Filed By Energy Transfer Equity, L.P.
pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: The Williams Companies, Inc.
Commission File No.: 001-04174
Date: November 6, 2015
The following is a transcript of the Energy Transfer Partners, L.P. (ETP) and Energy Transfer Equity, L.P. (ETE) joint third quarter 2015 earnings conference call held at 8:00 a.m. Central time on November 5, 2015. While every effort has been made to provide an accurate transcription, there may be typographical mistakes, inaudible statements, errors, omissions or inaccuracies in the transcript. ETE believes that none of these inaccuracies is material.
Tom Long Energy Transfer PartnersCFO
Jamie Welch Energy Transfer EquityGroup CFO and Head of Business Development
Kelcy Warren Energy Transfer PartnersCEO and Chairman of the Board of Directors
Mackie McCrea Energy Transfer PartnersPresident and COO
CONFERENCE CALL PARTICIPANTS
Shneur Gershuni UBSAnalyst
Michael Blum Wells Fargo Securities, LLCAnalyst
Helen Rue Barclays CapitalAnalyst
John Edwards Credit SuisseAnalyst
Darren Horowitz Raymond James & Associates, Inc.Analyst
Kristina Kazarian Deutsche BankAnalyst
Elvira Scotto RBC Capital MarketsAnalyst
Mark Reichman SimmonsAnalyst
Jeremy Tonet JPMorganAnalyst
Brandon Blossman Tudor, Pickering, HoltAnalyst
Greetings, and welcome to the Energy Transfer Partners and Energy Transfer Equity third-quarter 2015 earnings conference call.
As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host, Tom Long, Energy Transfer Partners Chief Financial Officer. Thank you, sir; you may begin.
Tom Long Energy Transfer PartnersCFO
Thank you, operator. Good morning, everyone, and welcome to Energy Transfer Partners and Energy Transfer Equitys third-quarter 2015 earnings call, and thank you for joining us today. I will be providing comments for Energy Transfer Partners, and then hand the meeting over to Jamie Welch, who will discuss Energy Transfer Equitys third-quarter earnings and other highlights at ETE. Im also joined today by Kelcy Warren, Mackie McCrea, John McReynolds, and other members of our senior management team who are here to help us answer your questions after our prepared remarks. Ill begin with discussing our third-quarter results, followed by a growth project update, a financing and liquidity update, and concluding with a distribution discussion and a brief ETP/RGP synergy update.
As a reminder, we will be making forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These are based on our beliefs, as well as certain assumptions and information currently available to us. Ill also refer to adjusted EBITDA and distributable cash flow, or DCF; both of which are non-GAAP financial measures. You will find a reconciliation of our non-GAAP measures on our website.
Now for our Q3 results, please note, as a result of the Regency merger, which was a combination of entities under common control, ETPs financial results have been retrospectively adjusted to reflect the consolidation of Regency. Also note, effective July 1, ETE acquired 100% of the membership interest of Sunoco GP LLC, the general partner of Sunoco LP, and all of the incentive distribution rights of Sun from ETP. As a result, ETP no longer consolidates Sun for accounting purposes going forward. ETPs remaining proportionate investment in Sun is accounted for under the equity method.
Now for ETPs third-quarter results, adjusted EBITDA on a consolidated basis totaled $1.5 billion, which is up $48 million compared to the third quarter of 2014, and was slightly above consensus. DCF attributable to the partners of ETP, as adjusted, totaled $740 million, a decrease of $130 million from a year ago. Overall, we had strong performance from our NGL business, and solid performance in the inter- and intra-state pipeline segments. However, DCF for the third quarter was affected by a partial reversal from the second-quarter 2015 tax benefits, with $79 million of current income tax expense for the third quarter of 2015, as well as lower NGL and gas prices, continued shut-in in volumes in the Northeast, and unscheduled plant outages in the Permian region.
Now lets go over individual segment results. In the midstream segment, adjusted EBITDA decreased by $61 million to $318 million compared to the same period a year ago. This decrease was primarily driven by lower commodity prices and plant outages in the Permian, partially offset by higher throughput volumes. Gathered gas volumes totaled over 10 million MMBtus per day, which is up 13% versus the same period last year, primarily due to production growth in the Eagle Ford, Permian, and Cotton Valley regions, as well as the King Ranch acquisition.
In the liquids transportation and services segment, adjusted EBITDA increased by $29 million to $192 million compared to the same period last year. The increase in adjusted EBITDA was due to higher throughput at Lone Star fractionators and West Texas NGL pipelines, as well as increases in storage margin due to the ramp up of the Mariner South and related storage fees. NGL and crude transportation volumes on our wholly owned and joint venture pipelines increased from a year ago by nearly 90,000 barrels per day to 443,000 barrels. This was, in large part, due to increased volumes out of West Texas, as producers ramped up volumes, as well as commissioning of a crude transportation pipeline at the end of 2014. The remainder of the increase was related to volumes on our NGL pipelines from our plants in Southeast Texas and in the Eagle Ford region. Average daily fractionated volumes increased approximately 10,000 barrels per day from a year ago to 237,000 barrels, due to the ramp up of our second 100,000 barrel a day fractionator in Mont Belvieu, which was commissioned in late 2013.
In our intrastate statement, adjusted EBITDA increased slightly year over year to $127 million. This was primarily due to increased transportation fees recently renegotiated, and newly initiated long-term fixed-fee contracts for Mexico export volumes on our Houston pipeline system, partially offset by lower retained fuel revenues and lower natural gas sales. Transported volumes declined compared to the same period last year as a result of lower production in the Barnett Shale, which was partially offset by a ramp up in volumes related to the new long-term contract just mentioned. We expect throughput to stabilize, as increased natural gas demand from Mexico and the Gulf Coast LNG facilities helps offset declines in the Barnett Shale.
In our interstate segment, adjusted EBITDA decreased slightly to $286 million from a year ago, partially due to the removal of Trunklines 30-inch line from natural gas service in July. This line is being converted from natural gas to crude oil service as part of the Bakken pipeline project. Transported volumes were up approximately 117,000 MMBtus per day due to the increased throughput on the Tiger and Transwestern Pipelines.
Moving on to Sunoco Logistics, who had a tremendous quarter, with EBITDA of $289 million, which was predominantly blue-bar. This was $43 million higher than SXLs third quarter of 2014.
Moving to retail marketing, and as a reminder, effective July 1, ETE acquired 100% of the membership interest of Sunoco GP LLC, the general partner of Sunoco LP, and all of the incentive distribution rights of Sunoco from ETP in exchange for 21 million ETP common units previously owned by ETE. As a result of this transaction, ETP no longer consolidates Sunoco for accounting purposes. ETPs remaining proportionate investment in Sun is accounted for under the equity method. This change impacts the comparability of segment results versus prior periods.
Starting this quarter, adjusted EBITDA for the retail marketing segment will be reported as ETPs 100% ownership of the assets in Sunoco, Inc., and includes adjusted EBITDA related to the unconsolidated affiliates, which is comprised of our 68.4% interest in Sunoco LLC, the wholesale distribution business, and our investment in Sunoco LP based upon ETPs percentage ownership of the outstanding LP units. For the third quarter, the retail marketing segment contributed $195 million of adjusted EBITDA; a really strong quarter based upon higher fuel margins and volumes, as well as solid same-store sales growth.
For all other segment, adjusted EBITDA increased $32 million to $92 million versus a year ago. As it relates to the PES IPO, this has been postponed, and will restart when market conditions improve. We still view this interest as an attractive near-term monetization option for ETP.
Now lets move to our growth projects, where Ill provide a brief update. We will discuss these projects in more detail at our Analyst Day on November 17.
Starting with the Bakken pipeline project, we remain in the process of obtaining the necessary permits and regulatory authorizations for this project. The current regulatory timetables for the applicable state agencies have those authorizations coming in late 2015 or early 2016, providing us with sufficient time to construct the project in accordance with our anticipated completion schedule of Q4 of 2016. I do want to point out that last month we closed on our previously announced transfer of a net 30% interest in the Bakken pipeline project to Sunoco Logistics. In exchange for this interest, ETP received from SXL 9.4 million class B units, representing limited partnership interest in SXL, and $382 million of cash representing the reimbursements of SXLs proportionate interest of the capital spent to date on the project. With this transaction now complete, the net ownership in the Bakken pipeline project is as follows: ETP owns 45%, SXL 30%, and Phillips 66 owns 25%.
Next, on Bayou Bridge, which is a JV we formed with SXL and Phillips 66 to develop a crude oil pipeline from the Phillips 66 and Sunoco Logistics terminals in Nederland, Texas, to St. James, Louisiana. Construction is under way on the Nederland to Lake Charles segment of the pipeline, which will be 30 inches in diameter, and is expected to begin commercial operations in the first quarter of 2016. The joint venture has commenced an expansion open season for service from Lake Charles to St. James to determine the pipeline diameter of this segment, which is scheduled to commence service in the second half of 2017.
For the Rover gas pipeline, we expect to receive the draft EIS by year end, and the FERC certificate in 2Q of 2016. We anticipate being in service to the midwest hub near Defiance, Ohio, by January of 2017, and to markets in Michigan and the Union Gas Dawn hub by mid-2017. Completion of Lone Stars Frack III has been accelerated, and is now scheduled to be in service by mid-December 2015, and will come in under budget. And Frack IV remains on schedule to be in service by December of 2016. The Lone Star Express NGL pipeline remains on schedule to be in service by the third quarter of 2016, and the conversion of our existing West Texas 12-inch NGL pipeline into a crude oil/condensate line remains on schedule to be completed in the first quarter of 2017.
The Trans-Pecos and Comanche Trail pipelines, which will expand our intrastate pipeline capacity to carry gas from the Permian Basin to Mexico, remains on track to be in service in the first quarter of 2017. And at this time, the project financing is expected to close shortly. We also began flowing gas to our Edinburg pipeline in South Texas last month, and we continue to ramp up volumes to Mexico through our 36-inch Nueces pipeline. The in-service date on both the 24-inch Volunteer pipeline and the 200 million cubic foot per day cryo East Texas plant, also known as the Alamo plant, remains year-end 2015.
In the Northeast, construction of the 2.1 Bcf per day Utica Ohio River expansion continues, and Phase I was placed into service in mid-October. Phases II and III are expected online by the end of this year.
The Delaware Basin crude gathering pipeline, when completed, will consist of three separate gathering systems with an aggregate of approximately 130 miles of pipe. The gathering system, which will have approximately 120,000 barrels per day of crude oil capacity, will deliver crude oil into SXL Delaware Basin extension. Our gathering pipeline is projected to be in service by the first half of 2016.
And one final update on our projects, the Revolution project, the pipeline and plant, as well as the fractionation facility, are expected to be in service in the second quarter of 2017. As a reminder, our project provides shippers with a unique end-to-end solution with significantly improved net-back economics compared to their other alternatives.
Now moving to our CapEx discussion, ETP invested over $1.6 billion during the third quarter in growth CapEx projects, with the majority allocated to our liquids transportation and services, midstream and interstate segments. For the nine months ending September 30, ETP has now invested more than $4.3 billion in growth CapEx projects in 2015. For full-year 2015, CapEx for ETP is expected to be in a range of $5.7 billion to $6 billion.
Before moving on to discussions on distribution, lets take a quick look at ETPs liquidity position. We ended the quarter with a debt-to-EBITDA ratio of 4.49 for our credit facility. As of September 30, 2015, there were $665 million in outstanding borrowings under the $3.75 billion credit facility. We also issued approximately $306 million of equity during the third quarter of 2015 under our ATM and DRIP programs.
Now Id like to touch on our recent distribution announcement. Last week, we were pleased to announce the ninth straight quarterly distribution increase for ETP to $1.055 per common unit, or $4.22 per common unit on an annualized basis. This represents a distribution increase of $0.32 per common unit on an annualized basis, or 8.2% compared to the third quarter 2014. And it will be paid on November 16 to unitholders of record as of the close of business today.
We continue to be pleased with the progress we have made on the ETP Regency integration. We have initiated work on most of the synergy opportunities, and feel very good about achieving the upper end of our synergy range of $160 million to $225 million.
And with that, Ill turn the call over to Jamie, who will walk you through ETEs results.
Jamie Welch Energy Transfer EquityGroup CFO and Head of Business Development
Thank you, Tom. Good morning, every
The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.
To receive a free e-mail notification whenever Williams Companies makes a similar move, sign up!
Other recent filings from the company include the following:
Entry into a Material Definitive - Nov. 22, 2017
Williams Companies's President & CEO just picked up 6,000 shares - Nov. 16, 2017
Williams Companies director just picked up 6,000 shares - Nov. 16, 2017