A guide to Williams Companies’ NGL & Petchem Services segment

Revenues are falling at NGL & Petchem Services

Williams Companies’ (WMB) NGL & Petchem Services segment consists primarily of Canadian midstream operations and certain domestic olefins pipeline assets.

Revenues have been falling in WMB’s NGL & Petchem Services segment. They decreased 2% in 2013 to $273 million after falling 18% in 2012 from the previous year.

Margins are sharply down

NGL & Petchem Services segment profits and margins fell steeply over the past three years. While profits fell by ~75% in 2013 from 2011, profit margins have come down to 14% from 46% during the same period.

NGL margins were approximately 40% lower in 2013 compared to 2012. This fall was driven by reduced ethane recoveries as a result of lower NGL prices and higher natural gas prices.

The higher profits in 2011 resulted from hedging gains, which increased WMB’s realized non-ethane sales prices.

In 1H14, the company incurred a loss in the NGL & Petcem Services segment.

NGL & Petchem Services volumes

Propylene sales decreased in 2013. Meanwhile, NGL sales in WMB’s Canadian operations remained relatively steady over the past three years.

Sales and margins deteriorate despite steady production

Operating and maintenance expenses increased significantly in 2013. This rise related to the 2013 scheduled plant shutdown and $20 million in abandoned project write-offs.

Depreciation and amortization expenses also increased due to certain asset de-commissioning for completing the ethane recovery system. These negative factors were partially offset by 18% higher average realized propylene sales prices.

Key stocks and ETFs

Williams Companies (WMB) is a component of the Energy Select Sector SPDR (XLE). Other companies in the midstream energy processing and transportation space include Enterprise Products Partners (EPD), Spectra Energy Corporation (SE), and Atmos Energy Corporation (ATO). Some of these companies are components of XLE and the Alerian MLP ETF (AMLP).