Williams Partners Reports Year-End 2012 Financial Results

• 2012 Net Income is $1.23 Billion, $1.89 per Common Unit
• Significantly Lower NGL Margins – Down 46% in 4Q – Drive Lower 2012 Net Income, DCF
• Midstream Fee-based Business Continues Strong Growth; Up 18% in 4Q vs. Prior Year, Up 17% for Full Year
• Reaffirming Strong Annual Cash Distribution Growth Guidance of 9% for 2013, 2014
• Lowering 2013-14 Earnings Guidance; Expect Fee-Based Business Growth, Ethane-Consuming Gulf Olefins Business Will Partially Offset Effect of Sharply Lower Ethane, Propane Prices
• Robust Demand for Infrastructure, Related Projects, Investments Drive Strong Growth

TULSA, Okla.--(BUSINESS WIRE)--Williams Partners L.P. (NYSE: WPZ):

“Our 2012 results were impacted by the significant decline in NGL margins during the year, but our fee-based business growth, including 18 percent growth in Midstream during the fourth quarter, helped mitigate our commodity exposure.”

Summary Financial Information	Full Year						4Q
Amounts in millions, except per-unit and coverage ratio amounts.		2012			2011			2012			2011
(Unaudited)
Net income	$	1,232		$	1,511		$	291		$	412
Net income per common L.P. unit	$	1.89		$	3.69		$	0.42		$	1.05
Distributable cash flow (DCF) (1)	$	1,681		$	1,786		$	425		$	466
Less: Pre-partnership DCF (2)		(192	)		(136	)		(20	)		(22	)
DCF attributable to partnership operations	$	1,489		$	1,650		$	405		$	444
Cash distribution coverage ratio (1)	0.95x			1.41x			0.92x			1.43x

(1) Distributable Cash Flow and Cash Distribution Coverage Ratio are non-GAAP measures. Reconciliations to the most relevant measures included in GAAP are attached to this news release.

(2) This amount represents DCF from the Gulf Olefins assets from January 2011 through its acquisition date in November 2012, since these periods were prior to the receipt of cash flows from the assets.

Williams Partners L.P. (NYSE: WPZ) today announced unaudited 2012 net income of $1.23 billion, or $1.89 per common limited-partner unit, compared with 2011 net income of $1.51 billion, or $3.69 per common limited-partner unit.

For fourth-quarter 2012, Williams Partners reported net income of $291 million, or $0.42 per common limited-partner unit, compared with $412 million, or $1.05 per common limited-partner unit, for fourth-quarter 2011.

The decline in net income during the 2012 periods is due to a significant decline in natural gas liquid (NGL) margins, primarily driven by a sharp mid-year decline in NGL prices during 2012, which led to lower results in the partnership’s midstream business. Higher expenses associated with developing businesses acquired during 2012, also contributed to the lower results for the year.

An increase in fee-based revenue partially offset the negative impacts of lower NGL prices and other factors. Fee-based revenue in Williams Partners’ midstream business increased by more than 18 percent in fourth-quarter 2012 compared with fourth-quarter 2011. For the full year, fee-based revenue in the partnership’s midstream business was up 17 percent over 2011.

There is a more detailed analysis of the partnership’s businesses later in this news release. Prior-period results throughout this release have been recast to include the results of the olefins production facility acquired from Williams in November 2012.

Distributable Cash Flow

For 2012, Williams Partners generated $1.49 billion in distributable cash flow attributable to partnership operations, compared with $1.65 billion in DCF attributable to partnership operations in 2011.

For the fourth quarter of 2012, Williams Partners generated $405 million in DCF attributable to partnership operations, compared with $444 million for the fourth quarter of 2011.

The previously noted significant decline in NGL margins was the key driver of the decline in distributable cash flow. Higher fee-based revenue in the midstream business partially offset the lower NGL margins. Although fourth-quarter 2012 distributable cash flow declined compared with fourth-quarter 2011, it increased 28 percent sequentially compared with the third-quarter 2012 amount of $316 million.

Williams Partners recently announced that it increased its quarterly cash distribution to unitholders to $0.8275 per unit, an 8.5 percent increase over the year-ago amount. As planned, the partnership’s previously strong cash distribution coverage enabled it to continue its cash distribution growth during a period of significantly unfavorable commodity prices. Also, the partnership has issued a significant amount of additional partnership units this year to finance numerous projects that are in the early stages of development.

CEO Perspective

Alan Armstrong, chief executive officer of Williams Partners’ general partner, made the following comments:

“Our 2012 results were impacted by the significant decline in NGL margins during the year, but our fee-based business growth, including 18 percent growth in Midstream during the fourth quarter, helped mitigate our commodity exposure.

“We continue to rapidly grow our fee-based business. We are directing the vast majority of the $12 billion of our 2012-2014 growth capital to projects that serve to reduce the effect of NGL prices on our earnings. As well, our newly acquired and significantly expanding olefins business also has the effect of reducing our exposure to ethane prices.

“We expect to return our cash-distribution coverage to normal levels in 2014 as we bring into service this vast array of fee-based projects and benefit from the significant expansion of our olefins business.

“The need for reliable energy infrastructure is growing rapidly, as demand continues to grow for low-cost natural gas to serve winter heating loads and cleaner burning power generation, as well as the booming petrochemical and manufacturing sectors. We’re well positioned to help meet these demands; our focus now is executing on the wide variety of growth opportunities across our businesses,” Armstrong said.

2013-14 Guidance

Williams Partners is lowering its 2013-14 guidance for adjusted segment profit and distributable cash flow primarily to reflect sharply lower commodity margin assumptions.

Capital expenditures for 2013-14 are increasing, primarily due to increases of approximately $220 million in 2013 and $210 million in 2014 associated with a change in the forecasting presentation for Williams Partners’ Gulfstar FPS and Constitution Pipeline projects. Previous capital expenditure guidance only reflected Williams Partners’ 51-percent interest in Gulfstar and its 51-percent interest in Constitution. While Williams Partners’ interests in each project are unchanged, the new guidance reflects Gulfstar and Constitution on a fully consolidated basis with our partners non-controlling interests reflected separately. The capital increases associated with this presentation change will be fully offset by capital contributions from the partners on each project.

Earlier this month, Williams Partners announced that Marubeni Corporation agreed to acquire a 49-percent interest in the Gulfstar project. Cabot Oil & Gas (NYSE:COG) and Piedmont Natural Gas (NYSE: PNY) own 25-percent and 24-percent interests in Constitution, respectively.

The partnership’s current commodity price assumptions and the corresponding guidance for its earnings, distributable cash flow and capital expenditures are displayed in the following table:

Commodity Price Assumptions and Average NGL Margins	2013									2014
As of Feb. 20, 2013
	Low			Mid			High			Low			Mid			High
Commodity Price Assumptions
Ethane ($ per gallon)	$	0.23		$	0.33		$	0.43		$	0.30		$	0.40		$	0.50
Propane ($ per gallon)	$	0.81		$	0.96		$	1.11		$	1.05		$	1.20		$	1.35
Natural Gas - NYMEX ($/MMBtu)	$	3.00		$	3.50		$	4.00		$	3.50		$	4.00		$	4.50
Ethylene Spot ($ per pound)	$	0.46		$	0.56		$	0.66		$	0.46		$	0.56		$	0.66
Propylene Spot ($ per pound)	$	0.50		$	0.60		$	0.70		$	0.46		$	0.56		$	0.66
Crude Oil - WTI ($ per barrel)	$	75		$	90		$	105		$	75		$	90		$	105
NGL to Crude Oil Relationship (1)		40	%		40	%		39	%		45	%		44	%		43	%
Crack Spread ($ per pound) (2)	$	0.36		$	0.42		$	0.48		$	0.33		$	0.39		$	0.45
Composite Frac Spread ($ per gallon) (3)	$	0.47		$	0.56		$	0.65		$	0.52		$	0.61		$	0.71
Williams Partners Guidance
Amounts are in millions except coverage ratio.
	Low			Mid			High			Low			Mid			High
DCF attributable to partnership ops. (4)	$	1,625		$	1,800		$	1,975		$	2,270		$	2,475		$	2,680
Total Cash Distribution (5)	$	1,992		$	2,033		$	2,073		$	2,377		$	2,445		$	2,512
Cash Distribution Coverage Ratio (4)	0.82x			0.89x			0.95x			0.95x			1.01x			1.07x
Adjusted Segment Profit (4):
Gas Pipeline	$	725		$	750		$	775		$	775		$	800		$	825
Midstream		900			1,088			1,275			1,525			1,775			2,025
Total Adjusted Segment Profit	$	1,625		$	1,838		$	2,050		$	2,300		$	2,575		$	2,850
Adjusted Segment Profit + DD&A:
Gas Pipeline	$	1,095		$	1,130		$	1,165		$	1,165		$	1,200		$	1,235
Midstream		1,315			1,513			1,710			2,045			2,305			2,565
Total Adjusted Segment Profit + DD&A	$	2,410		$	2,643		$	2,875		$	3,210		$	3,505		$	3,800
Capital Expenditures:
Maintenance	$	315		$	350		$	385		$	350		$	385		$	420
Growth		3,235			3,400			3,565			1,600			1,765			1,930
Total Capital Expenditures	$	3,550		$	3,750		$	3,950		$	1,950		$	2,150		$	2,350

(1) Calculated as the price of natural gas liquids as a percentage of the price of crude oil on an equal volume basis.

(2) Crack spread is based on Delivered U.S. Gulf Coast Ethylene and Mont Belvieu Ethane.

(3) Composite frac spread is based on Henry Hub natural gas and Mont Belvieu NGLs.

(4) Distributable Cash Flow, Cash Distribution Coverage Ratio and Adjusted Segment Profit are non-GAAP measures. Reconciliations to the most relevant measures included in GAAP are attached to this news release.

(5) The cash distributions in guidance are on an accrual basis and reflect an approximate 7% (low), 9% (midpoint), and 11% (high) increase in quarterly limited partner cash distributions annually through 2014.

Business Segment Performance

For its year-end 2012 results, Williams Partners’ operations are reported through two business segments, Gas Pipeline and Midstream Gas & Liquids.

Consolidated Segment Profit	Full Year				4Q
Amounts in millions	2012		2011		2012		2011
Gas Pipeline	$	677	$	673	$	195	$	176
Midstream Gas & Liquids		1,135		1,362		246		364
Total Segment Profit	$	1,812	$	2,035	$	441	$	540
Adjustments		37		11		8		2
Adjusted Segment Profit*	$	1,849	$	2,046	$	449	$	542
* A schedule reconciling segment profit to adjusted segment profit is attached to this press release.

Key Operational Metrics	2011								2012
	1Q		2Q		3Q		4Q		1Q		2Q		3Q		4Q		4Q Change
Fee-based Revenues (millions)																	Year-over-year		Sequential
Gas Pipeline	$	361	$	359	$	368	$	384	$	384	$	366	$	372	$	392	2.1	%	5.4	%
Midstream Gas & Liquids		223		235		257		255		267		281		287		302	18.4	%	5.2	%
Total	$	584	$	594	$	625	$	639	$	651	$	647	$	659	$	694	8.6	%	5.3	%
NGL Margins
NGL margins (millions)	$	207	$	253	$	234	$	287	$	242	$	189	$	167	$	154	-46.3	%	-7.8	%
NGL equity volumes (gallons in millions)		289		308		274		317		308		295		301		279	-12.0	%	-7.3	%
Per-unit NGL margins ($/gallon)	$	0.71	$	0.83	$	0.85	$	0.91	$	0.79	$	0.64	$	0.55	$	0.55	-39.6	%	0.0	%

Gas Pipeline

Williams Partners owns two major interstate natural gas pipeline systems – Transco and Northwest Pipeline – and owns 50 percent of Gulfstream. These systems have a combined peak day delivery capacity of more than 14 billion cubic feet per day (Bcf/d), and transport approximately 14 percent of the natural gas consumed in the United States.

Gas Pipeline reported segment profit of $677 million for 2012, compared with $673 million for 2011. The increase in segment profit for the year was due to increased revenue from expansion projects placed into service, as well as higher equity earnings from Gulfstream due primarily to the partnership’s increased ownership percentage and a decrease in expenses related to the Eminence storage leak. These factors were mostly offset by higher costs and operating expenses.

For fourth-quarter 2012, Gas Pipeline reported segment profit of $195 million, compared with $176 million for the same time period in 2011. The reversal of project feasibility costs of three expansion projects from expense to capital, as well as higher revenue from expansion projects, drove the fourth-quarter 2012 increase in segment profit. Higher costs and expenses partially offset these benefits in the fourth quarter.

Midstream Gas & Liquids

Midstream provides natural gas gathering, treating, and processing; deepwater production handling and oil transportation; and NGL fractionation, storage and transportation services; and olefin production.

The business reported segment profit of $1.14 billion for 2012, compared with segment profit of $1.36 billion for 2011. For fourth-quarter 2012, Midstream reported segment profit of $246 million, compared with $364 million for fourth-quarter 2011.

Significantly lower NGL prices, partially offset by lower natural gas prices, was the primary driver of the lower segment profit in the full-year and fourth-quarter 2012 results. Higher operating costs and selling, general and administrative (SG&A) expenses, both partially attributable to developing businesses acquired during the year, also contributed to the lower segment profit. Included in the full-year 2012 results are $25 million of acquisition and transition costs and $61 million of depreciation expense related to the Caiman (now part of Ohio Valley Midstream area) and Laser (now part of Susquehanna Supply Hub area) acquisitions of early 2012.

Higher fee-based revenues partially offset the negative impacts described above. The increase in fee-based revenues was primarily due to higher volumes in the Marcellus Shale area, including new volumes on the Ohio Valley Midstream system and Susquehanna Supply Hub gathering assets. Higher olefin margins, driven primarily by lower ethylene feedstock prices also partially offset the negative impacts.

Year-End Materials to be Posted Shortly, Q&A Webcast Scheduled for Tomorrow

Williams Partners’ year-end 2012 financial results package will be posted shortly at www.williamslp.com. The package will include the data book and analyst package, and the investor presentation with a recorded commentary from Alan Armstrong, CEO of Williams Partners’ general partner.

Williams Partners L.P. and Williams will host a joint Q&A live webcast on Thursday, Feb. 21 at 9:30 a.m. EST. A limited number of phone lines will be available at [phone]. International callers should dial [phone]. A link to the live year-end webcast, as well as replays of the webcast in both streaming and downloadable podcast formats will be available for two weeks following the event at www.williamslp.com and www.williams.com.

Form 10-K

The partnership plans to file its 2012 Form 10-K with the Securities and Exchange Commission next week. Once filed, the document will be available on both the SEC and Williams Partners websites.

Definitions of Non-GAAP Financial Measures

This press release includes certain financial measures – distributable cash flow, cash distribution coverage ratio, and adjusted segment profit – that are non-GAAP financial measures as defined under the rules of the SEC.

For Williams Partners L.P., adjusted segment profit excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Management believes adjusted segment profit provides investors meaningful insight into Williams Partners L.P.'s results from ongoing operations.

For Williams Partners L.P. we define distributable cash flow as net income plus depreciation and amortization and cash distributions from our equity investments less our earnings from our equity investments, distributions to noncontrolling interests and maintenance capital expenditures. We also adjust for payments and/or reimbursements under omnibus agreements with Williams and certain other items.

For Williams Partners L.P. we also calculate the ratio of distributable cash flow to the total cash distributed (cash distribution coverage ratio). This measure reflects the amount of distributable cash flow relative to our cash distribution. We have also provided this ratio calculated using the most directly comparable GAAP measure, net income.

This press release is accompanied by a reconciliation of these non-GAAP financial measures to their nearest GAAP financial measures. Management uses these financial measures because they are accepted financial indicators used by investors to compare company performance. In addition, management believes that these measures provide investors an enhanced perspective of the operating performance of the Partnership's assets and the cash that the business is generating. Neither adjusted segment profit nor distributable cash flow are intended to represent cash flows for the period, nor are they presented as an alternative to net income or cash flow from operations. They should not be considered in isolation or as substitutes for a measure of performance prepared in accordance with United States generally accepted accounting principles.

About Williams Partners L.P. (NYSE: WPZ)

Williams Partners L.P. is a leading diversified master limited partnership focused on natural gas transportation; gathering, treating, and processing; storage; natural gas liquid (NGL) fractionation; and oil transportation. The partnership owns interests in three major interstate natural gas pipelines that, combined, deliver 14 percent of the natural gas consumed in the United States. The partnership’s gathering and processing assets include large-scale operations in the U.S. Rocky Mountains and both onshore and offshore along the Gulf of Mexico. Williams (NYSE: WMB) owns approximately 70 percent of Williams Partners, including the general-partner interest. More information is available at www.williamslp.com, where the partnership routinely posts important information.

Williams Partners L.P. is a limited partnership formed by The Williams Companies, Inc. Our reports, filings, and other public announcements may contain or incorporate by reference statements that do not directly or exclusively relate to historical facts. Such statements are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. You typically can identify forward-looking statements by various forms of words such as “anticipates,” “believes,” “seeks,” “could,” “may,” “should,” “continues,” “estimates,” “expects,” “assumes,” “forecasts,” “intends,” “might,” “goals,” “objectives,” “targets,” “planned,” “potential,” “projects,” “scheduled,” “will,” “guidance,” “outlook,” “in service date,” or other similar expressions. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to management and include, among others, statements regarding:

• Amounts and nature of future capital expenditures;
• Expansion and growth of our business and operations;
• Financial condition and liquidity;
• Business strategy;
• Cash flow from operations or results of operations;
• The levels of cash distributions to unitholders;
• Seasonality of certain business components; and
• Natural gas, natural gas liquids, and olefins prices and demand.

Forward-looking statements are based on numerous assumptions, uncertainties and risks that could cause future events or results to be materially different from those stated or implied in this announcement. Many of the factors that will determine these results are beyond our ability to control or predict. Specific factors that could cause actual results to differ from results contemplated by the forward-looking statements include, among others, the following:

• Whether we have sufficient cash from operations to enable us to pay current and expected levels of cash distributions, if any, following establishment of cash reserves and payment of fees and expenses, including payments to our general partner;
• Availability of supplies, market demand, volatility of prices, and the availability and cost of capital;
• Inflation, interest rates and general economic conditions (including future disruptions and volatility in the global credit markets and the impact of these events on our customers and suppliers);
• The strength and financial resources of our competitors;
• Ability to acquire new businesses and assets and integrate those operations and assets into our existing businesses, as well as expand our facilities;
• Development of alternative energy sources;
• The impact of operational and development hazards;
• Costs of, changes in, or the results of laws, government regulations (including safety and environmental regulations), environmental liabilities, litigation and rate proceedings;
• Our allocated costs for defined benefit pension plans and other postretirement benefit plans sponsored by our affiliates;
• Changes in maintenance and construction costs;
• Changes in the current geopolitical situation;
• Our exposure to the credit risk of our customers and counterparties;
• Risks related to strategy and financing, including restrictions stemming from our debt agreements, future changes in our credit ratings and the availability and cost of credit;
• The amount of cash distributions from and capital requirements of our investments and joint ventures in which we participate;
• Risks associated with future weather conditions;
• Acts of terrorism, including cybersecurity threats and related disruptions; and
• Additional risks described in our filings with the Securities and Exchange Commission (SEC).

Given the uncertainties and risk factors that could cause our actual results to differ materially from those contained in any forward-looking statement, we caution investors not to unduly rely on our forward-looking statements. We disclaim any obligations to and do not intend to update the above list or to announce publicly the result of any revisions to any of the forward-looking statements to reflect future events or developments.

In addition to causing our actual results to differ, the factors listed above may cause our intentions to change from those statements of intention set forth in this announcement. Such changes in our intentions may also cause our results to differ. We may change our intentions, at any time and without notice, based upon changes in such factors, our assumptions, or otherwise.

Limited partner interests are inherently different from the capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business.

Investors are urged to closely consider the disclosures and risk factors in our annual report on Form 10-K filed with the SEC on February 28, 2012, and our quarterly reports on Form 10-Q available from our offices or from our website.

Net income & distributable cash flow
Dollars in millions	2013 Guidance									2014 Guidance
	Low			Midpoint			High			Low			Midpoint			High
Net Income	$	1,100		$	1,290		$	1,480		$	1,700		$	1,925		$	2,150
D D & A		785			805			825			910			930			950
Maintenance Capex		(315	)		(350	)		(385	)		(350	)		(385	)		(420	)
Attributable to Noncontrolling Interests		-			-			-			(70	)		(75	)		(80	)
Other / Rounding		55			55			55			80			80			80
Distributable Cash Flow	$	1,625		$	1,800		$	1,975		$	2,270		$	2,475		$	2,680
Cash Distributions ^1	$	1,992		$	2,033		$	2,073		$	2,377		$	2,445		$	2,512
Cash Distribution Coverage Ratio	0.82x			0.89x			0.95x			0.95x			1.01x			1.07x
Net Income / Cash Distributions	0.55x			0.63x			0.71x			0.72x			0.79x			0.86x

¹ In 2013-2014 distributions reflect quarterly increases of 1.5¢ in the low case, 2.0¢ in the midpoint case, and 2.5¢ in the high case.

Segment profit guidance – reported to adjusted
Dollars in millions	2013 Guidance						2014 Guidance
	Low		Midpoint		High		Low		Midpoint		High
Reported segment profit:
Midstream	$	900	$	1,088	$	1,275	$	1,525	$	1,775	$	2,025
Gas Pipeline		725		750		775		775		800		825
Total reported segment profit		1,625		1,838		2,050		2,300		2,575		2,850
Adjustments:
Total adjustments - Midstream		-		-		-		-		-		-
Total adjustments - Gas Pipeline		-		-		-		-		-		-
Total segment profit adjustments		-		-		-		-		-		-
Adjusted segment profit:
Midstream		900		1,088		1,275		1,525		1,775		2,025
Gas Pipeline		725		750		775		775		800		825
Total adjusted segment profit	$	1,625	$	1,838	$	2,050	$	2,300	$	2,575	$	2,850