZ) (“Williams Partners”) today announced an agreement to
permanently waive payment obligations under the incentive
distribution rights held by Williams and convert Williams’ economic
general partner interest into a non-economic interest for 289
million newly issued Williams Partners common units (collectively,
the “IDR Waiver”). The estimated transaction value is approximately
$11.4 billion. Following the IDR Waiver, Williams will hold
approximately 660 million Williams Partners common units,
representing approximately 72% of the common units outstanding.
Williams also announced that it expects to purchase newly issued
common units of Williams Partners at a price of $36.08586 per unit
(the “Unit Private Placement”, and together with the funding with
Williams equity and the IDR Waiver, the “Transactions”). Williams
expects to fund the unit purchase with equity. With respect to
units issued to Williams in the private placement, Williams
Partners will not be required to pay distributions for the quarter
ended December 31, 2016 and the prorated portion of the first
quarter of 2017 up to closing of the private placement. Williams
expects to discontinue participation in Williams Partners’ DRIP
program, upon successful completion of the Transactions and asset
monetizations.
Alan Armstrong, Williams’ president and chief executive officer,
made the following statements regarding the Transactions:
“Today we announced a comprehensive series of measures to
strengthen Williams’ role as North America’s premier natural gas
infrastructure company. These actions will deliver immediate and
ongoing benefits and position Williams and Williams Partners for
long-term, sustainable growth. The improvement of Williams
Partners’ cost of capital and simplified organizational structure
will better align GP and LP interests as well as solidify Williams
Partners’ investment-grade credit ratings. This strong financial
position combined with Williams Partners’ high quality, low risk
growth portfolio makes Williams a leader amongst peers.”
Effective with the quarterly distribution for the quarter ending
March 31, 2017, Williams Partners expects to pay a quarterly
distribution of $0.60 ($2.40 per unit on an annualized basis), a
reduction of approximately 29% from Williams Partners’ expected
fourth quarter 2016 distribution of $0.85 per common unit ($3.40
per unit on an annualized basis). Williams Partners expects
distribution growth of 5-7% annually over the next several years.
Future quarterly distributions are subject to quarterly approval by
Williams Partners’ board of directors.
Williams announced that effective with the quarterly dividend to
be paid in March 2017, Williams expects to pay a quarterly dividend
of $0.30 per share ($1.20 per share on an annualized basis), an
increase of 50% above Williams’ dividend paid in December 2016 of
$0.20 per share ($0.80 per share on an annualized basis). Williams
expects dividend per share growth of 10-15% annually over the next
several years. Future quarterly dividend payments are subject to
quarterly approval by Williams’ board of directors.
As a result of the measures announced today, Williams expects
that Williams Partners will not be required to access the public
equity markets for the next several years. In addition, the
Transactions result in debt reduction at Williams Partners and a
meaningful increase in its cash coverage ratio to approximately
1.2x in 2017 and maintenance of strong coverage in excess of 1.1x
thereafter.
Dividend coverage ratio at Williams will be approximately 1.3x
in 2017, with continued coverage in excess of 1.1x thereafter.
Excess cash at Williams after dividend payments will be used to
reduce leverage over time.
Strengthening Williams Partners’ coverage and credit profile
through the Transactions will benefit stakeholders in Williams
Partners, including Williams. In addition, maintaining Williams
Partners as a strong, separate entity provides on-going strategic
and financial flexibility to Williams, enabling it to capitalize on
future opportunities to grow both organically and
inorganically.
As part of Williams’ ongoing commitment to maximize returns on
capital deployed, Williams today announced that, in addition to the
previously announced Geismar monetization process, Williams has
identified other select assets that do not support the company’s
clear strategy, ensuring focus on those assets and regions that are
core to Williams’ operations and growth. Williams expects to raise
more than $2.0 billion in after-tax proceeds, inclusive of the
ongoing Geismar monetization process.
Guidance
Current guidance for 2017 is set out in the following table:
Williams Partners 2017
Williams 2017 Amounts in billions, except
per-unit cash distribution and coverage ratio amounts. All income
amounts attributable to Williams Partners L.P. Amounts in billions,
except per-share cash dividend and coverage ratio amounts.
Net income (1) $1.7 Per-share Cash Dividend $1.20 Adjusted EBITDA
(1) (2) (3) $4.6 Cash Available for Dividends (2) (5) $1.3
Distributable Cash Flow (2) (4) $2.8 Dividend Coverage Ratio (2)
~1.3x Cash Distribution Coverage Ratio (2) (4) ~1.2x Per-unit Cash
Distribution $2.40 Total Growth Capital Expenditures $2.1-$2.8
Transco Growth Capital Expenditures $1.4-$1.9 (1) Does not
include any expected asset sales (e.g., Geismar). Includes
amortization of $240 million associated with the $820 million
Barnett & MidCon contract restructure prepayments
(2) For Williams Partners, Adjusted
EBITDA, Distributable Cash Flow and Cash Distribution Coverage
Ratio are non-GAAP measures and for Williams Cash Available for
Dividends and Dividend Coverage Ratio are non-GAAP measures;
reconciliations to the most relevant measures are attached in this
news release
(3) Assumes 2017 WTI oil price of approximately $55 per barrel and
Henry Hub natural gas price of approximately $3.35 per mmbtu (4)
Does not include any expected asset sales (e.g., Geismar). Also,
excludes amortization of $240 million associated with the $820
million Barnett & MidCon contract restructure prepayments (5)
Williams does not expect to be a U.S. federal income cash taxpayer
through at least 2020, excluding taxes on any potential asset
monetizations
Investor Conference Call
Williams will hold a conference call to discuss the transaction
today at 3:10 p.m. Central Time (4:10 p.m. Eastern Time) and
materials will be posted at www.williams.com. A limited number of
phone lines will be available at (888) 430-8678. International
callers should dial (719) 325-2477. The conference ID is 1460428. A
link to the webcast, as well as replays of the webcast, will be
available for two weeks following the event
at www.williams.com.
Additional Detail
The IDR Waiver is effective immediately and is not subject to
any further conditions or approvals.
Williams has reviewed the Transactions with the rating agencies
and expects the impact of the Transactions to be positive to the
ratings of both Williams and Williams Partners.
The IDR Waiver and the Unit Private Placement were evaluated,
negotiated and approved on behalf of Williams Partners by the
conflicts committee of Williams Partners, comprised solely of
independent directors, and by the board of directors of Williams
Partners GP, and on behalf of Williams by the Williams Board.
Morgan Stanley & Co. LLC and Gibson, Dunn & Crutcher LLP
acted as financial and legal advisors, respectively, to Williams.
Evercore and Baker Botts L.L.P. acted as financial and legal
advisors, respectively, to the conflicts committee of Williams
Partners.
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 72 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 from gathering,
processing and interstate transportation of natural gas and natural
gas liquids to petchem production of ethylene, propylene and other
olefins. 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
About Williams Partners
Williams Partners (NYSE: WPZ) is an industry-leading, large-cap
natural gas infrastructure master limited partnership with a strong
growth outlook and major positions in key U.S. supply basins.
Williams Partners has operations across the natural gas value chain
from gathering, processing and interstate transportation of natural
gas and natural gas liquids to petchem production of ethylene,
propylene and other olefins. 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. Tulsa, Okla.-based Williams (NYSE: WMB), a
premier provider of large-scale U.S. natural gas infrastructure,
owns approximately 72 percent of Williams Partners.
www.williams.com
Definitions of Non-GAAP Measures
This news release may include certain financial measures –
adjusted EBITDA, distributable cash flow, adjusted income
(“earnings”), adjusted earnings per share, cash available for
dividends, dividend coverage ratio and cash distribution coverage
ratio – that are non-GAAP financial measures as defined under the
rules of the Securities and Exchange Commission.
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 and may
include assumed business interruption insurance related to the
Geismar plant. 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 MLPs, cash received (used) by the
Williams NGL & Petchem Services segment (other than cash for
capital expenditures) less interest, taxes and maintenance capital
expenditures associated with Williams and not the underlying MLPs.
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 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. We have also provided this ratio using the
most directly comparable GAAP measure, net income (loss).
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, or cash available for
dividends and other uses 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.
Forward-Looking Statements
The reports, filings, and other public announcements of The
Williams Companies, Inc. (Williams) and Williams Partners L.P.
(WPZ) 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, and Section
21E of the Securities Exchange Act of 1934, as amended. 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 fact,
included in this document 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” and 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:
- Levels of cash distributions by
Williams Partners L.P. (WPZ) with respect to limited partner
interests;
- Levels of dividends to Williams
stockholders;
- Future credit ratings of Williams and
WPZ;
- Amounts and nature of future capital
expenditures;
- Expansion and growth of our business
and operations;
- Financial condition and liquidity;
- Business strategy;
- Cash flow from operations or results of
operations;
- Seasonality of certain business
components;
- Natural gas, natural gas liquids, and
olefins prices, supply, and demand;
- Demand for Williams’ services.
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 in this
report. 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:
- Whether WPZ will produce sufficient
cash flows to provide the level of cash distributions that we
expect;
- Whether we are able to pay current and
expected levels of dividends;
- Whether we will be able to effectively
execute our financing plan including the receipt of anticipated
levels of proceeds from planned asset sales;
- Availability of supplies, including
lower than anticipated volumes from third parties served by our
midstream business, and market demand;
- Volatility of pricing including the
effect of lower than anticipated energy commodity prices and
margins;
- Potential fluctuations in the market
price of WPZ’s common units following our announcement of the
Transactions;
- Inflation, interest rates, fluctuation
in foreign exchange rates and general economic conditions
(including future disruptions and volatility in the global credit
markets and the impact of these events on customers and
suppliers);
- The strength and financial resources of
our competitors and the effects of competition;
- Whether we are able to successfully
identify, evaluate and timely execute capital projects and other
investment opportunities in accordance with our forecasted capital
expenditures budget;
- Our ability to successfully expand our
facilities and operations;
- Development of alternative energy
sources;
- Availability of adequate insurance
coverage and the impact of operational and developmental hazards
and unforeseen interruptions;
- The impact of existing and future laws,
regulations, the regulatory environment, environmental liabilities,
and litigation, as well as our ability to obtain permits and
achieve favorable rate proceeding outcomes;
- Our costs and funding obligations for
defined benefit pension plans and other postretirement benefit
plans;
- Changes in maintenance and construction
costs;
- Changes in the current geopolitical
situation;
- Our exposure to the credit risk of our
customers and counterparties;
- Risks related to financing, including
restrictions stemming from debt agreements, future changes in
credit ratings as determined by nationally-recognized credit rating
agencies and the availability and cost of capital;
- The amount of cash distributions from
and capital requirements of investments and joint ventures in which
we participate;
- Risks associated with weather and
natural phenomena, including climate conditions and physical damage
to our facilities;
- Acts of terrorism, including
cybersecurity threats and related disruptions; and
- Additional risks described in our
filings with the Securities and Exchange Commission (SEC).
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 and referred to below may cause our intentions to
change from those statements of intention set forth in this press
release. 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
Williams and WPZ’s annual and quarterly reports filed with the SEC
and available from Williams’ offices or Williams’ website at
www.williams.com.
WPZ Reconciliation of GAAP Net Income
to Non-GAAP Modified EBITDA, Adjusted EBITDA and Distributable Cash
Flow
2017 (Dollars in billions, except coverage
ratios) Guidance Net income (loss) $1.7
Provision (benefit) for income taxes 0.0 Interest expense 0.9
Equity (earnings) losses (0.5 ) Proportional Modified EBITDA of
equity-method investments 0.7 Depreciation and amortization
expenses and accretion for asset retirement obligations 1.8
Modified EBITDA (1) $4.6 Adjustments: Total EBITDA
adjustments $0.0 Adjusted EBITDA (1) $4.6 Maintenance
capital expenditures (2) ($0.5 ) Interest expense (cash portion)
(3) (0.9 ) Remove amortization associated with Barnett & MidCon
contract restructure prepayments (4) (0.2 ) Income attributable to
noncontrolling interests, cash taxes and other (0.2 )
Distributable cash flow attributable to Partnership Operations (5)
$2.8 Cash distributions $2.3 Cash Coverage
Ratio (Distributable cash flow attributable to Partnership
Operations / Cash distributions) (5) 1.2x
Notes:
*
Assumes 2017 WTI oil price of
approximately $55 per barrel and Henry Hub natural gas price of
approximately $3.35 per mmbtu
(1) Includes full year of Geismar operations. Also includes
amortization of $240 million associated with the $820 million
Barnett & MidCon contract restructure prepayments. (2) Includes
proportionate share of maintenance capital expenditures of equity
investments. (3) Includes proportionate share of interest expense
of equity investments. (4) Amortization of $240 million associated
with the $820 million Barnett & MidCon contract restructure
prepayments. (5) Includes full year of Geismar operations. Excludes
amortization of $240 million associated with the $820 million
Barnett & MidCon contract restructure prepayments.
WMB Dividend Coverage Ratio
2017 (Dollars in billions, except per share
amounts) Guidance Distributions from WPZ
(accrued / “as declared” basis) $1.6 Corporate interest (0.3
) Subtotal $1.3 WMB cash tax rate 0.0 % WMB cash taxes (excludes
cash taxes paid by WPZ) - Corporate Capex
<(0.1
)
WMB cash available for dividends and other uses $1.3 WMB dividends
paid (1.0 ) Excess cash available after dividends $0.3
Dividend per share $1.20 Coverage ratio (1) 1.3x
Notes:
*
Assumes WTI oil price of approximately $55
per barrel and a Henry Hub natural gas price of approximately $3.35
per mmbtu
*
Williams does not expect to be a U.S.
federal income cash taxpayer through at least 2020, excluding taxes
on any potential asset monetizations
(1)
WMB cash available for dividends and other
uses / WMB dividends paid
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170109006323/en/
WilliamsMedia Contact:Lance Latham,
918-573-9675orInvestor Contacts:John Porter,
918-573-0797orBrett Krieg, 918-573-4614
Williams Companies (NYSE:WMB)
Historical Stock Chart
From Aug 2024 to Sep 2024
Williams Companies (NYSE:WMB)
Historical Stock Chart
From Sep 2023 to Sep 2024