Leading diversified master limited partnership (MLP), Williams Partners L.P. (WPZ) updated its earnings as well as capex guidance for the next three years. This move mainly reflects the partnership's reduced natural gas and natural gas liquid (NGL) margins expectations.
Williams Partners has guided net income in the range of $890 million to $1.01 billion for this year, $890 million to $1.28 billion for the next year, and $1 billion to $1.53 billion for 2012.
The partnership expects earnings to disappoint in the coming three years. However, it anticipates steady volume growth despite a volatile commodity environment.
The capital spending forecast remains unchanged, with minimal reductions at the high end of the range. The capex guidance is $1.39 billion to $1.66 billion for 2010, $830 million to $1.18 billion for 2011 and $805 million to $1.16 billion for 2012.
The partnership also expects to maintain a distribution coverage ratio of 1.2x for 2010, 1.3x for 2011, and 1.5x for 2012. For the long run, we remain optimistic on the partnership's distribution growth potential, which is likely to improve on a series organic expansion projects around its midstream and pipeline assets.
Williams Companies Inc. (WMB), the parent company of Williams Partners, has cut back its 2010–2012 capital spending and earnings outlook on lower natural gas price projections. For full-year 2010, Williams expects adjusted earnings of $1.00 per share to $1.20 per share (versus its July forecast of $1.00 to $1.45 per share). Adjusted earnings are expected to be in the range of 85 cents to $1.65 per share and 95 cents to $2.00 per share for 2011 and 2012, respectively.
The company's exploration and production capital expenditure for 2011 and 2012, currently estimated at $1.2 billion and $1.3 billion, respectively, is also expected to be significantly lower than $2.0 billion likely to be expended this year. Williams Companies owns approximately 80% of Williams Partners, including the general-partner interest.
Williams Partners' recently concluded consolidation program will allow it to simplify its structure, pay down debt and drive growth. Moreover, the partnership's broad exposure to the high-return Marcellus Shale play is expected to be accretive in the long term. However, we remain concerned about the less favorable commodity price market. Consequently, we have a Zacks #3 Rank (short-term Hold recommendation) for Williams Partners.
WILLIAMS COS (WMB): Free Stock Analysis Report
WILLIAMS PTNRS (WPZ): Free Stock Analysis Report
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