Williams Pipeline Partners announced unaudited 2008 net income of $51.9 million. Net income per limited partner unit was $1.43.
The 2008 per-unit amount is based on prorated net income for the period from the date the partnership completed its initial public offering on Jan. 24 through Dec. 31. Net income for the year is based on a full first quarter.
For fourth-quarter 2008, Williams Pipeline Partners reported net income of $13.3 million. Net income per limited partner unit was $0.39.
Higher transportation volumes contributed to a strong improvement in Northwest Pipeline GP's fourth-quarter operating results. Higher revenues and lower operating expenses were the primary drivers of improvement in Northwest Pipeline's full-year recurring operating results. Those results are a key component of the partnership's earnings from its 35 percent equity interest in Northwest Pipeline.
Total distributable cash flow in 2008 for Williams Pipeline Partners' limited-partner unitholders was $44.8 million, or $1.34 per weighted average limited-partner unit. For fourth-quarter 2008, total distributable cash flow for limited-partner unitholders was $10.7 million, or $0.32 per weighted average limited-partner unit.
Subsequent to the close of the fourth quarter, Williams Pipeline Partners announced it had raised its regular cash distribution to unitholders to $0.32 per unit.
The new distribution amount is a 1.6-percent increase over the third-quarter 2008 distribution of $0.315 per unit and a 6.7-percent increase over the partnership's initial prorated cash distribution to unitholders of $0.2242 per unit for first-quarter 2008.
Liquidity and Debt Maturities
As of Jan. 31, Williams Pipeline Partners had $18.6 million of cash and no outstanding debt. The partnership on Feb. 13 made its fourth-quarter 2008 cash distribution to unitholders; the distribution totaled approximately $11 million.
Northwest Pipeline on Jan. 31 had approximately $54.7 million of available cash through demand notes with Williams (NYSE: WMB) and $381 million of available capacity under Williams' credit facility. Northwest Pipeline has no significant debt maturities until 2016.
Outlook on 2009, Update on Liquidity
The global recession and resulting drop in demand and prices for NGLs has significantly reduced the profitability and cash flows of the partnership's gathering and processing businesses including Four Corners, Wamsutter and Discovery. Partnership management expects continued low NGL margins during 2009. As a result, management expects cash flow from operations, including cash distributions to the partnership from Wamsutter and Discovery, to be significantly lower in 2009 than 2008.
During 2006 through 2008, the partnership's distributable cash flow significantly exceeded its distributions, principally as a result of high NGL prices and margins. The partnership retained a portion of these excess earnings and related cash to create a reserve for future periods when NGL prices and margins might be substantially lower - as they are now and expected to be during 2009.
Williams Partners' cash balance was $65.7 million on Feb. 16, following payment of the fourth-quarter 2008 distribution on Feb. 13.
The partnership's latest business plan for 2009 assumes a range of $40 to $60 per barrel for West Texas Intermediate (WTI) crude oil and $4.50 to $6.00 for natural gas (Henry Hub). Williams Partners expects, but cannot ensure, improved economic conditions and energy prices, as indicated by forward market prices, in 2010.
While the partnership's goal is to maintain the current level of distributions, it may need to reduce distributions if energy prices and margins decline further or remain at low levels for a prolonged period of time; and/or if other unexpected events adversely affect cash flows.
The partnership has $208 million in undrawn credit facilities it may use to fund growth opportunities or for any unforeseen cash requirements. However, debt covenants may restrict the full use of the credit facilities. The partnership has no debt due until 2011.
Chief Operating Officer Perspective
"We had very strong performance in 2008 despite the precipitous decline in NGL prices during the fourth quarter," said Alan Armstrong, chief operating officer of the general partner of Williams Partners.
"The partnership has a firm foundation from which to weather a recession-weakened 2009 commodity environment. For the balance of 2009, we are planning for weak margins and general economic conditions will continue to depress our cash flows from both operations and our equity investments. Though we can't predict future commodity prices, management understands the importance of maintaining the current level of distributions and that is our objective."
Regular cash distributions to unitholders for 2008 were $2.50 per unit. The partnership's cash distribution coverage ratio for 2008 was 1.6.
For the fourth quarter, the partnership's regular cash distribution to unitholders was $0.635 per unit. The partnership's cash distribution coverage ratio was 1.4 for the fourth quarter.
The cash distribution coverage ratio reflects the amount of distributable cash flow the partnership had relative to its cash distributions to both the general partner and limited partners.
The year-to-date 2007 results throughout this release reflect the partnership's 2007 acquisitions of an additional 20-percent interest in Discovery and its Wamsutter ownership interests. Because the acquisitions closed in the last half of 2007, the majority of those assets' net income was allocated to the general partner as pre-partnership income. As a result, a higher portion of the partnership's total net income was allocated to limited partners in 2008 compared with 2007.
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