Must-know: Williams Partners’ 3Q14 performance



William Partners’ 3Q14 performance

Throughout this series, we’ve analyzed Williams Companies’ (WMB) 3Q14 performance from the company’s perspective. In this part of the series, we’ll analyze Williams Partners (or WPZ). It’s one of WMB’s operating subsidiaries.

Williams Partners’ revenues in 2014

WPZ accounts for the majority of WMB’s operations and profits. It’s important that investors gain deeper insight into WPZ’s performance.

WPZ Revenues

During 3Q14, segment revenues increased 5.6% to $1.70 billion—from $1.61 billion in 3Q13. This was due to higher fee-based revenues. However, on a year-to-date (or YTD) basis, revenues decreased 3% to $5.01 billion in 2014—from $5.18 billion in 2013.

In 2013, WPZ’s segment revenues decreased 8.7% to ~$6.7 billion—from $7.3 billion in 2012. This followed a 5.1% fall in revenues in 2012 compared to 2011.

WPZ Segment profit and margin

WPZ’s margins in 2014

In 3Q14, reported segment profit decreased 9.2% to $373 million—from $411 million in 3Q13. The profit margin also fell to 22% from 25%. The decrease for the quarter was driven by a $45 million decrease in natural gas liquid (or NGL) and marketing margins.

The reported segment profit decreased 4.7% to $1.26 billion YTD in 2014—from $1.33 billion in 2013.

Margins are on a declining trend

As noted in the above graph, WPZ’s reported segment profit decreased 11.4% in 2013 to $1.6 billion—from $1.8 billion in 2012. It fell 11% in 2012 compared to 2011.

The segment profit margin decreased to 24% in 2013—from 24.8% in 2012 and 26.4% in 2011.

WPZ’s operating revenues were negatively affected by the Geismar incident. However, its income was boosted by insurance recoveries during the quarters in 2013 and 2014.

In June 2013, an explosion and a fire occurred at WPZ’s Geismar olefins plant. The facility had to be closed temporarily for repairs.

Key stocks and exchange-traded funds (or ETFs)

Enterprise Products Partners (EPD) and TC Pipelines (TCP) are also active players in the midstream energy space. Some of these companies are part of the Energy Select Sector SPDR (XLE) and the Alerian MLP ETF (AMLP).

In the next part of the series, we’ll discuss if the volume and prices affected WPZ’s results.

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