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Analyzing How Williams Partners’ Segments Performed in 1Q15

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Updated

Largest contribution to EBITDA

Williams Partners (WPZ) operates through five business segments including:

  • Access Midstream
  • Northeast G&P
  • Atlantic-Gulf
  • West
  • NGL & Petchem Services

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Best performing segment—Atlantic-Gulf

For the quarter, the adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) increased by 25.9% to $335 million—compared to $266 million for 1Q14. It increased primarily due to higher fee-based revenue from Gulfstar One and higher transportation fee-based revenue from Transco. Gulfstar and Transco are consolidated entities of Williams Partners. The higher EBITDA was partially offset by lower NGL (natural gas liquid) margins. This segment earns 74.6% of its revenue from fee-based contracts and 25.4% from commodity-based contracts.

Worst performing segment—NGL & Petchem Services

For the quarter, the adjusted EBITDA decreased by 97.5% to $6 million. It decreased due to lower Geismar earnings. On June 13, 2013, an explosion and fire occurred at the Geismar olefins plant. As a result, the facility wasn’t operable temporarily. It’s important to note that 1Q14 EBITDA included $173 million of business interruption insurance proceeds. For 1Q15, the Geismar plant was off-line for most of the time. It resumed consistent operations in late March 2015.

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Access Midstream

Williams Partners’ earnings for 1Q14 are on a pre-merger basis and exclude Access Midstream. For the quarter, the market looks at the adjusted EBITDA. It increased by 25.6% to $314 million—compared to $250 million for 1Q14. It’s important to note that the figure for 1Q14 was before the merger. It increased due to higher fee-based volumes in the Utica, Eagle Ford, and Haynesville areas.

Northeast G&P

The adjusted EBITDA for the quarter increased by 85.2% to $100 million—compared to $54 million for 1Q14. It increased due to a $43 million increase in fee-based revenue—driven by 32% higher volumes primarily at the Susquehanna supply hub. This segment earns 78.9% of its revenue from fee-based contracts and 26.8% from commodity-based contracts.

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West

For the quarter, the adjusted EBITDA decreased by 23.6% to $162 million—compared to $212 million for 1Q14. It decreased due to lower NGL margins from low NGL prices. This segment earns 80.4% of its revenue from fee-based contracts and 19.6% from commodity-based contracts.

Key ETFs and stocks

The NGL & Petchem Services segment was also the worst performing segment for Enterprise Product Partners (EPD), EQT Midstream Partners (EQM), and Boardwalk Pipeline Partners (BWP). Together with Williams Partners, these MLPs (master limited partnerships) have a combined weight of 24.2% in the Alerian MLP ETF (AMLP).

In the next part of this series, we’ll discuss William Partners’ capital spending for the quarter and its outlook for the whole year.

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