Williams Partners L.P. Reports Third-Quarter 2009 Financial Results

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-- Net Income, DCF Performance Continue to Improve -- Strong 3Q Results: DCF Up 97% Over 2Q -- 3Q Distribution Coverage Ratio is 1.80x TULSA, Okla., Oct. 29 /PRNewswire-FirstCall/ -- Williams Partners L.P. (NYSE:WPZ) today announced unaudited third-quarter 2009 net income of $55.9 million, compared with third-quarter 2008 net income of $60.8 million. Net income per limited-partner unit for third-quarter 2009 was $1.04, compared with $1.00 per limited-partner unit, as revised, for third-quarter 2008. Lower natural gas liquid (NGL) margins, driven by much lower NGL prices, were the primary reason for the decline in net income in the third quarter. The lower prices were significantly offset by sharply lower natural gas prices. Gathering volumes at Wamsutter and Four Corners remained steady. Lower operating and maintenance expenses at Four Corners and higher volumes at Discovery partially offset the lower NGL margins. Year-to-date through Sept. 30, Williams Partners' net income was $100.0 million, compared with $176.3 million for the same period in 2008. Net income per limited-partner unit for the first nine months of 2009 was $1.88, compared with $2.92, as revised, for the first nine months of 2008. Lower NGL margins, due to much lower NGL prices, were also the primary reason for the decline in net income in the year-to-date period. These lower prices were significantly offset by the benefit of sharply lower natural gas prices. Lower operating and maintenance expenses at Four Corners also helped partially offset the lower NGL margins. Third-quarter and year-to-date 2008 net income per limited-partner unit have been revised pursuant to the adoption of an accounting rule change in 2009, which changed the method the partnership previously used to allocate undistributed earnings between the limited partners and the general partner. Distributable Cash Flow Significantly Improved Versus 2Q '09 For third-quarter 2009, the key measure of distributable cash flow per weighted-average limited partner unit was $1.15, compared with $0.96 for third-quarter 2008. Distributable cash flow for limited-partner unitholders was $60.5 million for third-quarter 2009, compared with $50.5 million for third-quarter 2008. Distributable cash flow per weighted-average limited partner unit was $2.29 for the first nine months of 2009, compared with $2.65 for the first nine months of 2008. Distributable cash flow for limited-partner unitholders was $120.6 million for the first nine months of 2009, compared with $139.3 million for the same period in 2008. The 2009 amounts were significantly, favorably impacted by Williams' (NYSE:WMB) waiver of its incentive distribution rights for 2009. The waiver, which was detailed in the partnership's April 15, 2009, press release, decreases the amount of distributable cash flow allocated to the general partner. Although distributable cash flow is down compared to 2008 for the year-to-date period, it has significantly improved throughout 2009, and is up 97 percent over second-quarter 2009. The partnership's cash distribution coverage ratio was 1.80x for third-quarter 2009, which included the benefit of Williams' IDR waiver. Without that benefit, the partnership's cash distribution coverage ratio would have been 1.48x for third-quarter 2009. The year-over-year declines in distributable cash flow in the 2009 periods are due to lower cash distributions from the Discovery and Wamsutter investments, as well as lower results from Four Corners. Lower NGL margins drove the decline in results at Four Corners and Wamsutter. As a result of 2008 hurricane impacts and sharply lower NGL margins, Discovery did not make cash distributions to the partnership earlier in the year. However, Discovery was fully operational for third-quarter 2009 and paid the partnership an $11.1 million cash distribution in September. Partnership Strengthens Outlook for 2009 DCF, Distribution Coverage Williams Partners' management is updating its outlook for full-year 2009 commodity price assumptions and the corresponding effect on select partnership results to reflect year-to-date results and the outlook for the fourth quarter. The partnership's outlook for 2009 distributable cash flow and cash distribution coverage ratio have both been increased compared with previous guidance, which was issued on Aug. 6. The full commodity price outlook and guidance are presented in the following chart. 2009 Commodity Price Results, Assumptions and Outlook ----------------------------------------------------- YTD 3Q Full-Year 2009 Results Results Assumptions/Outlook ------- ------- ------------------- Low High --- ---- Natural Gas ($/MMBtu): NYMEX $3.93 $3.39 $3.95 $4.35 Rockies $2.79 $2.71 $3.00 $3.40 San Juan $3.02 $2.95 $3.20 $3.50 Oil / NGL: Low High --- ---- Crude Oil - WTI ($/barrel) $53 $68 $55 $60 NGL to Crude Oil relationship* 51% 47% 49% 51% Financial Impacts ----------------- Amounts in millions, except NGL margins and coverage ratios Four Corners NGL Margins ($/gallon) $0.39 $0.46 $0.40 $0.44 Wamsutter NGL Margins ($/gallon) $0.36 $0.43 $0.36 $0.39 2009 Distributable Cash Flow** $123 $62 $170 $190 2009 Distributions $103 $34 $137 $137 Cash Distribution Coverage 1.2x 1.8x 1.2x 1.4x Ratio** * This is calculated as the price of natural gas liquids as a percentage of the price of crude oil on an equal volume basis. ** 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. Management is also providing its initial outlook for 2010 distributable cash flow and cash distribution coverage, as well as NGL margins at Four Corners and Wamsutter, based on current forward market commodity prices for 2010. This information is presented in the following chart. The cash distribution coverage ratio range shown below is based on current annual cash distribution per limited-partner unit of $2.54 and includes full payment of incentive distribution rights to Williams in 2010. 2010 Base Business Outlook -------------------------- Market (10-19-09) ---------- Natural Gas ($/MMBtu): NYMEX $6.31 Rockies $5.74 San Juan $5.83 Oil / NGL: Crude Oil - WTI ($/barrel) $82.52 Crude to Gas Ratio 13:1 NGL to Crude Oil relationship* 50% - 55% Financial Impacts ----------------- Four Corners NGL margin ($/gallon) $0.48 - $0.59 Wamsutter NGL margin ($/gallon) $0.43 - $0.52 Distributable Cash Flow (in millions) ** $175 - $210 Cash Distribution Coverage Ratio** 1.1x - 1.3x * This is calculated as the price of natural gas liquids as a percentage of the price of crude oil on an equal volume basis. ** 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. Chief Operating Officer Perspective "The partnership turned in a very strong performance in the third quarter, as NGL margins have continued to improve and gathering and equity sales volumes were strong across all of our gathering and processing businesses," said Alan Armstrong, chief operating officer of the general partner of Williams Partners. "Our well connect program in the West helped drive a 7 percent increase in gathered volumes at Wamsutter during the quarter; and the new Tahiti volumes, as well as full recovery from the '08 hurricane effects, led to a 51 percent increase in plant inlet volumes at Discovery," Armstrong said. "Our strong performance in the second half of the year will also enable us to pursue some small organic growth opportunities and small bolt-on acquisitions," Armstrong said. Business Segment Performance Business segment performance includes results for the partnership's three business segments: Gathering and Processing - West, which includes Four Corners and the Wamsutter investment; Gathering and Processing - Gulf, which includes the Discovery investment; and NGL Services, which includes the Conway fractionation and storage complex. Consolidated Segment Profit 3Q YTD ---- ----- Amounts in thousands 2009 2008 2009 2008 Gathering and Processing - West $63,482 $70,691 $142,642 $207,874 Gathering and Processing - Gulf 10,925 8,480 15,591 30,437 NGL Services 5,796 6,315 15,286 15,270 ----- ----- ------ ------ Consolidated Segment Profit $80,203 $85,486 $173,519 $253,581 ======= ======= ======== ======== Recurring Consolidated Segment Profit* Amounts in thousands Gathering and Processing - West $58,482 $64,681 $138,608 $195,533 Gathering and Processing - Gulf 10,925 9,370 15,591 31,327 NGL Services 5,796 6,315 15,286 15,270 ----- ----- ------ ------ Recurring Consolidated Segment Profit* $75,203 $80,366 $169,485 $242,130 ======= ======= ======== ======== * A schedule reconciling segment profit to recurring segment profit is attached to this press release. Lower per-unit NGL margins at Four Corners drove the lower results for the Gathering & Processing - West segment during the third quarter. Lower operating and maintenance expenses at Four Corners, as well as higher equity earnings from Wamsutter partially offset the lower NGL margins. The lower operating and maintenance expenses at Four Corners were primarily due to lower system losses. The higher third-quarter equity earnings from Wamsutter were due to a higher allocation of Wamsutter's net income to the partnership in 2009 compared with 2008. Based on the provisions of Wamsutter's LLC agreement, Williams Partners' share of Wamsutter's net income varies depending on its year-to-date net income for a given period and the partnership's overall level of ownership. This higher allocation offset the decrease in Wamsutter's total net income. Higher third-quarter equity earnings from the Discovery investment drove the higher segment profit in the Gathering and Processing -- Gulf segment for the third-quarter of 2009. Discovery's third-quarter 2008 equity earnings were reduced by approximately $5.0 million as a result of hurricane-related damages and downtime. Lower per-unit NGL margins at Four Corners and lower equity earnings from Wamsutter were the key drivers of the lower year-to-date results in the Gathering and Processing - West segment. Lower per-unit NGL margins led to the lower equity earnings at Wamsutter. Downtime at Ignacio due to the June 2009 pipeline rupture also negatively affected the year-to-date results. Lower operating and maintenance expenses at Four Corners, as well as higher fee-based revenues at Wamsutter on higher gathering volumes partially offset the lower NGL margins. The lower operating and maintenance expenses at Four Corners were primarily due to lower system losses. Lower equity earnings from the Discovery investment drove the lower segment profit results in the Gathering and Processing - Gulf segment for the year-to-date 2009 period. The reduced equity earnings were due primarily to lower per-unit NGL margins and lower plant inlet volumes as both Discovery and its producers worked to recover from the 2008 hurricane damage. These negative impacts were partially offset in the year-to-date period by the receipt of $4.2 million in business interruption insurance proceeds on the Discovery investment during the first quarter. Reconciliations of the partnership's distributable cash flow for limited-partner unitholders to net income, cash distribution coverage ratio, as well as recurring segment profit to reported segment profit, are available on Williams Partners' web site at http://www.williamslp.com/ and as an attachment to this document. Definitions of Non-GAAP Financial Measures Williams Partners defines recurring segment profit as segment profit excluding items of income or loss that the partnership characterizes as unrepresentative of its ongoing operations. Williams Partners defines distributable cash flow attributable to partnership operations as net income (loss) plus depreciation, amortization and accretion, less earnings from equity investments, as well as adjustments for certain non-cash, non-recurring items, plus reimbursements from Williams under an omnibus agreement and less maintenance capital expenditures, plus the actual cash distributed by Wamsutter and Discovery. Distributable cash flow per weighted average limited-partner unit is a key measure of the partnership's financial performance and available cash flows to unitholders. Williams Partners defines distributable cash flow per limited-partner unit as distributable cash flow attributable to partnership operations allocable to limited partners divided by the weighted average limited partner-units outstanding. Distributable cash flow attributable to partnership operations allocable to limited partners is calculated by allocating the distributable cash flow attributable to partnership operations, as defined in the preceding paragraph, between the general partner and the limited partners in accordance with the cash-distribution provisions of our partnership agreement. Williams Partners calculates the ratio of distributable cash flow per limited partner unit to the actual cash distribution per unit paid and the ratio of distributable cash flow attributable to partnership operations to the total cash distributed (cash distribution coverage ratio). These two measures reflect the amount of distributable cash flow relative to the partnership's actual cash distribution on both a per limited partner unit and total distribution basis. Today's Analyst Call Williams Partners' management will discuss the partnership's third-quarter 2009 financial results during a live webcast today beginning at 11 a.m. EDT. Participants are encouraged to access the webcast and slides for viewing, downloading and printing at http://www.williamslp.com/. A limited number of phone lines also will be available at (888) 208-1812. International callers should dial (719) 325-2327. Replays of the third-quarter webcast, in both streaming and downloadable podcast formats, will be available for two weeks at http://www.williamslp.com/ following the event. Form 10-Q The partnership plans to file its Form 10-Q with the Securities and Exchange Commission today. The document will be available on both the SEC and Williams Partners web sites. About Williams Partners L.P. (NYSE:WPZ) Williams Partners L.P. is a publicly traded master limited partnership that owns natural gas gathering, transportation, processing and treating assets serving regions where producers require large scale and highly reliable services, including the Gulf of Mexico, the San Juan Basin in New Mexico and Colorado, and the Washakie Basin in Wyoming. The partnership also serves the natural gas liquids (NGL) market through its NGL fractionating and storage assets. The general partner is Williams Partners GP LLC. More information about the partnership is available at www.williamslp.com. Go to http://www.b2i.us/irpass.asp?BzID=1296&to=ea&s=0 to join our e-mail list. Contact: Jeff Pounds Williams (media relations) (918) 573-3332 Sharna Reingold Williams (investor relations) (918) 573-2078 Williams Partners L.P. is a limited partnership formed by The Williams Companies, Inc. (Williams). 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 the Private Securities Litigation Reform Act of 1995. You typically can identify forward-looking statements by the use of forward-looking words, such as "anticipates," believes," "could," "may," "should," "continues," "estimates," "expects," "forecasts," "intends," "might," "objectives," "planned," "potential," "projects," "scheduled," "will," and other similar expressions. These statements are based on our present intentions and our assumptions about future events and are subject to risks, uncertainties, and other factors. In addition to any assumptions, risks, uncertainties or other factors referred to specifically in connection with such statements, other factors not specifically referenced could cause our actual results to differ materially from the results expressed or implied in any forward-looking statements. Those factors include, among others: -- whether we have sufficient cash from operations to enable us to maintain current levels of cash distributions or to pay the minimum quarterly distribution following establishment of cash reserves and payment of fees and expenses, including payments to our general partner; -- availability of supplies (including the uncertainties inherent in assessing and estimating future natural gas reserves), market demand, volatility of prices, and the availability and cost of capital; -- inflation, interest rates and general economic conditions (including the current economic slowdown and the disruption of global credit markets and the impact of these events on our customers and suppliers); -- the strength and financial resources of our competitors; -- development of alternative energy sources; -- the impact of operational and development hazards; -- costs of, changes in, or the results of laws, government regulations (including proposed climate change legislation), environmental liabilities, litigation, and rate proceedings; -- changes in maintenance and construction costs; -- changes in the current geopolitical situation; -- our exposure to the credit risks of our customers; -- 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; -- risks associated with future weather conditions; -- acts of terrorism; and -- additional risks described in our filings with the Securities and Exchange Commission. 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. In addition to causing our actual results to differ, the factors listed above may cause our intentions to change. Such changes in our intentions may also cause our results to differ. We disclaim any obligation to and do not intend to publicly update or revise any forward-looking statements or changes to our intentions, whether as a result of new information, future events 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 Forms 10-K filed with the Securities and Exchange Commission on February 26, 2009, and our quarterly reports on Form 10-Q available from our offices or from our website at www.williamslp.com. Reconciliation of Non-GAAP Measures (UNAUDITED) This press release includes certain financial measures, Recurring Segment Profit, Distributable Cash Flow and Distributable Cash Flow per Limited Partner Unit that are non-GAAP financial measures as defined under the rules of the Securities and Exchange Commission. For Williams Partners L.P., Recurring Segment Profit excludes items of income or loss that we characterize as unrepresentative of our ongoing operations. Management believes Recurring 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 attributable to partnership operations as net income (loss) plus depreciation, amortization and accretion, less our earnings from equity investments, as well as adjustments for certain non-cash, non-recurring items, plus reimbursements from Williams under an omnibus agreement and less maintenance capital expenditures, plus the actual cash distributed by Wamsutter and Discovery. For our equity investments, Wamsutter and Discovery, we define Distributable Cash Flow as net income (loss) plus depreciation, amortization and accretion and less maintenance capital expenditures. We also adjust for certain non-cash, non-recurring items. Our equity share of Wamsutter's Distributable Cash Flow is based on the distribution provisions of the Wamsutter LLC Agreement. Our equity share of Discovery's Distributable Cash Flow is 60%. For Williams Partners L.P. we define Distributable Cash Flow per Limited Partner Unit as Distributable Cash Flow attributable to partnership operations allocable to limited partners divided by the weighted average limited partner units outstanding. Distributable Cash Flow attributable to partnership operations allocable to limited partners is calculated by allocating the distributable cash flow attributable to partnership operations, as defined in the preceding paragraph, between the general partner and the limited partners in accordance with the cash distribution provisions of our partnership agreement. For Williams Partners L.P. we also calculate the ratio of Distributable Cash Flow per Limited Partner Unit to the actual cash distribution per unit paid and the ratio of Distributable Cash Flow attributable to partnership operations to the total cash distributed (cash distribution coverage ratio). These measures reflect the amount of Distributable Cash Flow relative to our cash distribution on both a per Limited Partner Unit and total distribution basis. We have also provided these ratios calculated using the most directly comparable GAAP measures, net income per unit and 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 Recurring 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 (loss) or cash flow from operations. Distributable Cash Flow per Limited Partner is not presented as an alternative to net income per unit. 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. 2008 ---- (Thousands, except per- unit amounts) 1st Qtr 2nd Qtr 3rd Qtr Y-T-D 4th Qtr Full Year -------------- ------- ------- ------- ----- ------- --------- Williams Partners L.P. Reconciliation of Non-GAAP "Recurring Segment Profit" to GAAP "Segment Profit" Gathering and Processing - West $50,405 $86,778 $70,691 $207,874 $46,288 $254,162 Gathering and Processing - Gulf 13,511 8,446 8,480 30,437 (14,590) 15,847 NGL Services 5,541 3,414 6,315 15,270 8,768 24,038 ----- ----- ----- ------ ----- ------ Segment Profit 69,457 98,638 85,486 253,581 40,466 294,047 Non-recurring Items: Gathering and Processing - West Involuntary conversion gain resulting from Ignacio fire - (3,266) (6,010) (9,276) (2,328) (11,604) Wamsutter customer contract adjustment included in equity earnings (3,065) - - (3,065) - (3,065) Gathering and Processing - Gulf Discovery hurricane repair expenses up to insurance deductible (60%) - - 890 890 2,935 3,825 Hurricane- related survey costs (60%) - - - - 1,188 1,188 NGL Services Product imbalance valuation adjustment - - - - (1,437) (1,437) Other items: Gathering and Processing - Gulf Impairment of Carbonate Trend gathering pipeline - - - - 6,187 6,187 ------- ------- ------ -------- ----- ----- Recurring Segment Profit $66,392 $95,372 $80,366 $242,130 $47,011 $289,141 ======= ======= ======= ======== ======= ======== 2009 ---- (Thousands, except per- unit amounts) 1st Qtr 2nd Qtr 3rd Qtr Y-T-D -------------- ------- ------- ------- ----- Williams Partners L.P. Reconciliation of Non-GAAP "Recurring Segment Profit" to GAAP "Segment Profit" Gathering and Processing - West $38,310 $40,850 $63,482 $142,642 Gathering and Processing - Gulf 691 3,975 10,925 15,591 NGL Services 4,316 5,174 5,796 15,286 ----- ----- ----- ------ Segment Profit 43,317 49,999 80,203 173,519 Non-recurring Items: Gathering and Processing - West Involuntary conversion gain resulting from Ignacio fire 966 - (5,000) (4,034) Wamsutter customer contract adjustment included in equity earnings - - - - Gathering and Processing - Gulf Discovery hurricane repair expenses up to insurance deductible (60%) - - - - Hurricane- related survey costs (60%) - - - - NGL Services Product imbalance valuation adjustment - - - - Other items: Gathering and Processing - Gulf Impairment of Carbonate Trend gathering pipeline - - - - ------- ------- ------- -------- Recurring Segment Profit $44,283 $49,999 $75,203 $169,485 ======= ======= ======= ======== 2008 ---- (Thousands, except per- unit amounts) 1st 2nd 3rd 4th Full Qtr Qtr Qtr Y-T-D Qtr Year ------ ------- ------- ------- ----- ------- ---- Williams Partners L.P. Reconciliation of Non-GAAP "Distributable Cash Flow per Limited Partner Unit" to GAAP "Net income" Net income $43,629 $71,822 $60,833 $176,284 $15,105 $191,389 Depreciation, amort- ization and accretion 11,226 11,002 11,735 33,963 11,066 45,029 Non-cash amortization of debt issuance costs included in interest expense 489 459 459 1,407 461 1,868 Involuntary conversion gain resulting from Ignacio fire - (3,266) (6,010) (9,276) (2,328) (11,604) Equity earnings (34,815) (46,050) (29,045) (109,910) 731 (109,179) Reimburse- ments from Williams under omnibus agreement 771 865 692 2,328 653 2,981 Impairment of Carbonate Trend gathering pipeline - - - - 6,187 6,187 Maintenance capital expendi- tures(a) (8,534) (2,497) (5,309) (16,340) (5,420) (21,760) ----- ----- ----- ------ ----- ------ Distributable Cash Flow Excluding Equity Invest- ments 12,766 32,335 33,355 78,456 26,455 104,911 ------ ------ ------ ------ ------ ------- Plus: Wamsutter cash distributions to Williams Partners L.P. 22,704 26,603 28,989 78,296 20,843 99,139 Plus: Discovery's cash distributions to Williams Partners L.P. (b) 16,800 15,600 13,200 45,600 10,800 56,400 ------ ------ ------ ------ ------ ------ Distributable cash flow attributable to partner- ship operations 52,270 74,538 75,544 202,352 58,098 260,450 Distributable Cash Flow attributable to partnership operations allocable to general partner 13,431 24,565 25,067 63,063 16,344 79,407 ------ ------ ------ ------ ------ ------ Distributable Cash Flow attributable to limited partnership operations allocable to limited partners $38,839 $49,973 $50,477 $139,289 $41,754 $181,043 ======= ======= ======= ======== ======= ======== Weighted average number of units out- stand- ing: 52,774,728 52,774,728 52,775,912 52,775,126 52,777,452 52,775,710 ========== ========== ========== ========== ========== ========== Distributable Cash Flow attributable to partnership operations per limited partner unit: $0.74 $0.95 $0.96 $2.65 $0.79 $3.44 ===== ===== ===== ===== ===== ===== Actual cash distribution per unit: $0.600 $0.625 $0.635 $1.860 $0.635 $2.495 Total cash distrib- uted: $37,922 $40,560 $41,617 $120,099 $41,617 $161,716 Coverage ratios: Distributable Cash Flow attributable to partnership operations per limited partner unit divided by Actual cash distribution per unit: 1.23 1.52 1.51 1.42 1.25 1.38 ==== ==== ==== ==== ==== ==== Distributable cash flow attributable to partnership operations divided by Total cash distributed 1.38 1.84 1.82 1.68 1.40 1.61 ==== ==== ==== ==== ==== ==== Distributable cash flow attributable to partnership operations divided by total cash distribution excluding Williams' IDR Support (c) N/A N/A N/A N/A N/A N/A ======= ======= ======= ======= ======= ======= Net income, per common and subordinated unit divided by Actual cash distribution per unit 1.18 1.94 1.57 1.57 0.24 1.23 ==== ==== ==== ==== ==== ==== Net income divided by Total cash distributed 1.15 1.77 1.46 1.47 0.36 1.18 ==== ==== ==== ==== ==== ==== (a) Maintenance capital expenditures includes certain well connection capital. (b) Discovery's LLC agreement was amended in the second quarter 2009 so that it would make its cash distribution for a given quarter in that same quarter. (c) Williams' IDR support is a reduction of total cash distributed of approximately $7.4 million. Wamsutter Reconciliation of Non-GAAP "Distributable Cash Flow" to GAAP "Net income" Net income $21,194 $37,480 $32,007 $90,681 $13,083 $103,764 Depreciation and accretion 5,228 5,213 5,295 15,736 5,446 21,182 Maintenance capital expendi- tures (3,245) (6,258) (5,867) (15,370) (6,070) (21,440) ----- ----- ----- ------ ----- ------ Distributable Cash Flow - 100% $23,177 $36,435 $31,435 $91,047 $12,459 $103,506 ======= ======= ======= ======= ======= ======== Discovery Producer Services Reconciliation of Non-GAAP "Distributable Cash Flow" to GAAP "Net income" Net income (loss) $22,701 $14,282 $13,740 $50,723 ($16,323) $34,400 Depreciation and accretion 6,983 6,802 3,726 17,511 3,813 21,324 Maintenance capital expendi- tures (187) (285) (680) (1,152) (19) (1,171) --- --- --- ----- --- ----- Distributable Cash Flow - 100% $29,497 $20,799 $16,786 $67,082 ($12,529) $54,553 ======= ======= ======= ======= ======== ======= Distributable Cash Flow - our 60% interest $17,698 $12,479 $10,072 $40,249 ($7,517) $32,732 ======= ======= ======= ======= ======= ======= 2009 ---- (Thousands, except per-unit amounts) 1st Qtr 2nd Qtr 3rd Qtr Y-T-D ------------------ ------- ------- ------- ----- Williams Partners L.P. Reconciliation of Non-GAAP "Distributable Cash Flow per Limited Partner Unit" to GAAP "Net income" Net income $18,672 $25,368 $55,947 $99,987 Depreciation, amortization and accretion 11,184 11,164 11,288 33,636 Non-cash amortization of debt issuance costs included in interest expense 460 462 461 1,383 Involuntary conversion gain resulting from Ignacio fire 966 - (5,000) (4,034) Equity earnings (12,110) (22,962) (34,700) (69,772) Reimbursements from Williams under omnibus agreement 327 914 760 2,001 Impairment of Carbonate Trend gathering pipeline - - - - Maintenance capital expenditures (a) (5,142) (7,176) (3,780) (16,098) ------ ------ ------ ------- Distributable Cash Flow Excluding Equity Investments 14,357 7,770 24,976 47,103 ------ ----- ------ ------ Plus: Wamsutter cash distributions to Williams Partners L.P. 15,643 20,045 25,634 61,322 Plus: Discovery's cash distributions to Williams Partners L.P. (b) - 3,540 11,100 14,640 ------ ----- ------ ------ Distributable cash flow attributable to partnership operations 30,000 31,355 61,710 123,065 Distributable Cash Flow attributable to partnership operations allocable to general partner 600 627 1,234 2,461 --- --- ----- ----- Distributable Cash Flow attributable to limited partnership operations allocable to limited partners $29,400 $30,728 $60,476 $120,604 ======= ======= ======= ======== Weighted average number of units outstanding: 52,777,452 52,777,452 52,777,452 52,777,452 ========== ========== ========== ========== Distributable Cash Flow attributable to partnership operations per limited partner unit: $0.56 $0.58 $1.15 $2.29 ===== ===== ===== ===== Actual cash distribution per unit: $0.635 $0.635 $0.635 $1.905 Total cash distributed: $34,197 $34,197 $34,197 $102,591 Coverage ratios: Distributable Cash Flow attributable to partnership operations per limited partner unit divided by Actual cash distribution per unit: 0.88 0.92 1.80 1.20 ==== ==== ==== ==== Distributable cash flow attributable to partnership operations divided by Total cash distributed 0.88 0.92 1.80 1.20 ==== ==== ==== ==== Distributable cash flow attributable to partnership operations divided by total cash distribution excluding Williams' IDR Support (c) 0.72 0.75 1.48 0.99 ==== ==== ==== ==== Net income, per common and subordinated unit divided by Actual cash distribution per unit 0.57 0.76 1.64 0.99 ==== ==== ==== ==== Net income divided by Total cash distributed 0.55 0.74 1.64 0.97 ==== ==== ==== ==== (a) Maintenance capital expenditures includes certain well connection capital. (b) Discovery's LLC agreement was amended in the second quarter 2009 so that it would make its cash distribution for a given quarter in that same quarter. (c) Williams' IDR support is a reduction of total cash distributed of approximately $7.4 million. Wamsutter Reconciliation of Non-GAAP "Distributable Cash Flow" to GAAP "Net income" Net income $15,321 $18,975 $23,642 $57,938 Depreciation and accretion 5,447 5,556 5,684 16,687 Maintenance capital expenditures (5,437) (6,080) (2,787) (14,304) ------ ------ ------ ------- Distributable Cash Flow - 100% $15,331 $18,451 $26,539 $60,321 ======= ======= ======= ======= Discovery Producer Services Reconciliation of Non-GAAP "Distributable Cash Flow" to GAAP "Net income" Net income (loss) ($5,352) $6,646 $18,430 $19,724 Depreciation and accretion 3,929 4,765 5,005 13,699 Maintenance capital expenditures (70) (1,037) (518) (1,625) --- ------ ---- ------ Distributable Cash Flow - 100% ($1,493) $10,374 $22,917 $31,798 ======= ======= ======= ======= Distributable Cash Flow - our 60% interest ($896) $6,224 $13,750 $19,079 ===== ====== ======= ======= Williams Partners L.P. Reconciliation of Non-GAAP "Distributable Cash Flow attributable to partnership operations" and coverage ratio outlook for 2009 and 2010 (Dollars in millions) Full Year 2009 Full Year 2010 -------------- -------------- Total Year Total Year Total Year Total Year Low High Low High --- ---- --- ---- Net income $130 $151 $144 $178 Depreciation, amortization and accretion 45 45 46 46 Certain non-cash, non-recurring items (3) (2) (7) (5) Reimbursements from Williams under omnibus agreement 4 4 1 1 Equity earnings (94) (99) (107) (123) Maintenance capital expenditures (21) (21) (32) (32) --- --- --- --- Distributable cash flow excluding equity investments $61 $78 $45 $65 --- --- --- --- Plus: Wamsutter cash distributions to Williams Partners L.P. 86 87 99 107 Plus: Discovery's cash distributions to Williams Partners L.P. 23 25 31 38 -- -- -- -- Distributable cash flow attributable to partnership operations $170 $190 $175 $210 ==== ==== ==== ==== Total cash to be distributed $137 $137 $166 $166 Coverage Ratios: Distributable cash flow attributable to partnership operations divided by total cash distributed 1.2 1.4 1.1 1.3 === === === === Net income divided by total cash distributed 1.0 1.1 0.9 1.1 === === === === Consolidated Statements of Income (UNAUDITED) 2008* ---- (Thousands, except per-unit amounts) ---------------- 1st Qtr 2nd Qtr 3rd Qtr Y-T-D 4th Qtr Full Year ------- ------- ------- ----- ------- --------- --------- Revenues: --------- Product sales: Affiliate $78,122 $94,134 $92,421 $264,677 $49,622 $314,299 Third- party 4,221 9,741 6,430 20,392 4,589 24,981 Gathering and processing: Affiliate 8,790 9,847 9,480 28,117 9,776 37,893 Third- party 46,210 49,548 50,721 146,479 48,577 195,056 Storage 7,333 7,102 8,264 22,699 8,730 31,429 Fractiona- tion 3,292 4,804 5,484 13,580 3,861 17,441 Other 2,394 3,069 2,913 8,376 7,585 15,961 ----- ----- ----- ----- ----- ------ Total revenues 150,362 178,245 175,713 504,320 132,740 637,060 Cost and expenses: Product cost and shrink replacement: Affiliate 22,033 27,686 22,358 72,077 13,295 85,372 Third- party 30,065 38,323 35,391 103,779 16,927 120,706 Operating and maintenance expense: Affiliate 23,133 16,548 21,220 60,901 15,834 76,735 Third- party 23,951 29,984 29,257 83,192 25,974 109,166 Depreciation, amortization and accretion 11,226 11,002 11,735 33,963 11,066 45,029 General and administrative expense: Affiliate 9,876 12,385 10,620 32,881 11,184 44,065 Third- party 928 749 664 2,341 653 2,994 Taxes other than income 2,505 2,167 2,314 6,986 2,522 9,508 Other, net 333 (2,811) (5,822) (8,300) 4,777 (3,523) --- ------ ------ ------ ----- ------ Total costs and expenses 124,050 136,033 127,737 387,820 102,232 490,052 ------- ------- ------- ------- ------- ------- Operating income 26,312 42,212 47,976 116,500 30,508 147,008 Equity earnings - Wamsutter 21,194 37,480 20,801 79,475 9,063 88,538 Discovery investment income (loss) 13,621 8,570 8,244 30,435 (8,078) 22,357 Interest expense (17,673) (16,683) (16,437) (50,793) (16,427) (67,220) Interest income 175 243 249 667 39 706 --- --- --- --- -- --- Net income $43,629 $71,822 $60,833 $176,284 $15,105 $191,389 ======= ======= ======= ======== ======= ======== Allocation of net income * Net income $43,629 $71,822 $60,833 $176,284 $15,105 $191,389 Allocation of net income (loss) to general partner* 5,981 7,811 7,985 21,777 7,180 28,957 ----- ----- ----- ------ ----- ------ Allocation of net income to limited partners* $37,648 $64,011 $52,848 $154,507 $7,925 $162,432 Net income, per common and subordinated unit* $0.71 $1.21 $1.00 $2.92 $0.15 $3.07 Weighted average number of units out- stand- ing 52,774,728 52,774,728 52,775,912 52,775,126 52,777,452 52,775,710 2009 ---- (Thousands, except per- unit amounts) 1st Qtr 2nd Qtr 3rd Qtr Y-T-D ----------------------- ------- ------- ------- ----- --------- Revenues: --------- Product sales: Affiliate $30,872 $32,886 $48,977 $112,735 Third-party 2,291 5,178 3,285 10,754 Gathering and processing: Affiliate 10,610 10,826 10,990 32,426 Third-party 47,255 44,462 48,425 140,142 Storage 8,361 8,101 8,531 24,993 Fractionation 2,557 2,619 2,396 7,572 Other 3,522 2,255 2,549 8,326 ----- ----- ----- ----- Total revenues 105,468 106,327 125,153 336,948 Cost and expenses: Product cost and shrink replacement: Affiliate 8,866 7,446 9,066 25,378 Third-party 11,296 13,092 20,937 45,325 Operating and maintenance expense: Affiliate 11,759 10,615 10,352 32,726 Third-party 28,147 31,766 27,232 87,145 Depreciation, amortization and accretion 11,184 11,164 11,288 33,636 General and administrative expense: Affiliate 11,587 11,879 11,551 35,017 Third-party 893 643 646 2,182 Taxes other than income 2,436 2,325 2,586 7,347 Other, net 1,679 (18) (5,019) (3,358) ----- --- ------ ------ Total costs and expenses 87,847 88,912 88,639 265,398 ------ ------ ------ ------- Operating income 17,621 17,415 36,514 71,550 Equity earnings - Wamsutter 15,321 18,975 23,642 57,938 Discovery investment income (loss) 812 4,151 11,058 16,021 Interest expense (15,116) (15,200) (15,281) (45,597) Interest income 34 27 14 75 -- -- -- -- Net income $18,672 $25,368 $55,947 $99,987 ======= ======= ======= ======= Allocation of net income * Net income $18,672 $25,368 $55,947 $99,987 Allocation of net income (loss) to general partner* (372) (137) 921 412 ---- ---- --- --- Allocation of net income to limited partners* $19,044 $25,505 $55,026 $99,575 Net income, per common and subordinated unit* $0.36 $0.48 $1.04 $1.88 Weighted average number of units outstanding 52,777,452 52,777,452 52,777,452 52,777,452 *The Net income, per common and subordinated unit for 2008 amounts have been retrospectively adjusted for new guidance regarding the application of the two-class method to calculate earnings per unit for Master Limited Partnerships, which states, among other things, that the calculation of earnings per unit should not reflect an allocation of undistributed earnings to the incentive distribution right (IDR) holders beyond amounts distributable to IDR holders under the terms of the partnership agreement. Previously, under generally accepted accounting principles, we calculated earnings per unit as if all the earnings for the period had been distributed, which resulted in an additional allocation of income to the general partner (the IDR holder) in quarterly periods where an assumed incentive distribution exceeded the actual incentive distribution. Following the adoption of this guidance, we no longer calculate assumed incentive distributions. We adopted this guidance in January 2009, and have retrospectively Segment Profit & Operating Statistics (UNAUDITED) 2008 ---- 1st Qtr 2nd Qtr 3rd Qtr Y-T-D 4th Qtr Full (Thousands) Year ----------- ------- ------- ------- ----- ------- ---- Gathering and Processing - West Segment revenues $132,333 $158,563 $155,217 $446,113 $114,025 $560,138 Cost and expenses: Product cost and shrink replacement 47,446 61,144 53,902 162,492 26,700 189,192 Operating and maintenance expense 40,893 36,677 42,129 119,699 37,014 156,713 Depreciation, amortization and accretion 10,299 10,136 10,811 31,246 9,969 41,215 Direct general and administrative expenses 1,930 2,058 2,188 6,176 2,157 8,333 Other, net 2,554 (750) (3,703) (1,899) 960 (939) ----- ---- ------ ------ --- ---- Segment operating income 29,211 49,298 49,890 128,399 37,225 165,624 Equity earnings 21,194 37,480 20,801 79,475 9,063 88,538 ------ ------ ------ ------ ----- ------ Segment profit $50,405 $86,778 $70,691 $207,874 $46,288 $254,162 ======= ======= ======= ======== ======= ======== ----------------- Gathering and Processing - Gulf Segment revenues $567 $546 $537 $1,650 $446 $2,096 Cost and expenses: Operating and maintenance expense 524 519 148 1,191 477 1,668 Depreciation and accretion 153 151 153 457 294 751 Other, net - - - - 6,187 6,187 --- --- --- --- ----- ----- Segment operating income (loss) (110) (124) 236 2 (6,512) (6,510) Discovery investment income (loss) 13,621 8,570 8,244 30,435 (8,078) 22,357 ------ ----- ----- ------ ------ ------ Segment profit (loss) $13,511 $8,446 $8,480 $30,437 ($14,590) $15,847 ======= ====== ====== ======= ======== ======= ------------ NGL Services Segment revenues $17,462 $19,136 $19,959 $56,557 $18,269 $74,826 Cost and expenses: Product cost 4,652 4,865 3,847 13,364 3,522 16,886 Operating and maintenance expense 5,667 9,336 8,200 23,203 4,317 27,520 Depreciation and accretion 774 715 771 2,260 803 3,063 Direct general and administrative expenses 544 700 631 1,875 707 2,582 Other, net 284 106 195 585 152 737 --- --- --- --- --- --- Segment profit $5,541 $3,414 $6,315 $15,270 $8,768 $24,038 ====== ====== ====== ======= ====== ======= ------------------ Williams Partners: Conway storage revenues $7,333 $7,102 $8,264 $22,699 $8,730 $31,429 Conway fractionation volumes (bpd) - our 50% 33,103 38,173 43,829 38,388 40,898 39,019 Carbonate Trend gathering volumes (BBtu/d) 24 23 21 23 19 22 Williams Four Corners: Gathering volumes (BBtu/d) 1,316 1,410 1,406 1,377 1,388 1,380 Plant inlet natural gas volumes (BBtu/d) 547 680 681 636 673 646 NGL equity sales (million gallons) 36 43 43 122 40 162 NGL margin ($/gallon) $0.74 $0.78 $0.88 $0.80 $0.57 $0.75 NGL production (million gallons) 112 140 134 386 132 518 Wamsutter - 100%: Gathering volumes (BBtu/d) 434 521 506 487 534 499 Plant inlet natural gas volumes (BBtu/d) 404 427 393 408 413 409 NGL equity sales (million gallons) 41 36 30 107 32 139 NGL margin ($/gallon) $0.58 $0.63 $0.77 $0.65 $0.40 $0.59 NGL production (million gallons) 106 114 97 317 98 415 Discovery Producer Services - 100% Plant inlet natural gas volumes (BBtu/d) 627 614 378 539 211 457 Gross processing margin ($/MMBtu) $0.45 $0.36 $0.48 $0.42 $- $0.37 NGL equity sales (million gallons) 37 23 21 81 4 85 NGL production (million gallons) 70 58 43 171 10 181 2009 ---- (Thousands) 1st Qtr 2nd Qtr 3rd Qtr Y-T-D ----------- ------- ------- ------- ----- Gathering and Processing - West Segment revenues $90,778 $91,664 $109,843 $292,285 Cost and expenses: Product cost and shrink replacement 18,461 19,054 28,059 65,574 Operating and maintenance expense 33,014 35,963 32,189 101,166 Depreciation, amortization and accretion 10,344 10,278 10,375 30,997 Direct general and administrative expenses 2,161 2,300 2,348 6,809 Other, net 3,809 2,194 (2,968) 3,035 ----- ----- ------ ----- Segment operating income 22,989 21,875 39,840 84,704 Equity earnings 15,321 18,975 23,642 57,938 ------ ------ ------ ------ Segment profit $38,310 $40,850 $63,482 $142,642 ======= ======= ======= ======== ---------------------------- Gathering and Processing - Gulf Segment revenues $486 $459 $350 $1,295 Cost and expenses: Operating and maintenance expense 575 575 124 1,274 Depreciation and accretion 32 60 33 125 Other, net - - 326 326 - - --- --- Segment operating income (loss) (121) (176) (133) (430) Discovery investment income (loss) 812 4,151 11,058 16,021 --- ----- ------ ------ Segment profit (loss) $691 $3,975 $10,925 $15,591 ==== ====== ======= ======= ------------ NGL Services Segment revenues $14,204 $14,204 $14,960 $43,368 Cost and expenses: Product cost 1,701 1,484 1,944 5,129 Operating and maintenance expense 6,317 5,843 5,271 17,431 Depreciation and accretion 808 826 880 2,514 Direct general and administrative expenses 756 764 860 2,380 Other, net 306 113 209 628 --- --- --- --- Segment profit $4,316 $5,174 $5,796 $15,286 ====== ====== ====== ======= ------------------ Williams Partners: Conway storage revenues $8,361 $8,101 $8,531 $24,993 Conway fractionation volumes (bpd) - our 50% 36,721 40,688 36,916 38,109 Carbonate Trend gathering volumes (BBtu/d) 20 19 15 18 Williams Four Corners: Gathering volumes (BBtu/ d) 1,355 1,321 1,377 1,351 Plant inlet natural gas volumes (BBtu/d) 653 554 653 620 NGL equity sales (million gallons) 39 39 44 122 NGL margin ($/gallon) $0.32 $0.40 $0.46 $0.39 NGL production (million gallons) 123 123 143 389 Wamsutter - 100%: Gathering volumes (BBtu/ d) 534 545 543 541 Plant inlet natural gas volumes (BBtu/d) 437 419 412 423 NGL equity sales (million gallons) 36 35 37 108 NGL margin ($/gallon) $0.25 $0.39 $0.43 $0.36 NGL production (million gallons) 105 109 114 328 Discovery Producer Services - 100% Plant inlet natural gas volumes (BBtu/d) 324 470 569 455 Gross processing margin ($/ MMBtu) $0.10 $0.20 $0.30 $0.22 NGL equity sales (million gallons) 12 25 30 67 NGL production (million gallons) 30 56 79 165 DATASOURCE: Williams Partners L.P. CONTACT: Jeff Pounds, media relations, +1-918-573-3332, Sharna Reingold, investor relations, +1-918-573-2078, both of Williams Web Site: http://www.williamslp.com/

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