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Compressor Station Start-up of Atlantic Sunrise Delayed; Williams Sticking to Mid-2018 In-Service

The expected July start-up of greenfield compression services along the Transcontinental Gas Pipe Line Co. (Transco) Atlantic Sunrise expansion project will be delayed a few months, parent company Williams CEO Alan Armstrong said Thursday.

Williams, however, is maintaining a 2018 in-service for the full 198-mile, 1.7 million Dth/d natural gas pipeline project.

Transco has completed more than 40% of the work related to the greenfield compressor stations, but the process to commission the stations is “much more complicated” than start-up activities related to the pipeline system, Armstrong said on a call to discuss 4Q2017 earnings. While Transco has completed only 30% of the pipeline work to date, management anticipates that contractors will be “mechanically complete” on the pipeline portion in July, at which time commissioning can begin.

Armstrong said the mega expansion project has been dealt “challenging weather,” but applauded his team managing the project’s contractors for getting the project on track and in compliance with the many environmental regulation controls required.

The $3 billion project would open a path for constrained Marcellus Shale gas to reach markets in the Southeast through the Transco system running along the Atlantic seaboard. The expansion includes 197.7 miles of pipeline composed of about 184 miles of new 30- and 42-inch diameter pipeline for the greenfield CPL North and CPL South segments in Pennsylvania; about 12 miles of new 36- and 42-inch diameter pipeline looping known as Chapman and Unity Loops in Pennsylvania; about three miles of 30-inch diameter replacements in Virginia, and associated compressor stations, equipment and facilities.

Transco in December got the green light from FERC to construct the Chapman Loop and the Unity Loop [CP15-138]. The Chapman Loop consists of 2.5 miles of 36-inch diameter looping pipeline to be built in Clinton County, while the Unity Loop is an 8.5-mile, 42-inch diameter looping pipeline planned for Lycoming County.

The Federal Energy Regulatory Commission issued a certificate order for Atlantic Sunrise in early February 2017, and a tolling order the following month. It was one of the last pipeline projects to be approved by FERC before former Chairman Norman Bay departed, which touched off a no-quorum period that lasted nearly seven months.

Williams reported a net income in 4Q2017 of $1.7 billion ($2.03/share), up from a $15 million loss (minus 2 cents) in 4Q2016. The gain was largely attributed to the re-measurement of deferred tax liabilities to reflect lower future tax payments expected because of the recently enacted Tax Cuts and Jobs Act of 2017.

For the full year, Williams reported net income of $2.174 billion ($2.62/share), up from a 2016 loss of $424 million (minus 57 cents). The nearly $2.6 billion gain was driven primarily by the net impact of the tax reform, a $1.1 billion gain associated with the sale of ownership interest in the Geismar olefins facility, the absence of impairments of equity-method investments and higher revenues from Williams Partners' Atlantic-Gulf business.

Partially offsetting the improvement was a net increase in impairments of certain assets and the absence of results associated with the Geismar olefins facility, which was sold last summer.

Distributable cash flow (DCF) was reported to be $349 million in 4Q2017, down from $518 million in 4Q2016. For 2017, DCF was $1.44 billion, compared with $1.82 billion in 2016.

Williams set dividend growth rate guidance at 10-15% annual growth rate, or $1.35/share.

Williams Partners reported a net loss in 4Q2017 of $342 million (minus 35 cents/share), a $487 million decrease from 4Q2016 earnings of $145 million (24 cents/share). The loss was largely attributed to the impact of charges at Transco and Northwest Pipeline related to tax reform.

For the full year, Williams Partners reported net income of $871 million (90 cents/share), from a 2016 loss of $431 million (minus 17 cents), mostly attributed to the sale of assets, the absence of impairments of equity-method investments and higher revenues for the Atlantic-Gulf segment.

DCF was reported to be $702 million in 4Q2017, up from $699 million (92 cents) in 4Q2016. For 2017, DCF was $2.82 billion, compared with $2.97 billion in 2016. The lower DCF in 2017 was attributed mostly deferred revenue amortization associated with contract restructurings and prepayments. To a lesser extent, to the tune of $42 million, an increase in maintenance capital expenditures (capex) also negatively impacted DCF.

Williams Partners set guidance for 2018 at between $1.5 billion and $1.7 billion for net income; at $2.90-$3.20 for DCF; at $2.7 billion for total growth capex and at $1.7 billion for Transco growth capex.

*Correction: Williams is targeting a July startup for the mainline portion of its Atlantic Sunrise project, with the greenfield compression likely taking a few months longer. The original headline in the story, July Start-up of Atlantic Sunrise Delayed; Williams Sticking to 2018 In-Service, suggested the entire project had been delayed, but the pipeline portion may go into service before the greenfield compression, which would immediately make available most of the design capacity. Also, Williams Partners LP fourth quarter and full-year 2017 earnings results were reported, not those of Williams. Williams reported net income in 4Q2017 of $1.7 billion ($2.03/share), up from a $15 million loss (negative 2 cents) in 4Q2016. For 2017, Williams reported net income of $2.174 billion ($2.62/share) versus a $424 million loss (minus 57 cents) in 2016. Distributable cash flow (DCF) was $349 million in 4Q2017, down from $518 million in 4Q2016. For 2017, DCF was $1.44 billion, compared with $1.82 billion in 2016. NGI regrets the error.

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