With an expectation of “strong” natural gas liquids (NGL) and olefin margins in its U.S. and Canadian midstream businesses, Williams last week increased its earnings guidance by 11% for 2011 and 2012.

The Tulsa-based company reported net profit of $321 million (54 cents/share) in 1Q2011, versus a net loss of $193 million (minus 33 cents) a year ago.

“We’re off to a good start this year, and we’re expecting an even stronger performance for the remainder of 2011 and 2012,” said CEO Alan Armstrong. “We’ve increased our earnings guidance 11% for both years, as we expect strong natural gas liquids and olefin margins in our midstream businesses. We continue to invest in and bring more value-adding natural gas and NGL infrastructure projects online.

“With abundant supplies in the new shale plays and growing demand from natural gas-fired electrical generation, the need for natural gas infrastructure will continue to grow. When you combine our existing assets with $4.8 billion in growth capital planned for 2011 and 2012, Williams stands to play a major role in providing the infrastructure that will bring the vast natural gas and NGL supplies in North America to market.”

During a conference call on Thursday Armstrong provided an update on Williams’ plans to split the company and create a separate exploration and production (E&P) company, which shareholders approved in February (see NGI, Feb. 21).

“We, of course, cannot say much at all about the spinoff of our E&P segment, to be known as WPX Energy,” Armstrong said, noting that the company has not yet received regulatory approvals. “I can…speak to the positive impact that we expect to see at WPX…[which] is going to be one of the top [E&P] companies in the nation…”

Profits rose slightly at Williams Partners LP, the midstream partnership, which reported net income of $437 million, versus $424 in the year-ago period. Meanwhile, the E&P segment reported that its profits plunged year/year to $51 million from $153 million because of lower gas prices. The lower gas prices were partially offset by a 6% increase in production volumes.

In its U.S. portfolio, average daily production jumped 6% year/year to 1,155 MMcfe/d from 1,091 MMcfe/d, but was down 1% from the final three months of 2010. The biggest production gains were in the Piceance Basin, where output jumped 12% to 706 MMcfe/d from 632 MMcfe/d. Williams expects average annual daily production to increase by 9% in 2011 and 11% in 2012 at guidance midpoints.

Bakken Shale activity also continues to expand, with three rigs now operating and two more to be added in the next six months. Current net production in the oily Bakken is about 4,000 b/d, which is “roughly double the first quarter 2011 average.”

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