Williams Reports Higher Results Across Key Metrics in Second Quarter

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Williams Reports Higher Results Across Key Metrics in Second Quarter

by ahnationtalk on August 3, 202143 Views

Williams (NYSE: WMB) today announced its unaudited financial results for the three and six months ended June 30, 2021.

Results exceed expectations and trend toward higher end of previously increased 2021 financial guidance

  • Net income of $304 million, or $0.25 per diluted share (EPS)
  • Adjusted EPS of $0.27 per diluted share – up 8% from 2Q 2020
  • Cash flow from operations (CFFO) of $1.1 billion – down $86 million or 8% from 2Q 2020; however, decline was due to working capital fluctuations
  • Available funds from operations (AFFO) of $919 million – up $47 million or 5% from 2Q 2020
  • Adjusted EBITDA of $1.317 billion – up $77 million or 6% from 2Q 2020
  • Achieved record quarterly gathering volumes of 13.79 Bcf/d
  • Debt-to-Adjusted EBITDA at quarter end: 4.13x
  • Dividend coverage ratio is 1.85x (AFFO basis)

Recently executed strategic transactions to drive optimization, synergies and volume growth across portfolio of assets

  • Finalized upstream JV with GeoSouthern in Haynesville, in addition to previously announced JV with Crowheart in Wamsutter
  • Closed Sequent Energy Management acquisition
  • Signed definitive agreements for Shenandoah deepwater Gulf of Mexico expansion project
  • Signed definitive agreements for Whale deepwater Gulf of Mexico expansion project following producer customer reaching final investment decision (FID)

CEO Perspective

Alan Armstrong, president and chief executive officer, made the following comments:

“Williams once again posted another strong quarter of results with Adjusted EBITDA up 6 percent, reflecting record quarterly gas gathering volumes and the successful execution of several critical Transco expansion projects. Our natural gas focused strategy continues to deliver, driven by our connections in the best supply areas and evidenced in another quarter of growth in our gathering volumes despite flat production nationwide. As we move into the second half of the year, we are trending to the higher end of our previously increased 2021 financial guidance and are on track to bring into full service the Leidy South Transco expansion ahead of schedule and in time for the winter heating season.

“Our strategy of connecting the best supplies of affordable, reliable and clean natural gas with growing customer demand continues to produce sustainable growth for our shareholders. Our recent acquisition of Sequent is designed to enhance this strategy and accelerate our natural gas pipeline and storage optimization activities. In addition, our upstream joint ventures with Crowheart in the Wamsutter and GeoSouthern in the Haynesville enhance the value of our midstream infrastructure in those regions, while setting the stage for future clean energy development.”

Armstrong added, “As detailed in our latest sustainability report published last week, we continue to capture near-term emissions reduction opportunities while driving a variety of other ESG initiatives focused on building strong communities, environmental stewardship and workforce diversity. I appreciate our employees for their commitment to sustainable operations as we meet today’s growing need for natural gas and leverage our leading infrastructure for additional low-carbon solutions.”

Williams Summary Financial Information

2Q

Year to Date

Amounts in millions, except ratios and per-share amounts. Per share amounts are reported on a diluted basis. Net income amounts are from continuing operations attributable to The Williams Companies, Inc. available to common stockholders.

2021

2020

2021

2020

GAAP Measures

Net Income (Loss)

$304

$303

$729

($215)

Net Income (Loss) Per Share

$0.25

$0.25

$0.60

($0.18)

Cash Flow From Operations

$1,057

$1,143

$1,972

$1,930

Non-GAAP Measures (1)

Adjusted EBITDA

$1,317

$1,240

$2,732

$2,502

Adjusted Income

$327

$305

$756

$618

Adjusted Income Per Share

$0.27

$0.25

$0.62

$0.51

Available Funds from Operations

$919

$872

$1,948

$1,792

Dividend Coverage Ratio

1.85

x

1.79

x

1.96

x

1.85

x

Other

Debt-to-Adjusted EBITDA at Quarter End (2)

4.13x

4.31

x

Capital Investments (3)

$460

$363

$737

$647

(1) Schedules reconciling Adjusted Income, Adjusted EBITDA, Available Funds from Operations and Dividend Coverage Ratio (non-GAAP measures) to the most comparable GAAP measure are available at www.williams.com and as an attachment to this news release.

(2) Does not represent leverage ratios measured for WMB credit agreement compliance or leverage ratios as calculated by the major credit ratings agencies. Debt is net of cash on hand, and Adjusted EBITDA reflects the sum of the last four quarters.

(3) Capital Investments includes increases to property, plant, and equipment, purchases of businesses, net of cash acquired, and purchases of and contributions to equity-method investments.

GAAP Measures

  • Second-quarter 2021 net income was consistent with the prior year, reflecting $26 million of increased earnings from Northeast G&P equity-method investments and revenues from recently acquired upstream operations, as well as the benefit of increased service revenues from Transco expansion projects and Northeast G&P, partially offset by a decrease from lower gathering volumes in the West. These favorable impacts were substantially offset by $33 million of higher depreciation expense primarily related to accelerated depreciation on decommissioning assets and higher operating and maintenance costs.
  • Year-to-date 2021 net income improved by $944 million over the prior year, reflecting $136 million of higher commodity margins, $54 million of increased earnings from Northeast G&P equity-method investments, and revenues from recently acquired upstream operations, partially offset by $42 million of higher depreciation expense and higher operating and maintenance costs. The improvement over last year also reflects the absence of $1.2 billion in pre-tax charges in 2020 related to impairments of equity-method investments, goodwill and goodwill at an equity investee, of which $65 million was attributable to noncontrolling interests. The provision for income taxes changed unfavorably by $347 million primarily due to higher pre-tax income.
  • The severe winter weather impact in February 2021 and the associated effect on commodity prices is estimated to have had a net favorable impact on our pre-tax results of approximately $77 million, primarily within our commodity margins and results from upstream operations.
  • Cash flow from operations for the second quarter of 2021 decreased as compared to 2020 primarily due to net working capital and other changes, partially offset by $15 million higher distributions from equity-method investments. Year-to-date, cash flow from operations increased due to higher operating results exclusive of non-cash charges and $22 million higher distributions from equity-method investments, partially offset by net working capital and other changes.

Non-GAAP Measures

  • Second-quarter 2021 Adjusted EBITDA increased by $77 million over the prior year, driven by the previously described benefits from recently acquired upstream operations and increased service revenues, as well as $41 million higher proportional EBITDA from Northeast G&P equity-method investments. These improvements were partially offset by higher operating and maintenance costs.
  • Year-to-date Adjusted EBITDA increased by $230 million over the prior year, driven by the previously described benefits from commodity margins and recently acquired upstream operations, as well as $74 million higher proportional EBITDA from Northeast G&P equity-method investments. These improvements were partially offset by higher operating and maintenance costs.
  • Second-quarter 2021 Adjusted Income improved by $22 million over the prior year, while year-to-date Adjusted Income improved by $138 million. The year-to-date increase was driven by the previously described impacts to net income, adjusted to remove the effects of the absence of $1.2 billion in pre-tax charges in 2020 related to impairments and related noncontrolling interest and income tax effects. Second-quarter and year-to-date 2021 were also adjusted to remove the impact of accelerated depreciation on decommissioning assets.
  • Second-quarter 2021 Available Funds From Operations increased by $47 million, primarily due to higher operating results exclusive of non-cash charges, $15 million higher distributions from equity-method investments and lower distributions to noncontrolling interests. The year-to-date increase of $156 million largely reflects higher operating results exclusive of non-cash charges and $22 million higher distributions from equity-method investments.

Business Segment Results & Form 10-Q

Williams’ operations are comprised of the following reportable segments: Transmission & Gulf of Mexico, Northeast G&P, West and Other. For more information, see the company’s second-quarter 2021 Form 10-Q.

Second Quarter

Year to Date

Amounts in millions

Modified EBITDA

Adjusted EBITDA

Modified EBITDA

Adjusted EBITDA

2Q 2021

2Q 2020

Change

2Q 2021

2Q 2020

Change

2021

2020

Change

2021

2020

Change

Transmission & Gulf of Mexico

$646

$615

$31

$648

$617

$31

$1,306

$1,277

$29

$1,308

$1,286

$22

Northeast G&P

409

370

39

409

363

46

811

739

72

811

733

78

West

231

253

(22

)

231

252

(21

)

546

468

78

546

468

78

Other

20

8

12

29

8

21

53

15

38

67

15

52

Totals

$1,306

$1,246

$60

$1,317

$1,240

$77

$2,716

$2,499

$217

$2,732

$2,502

$230

Note: Williams uses Modified EBITDA for its segment reporting. Definitions of Modified EBITDA and Adjusted EBITDA and schedules reconciling to net income are included in this news release.

Transmission & Gulf of Mexico

  • Second-quarter 2021 Modified and Adjusted EBITDA improved compared to the prior year driven by higher natural gas transmission service revenues related to recent expansion projects.
  • Year-to-date Modified and Adjusted EBITDA also improved compared to the prior year, as higher service revenues, commodity margins, and proportional EBITDA from equity-method investments were partially offset by higher operating and administrative costs.

Northeast G&P

  • Second-quarter and year-to-date 2021 Modified and Adjusted EBITDA increased over the prior year driven by higher proportional EBITDA from equity-method investments associated with higher gathering volumes on our Bradford and Marcellus South systems, along with the benefit of an increased ownership in Blue Racer Midstream, acquired in November 2020.
  • Gross gathering volumes for second-quarter 2021, including 100% of operated equity-method investments, increased by 9% over the same period in 2020.

West

  • Second-quarter 2021 Modified and Adjusted EBITDA declined compared to the prior year primarily due to lower service revenues reflecting lower gathering volumes, lower Barnett deferred revenue amortization and the absence of a deficiency fee, partially offset by higher commodity margins driven by higher prices.
  • Year-to-date 2021 Modified and Adjusted EBITDA increased over the prior year primarily due to an estimated $55 million net favorable impact from the February 2021 severe winter weather, $63 million of higher commodity margins driven by higher prices and the absence of prior year inventory impacts, and lower operating and administrative costs. These favorable changes were partially offset by lower service revenues reflecting lower Haynesville gathering revenues from lower rates and volumes, lower Barnett deferred revenue amortization and the absence of a deficiency fee, as well as lower proportional EBITDA from equity method investments driven by reduced transportation volumes on Overland Pass Pipeline.

Other

  • Second-quarter and year-to-date 2021 Modified and Adjusted EBITDA improved compared to the prior year primarily due to our recently acquired oil and gas producing properties. The year-to-date increase reflects an estimated $22 million attributable to the February 2021 severe winter weather.

2021 Financial Guidance

The company expects 2021 Adjusted EBITDA at the higher end of the previously increased guidance range of $5.2 billion to $5.4 billion and Available Funds from Operations between $3.7 billion and $3.9 billion. Moreover, the leverage ratio is expected to be less than the 4.2x midpoint for year-end 2021; growth capex is reaffirmed at $1 billion to $1.2 billion. Importantly, Williams expects to generate positive free cash flow (after capital expenditures and dividends), allowing it to retain financial flexibility.

Williams’ Second-Quarter 2021 Materials to be Posted Shortly; Q&A Webcast Scheduled for Tomorrow

Williams’ second-quarter 2021 earnings presentation will be posted at www.williams.com. The company’s second-quarter 2021 earnings conference call and webcast with analysts and investors is scheduled for Tuesday, Aug. 3, at 9:30 a.m. Eastern Time (8:30 a.m. Central Time). Participants who wish to join the call by phone must register using the following link: http://www.directeventreg.com/registration/event/9217437

A webcast link to the conference call is available at www.williams.com. A replay of the webcast will be available on the website for at least 90 days following the event.

About Williams

Williams (NYSE: WMB) is committed to being the leader in providing infrastructure that safely delivers natural gas products to reliably fuel the clean energy economy. Headquartered in Tulsa, Oklahoma, Williams is an industry-leading, investment grade C-Corp with operations across the natural gas value chain including gathering, processing, interstate transportation and storage of natural gas and natural gas liquids. With major positions in top U.S. supply basins, Williams connects the best supplies with the growing demand for clean energy. Williams owns and operates more than 30,000 miles of pipelines system wide – including Transco, the nation’s largest volume and fastest growing pipeline – and handles approximately 30 percent of the natural gas in the United States that is used every day for clean-power generation, heating and industrial use. www.williams.com

Read More: https://investor.williams.com/press-releases/press-release-details/2021/Williams-Reports-Higher-Results-Across-Key-Metrics-in-Second-Quarter/default.aspx

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