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Williams lowers earnings expectations for Q2 through 2013

25
Jul '12
Williams reaffirmed its previously published outlook for robust dividend growth through 2014, despite lowering its earnings outlook for 2012 and 2013 primarily because of less-favorable commodity prices. At the same time, the company increased its 2014 outlook for adjusted earnings per share at a level 59 percent higher than in 2011, based on the strength of its fundamental business, growth and improvement in certain commodity prices driven by continued high crude oil-to-gas ratios.

Williams continues to expect to pay a full-year 2012 shareholder dividend of $1.20 per share, a 55 percent increase over 2011. As well, the company confirmed it expects the full-year dividend it pays shareholders in each 2013 and 2014 to increase by 20 percent – to $1.44 and $1.75 per share, respectively. The dividend increases are supported by growing fee-based business and the benefit of new projects coming into service, as well as by strong cash coverage. The strength in cash coverage is designed to provide a significant buffer to periodic commodity-price volatility and other potential adverse factors.

For the second quarter this year, Williams expects its adjusted earnings per share will be significantly lower than the first-quarter's results, primarily because of an unexpectedly sharp decline in natural-gas-liquids margins in May and June at Williams Partners L.P.

Additional factors in the change include higher expenses at Williams Partners because of maintenance accelerated during a third-party fractionator outage; costs associated with recent acquisitions; normal seasonal demand changes and maintenance at Williams Partners' gas pipeline business; somewhat lower-than-expected volumes because of construction timing; lower Canadian sales volumes as a result of third-party outages and the effect of filling our new Boreal Pipeline, which went into service in late June.

The company estimates its second-quarter adjusted earnings per share will be approximately $0.21, down from $0.39 in the first quarter this year and $0.29 in the second quarter last year. The company's estimates of its second-quarter results are preliminary and subject to change based on completion of its normal quarter-end review process. As previously announced, the company plans to report its finalized second-quarter financial results on Aug. 1.

Williams' revised guidance midpoints for full-year 2012 and 2013 are, respectively, $1.15 and $1.38 for adjusted earnings per share and $2.9 billion and $3.3 billion for adjusted segment profit plus DD&A.

Regarding commodity prices, the company referenced an NGL-to-crude-oil price ratio that was approximately 40 percent below the 10-year average during the second quarter but recently rebounded somewhat. Key factors in the NGL market weakness have been high propane inventories caused by the extremely warm winter and the effect of the propane oversupply on ethane inventories and pricing.


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