With the spinoff of its exploration arm now complete, a transformed Williams has its sights set on new business and major infrastructure expansion projects both onshore and offshore in North America, CEO Alan Armstrong said Thursday.

Armstrong and his management team outlined the company’s strategy during a conference call with analysts and investors. At first glance, the latest quarterly and year-end results were “noisy,” the CEO admitted, “but the continuing operations are performing really well.”

The Tulsa-based company posted a loss of $444 million (minus 74 cents/share) in 4Q2011, versus profits of $174 million (29 cents) in the year-ago period. The losses resulted in large part to the spinoff of WPX Energy Inc., the exploration business, at the end of last year (see Daily GPI, Dec. 29, 2011). However, improved results from natural gas pipeline partnership Williams Partners Ltd., as well as Canadian midstream operations, lifted adjusted income from continuing operations to $214 million (36 cents/share) from $180 million (30 cents).

Williams Partners, of which Williams owns 72%, is growing by leaps and bounds in the onshore, as well as in the Gulf of Mexico (GOM). The partnership reported a 37% increase in profits in the latest quarter to $391 million ($1.05/unit) from $286 million (76 cents) a year earlier.

“Williams Partners is well on its way to creating a 3 Bcf/d natural gas supply hub in northeast Pennsylvania; it also has other major projects under way in the deepwater Gulf of Mexico and along the Transco [Transcontinental Gas Pipe Line] pipeline,” said Armstrong. “We also have significant expansions under way in our olefins business in both Canada and the U.S.”

Williams Partners on Tuesday unveiled an ambitious joint venture (JV) project with Cabot Oil & Gas Corp. to build the Constitution Pipeline, which would run 120 miles from the partnership’s gathering system in Susquehanna County, PA, to the Iroquois Gas Transmission and Tennessee Gas Pipeline systems in Schoharie County, NY. The partnership would own 75% of the system and through affiliates would provide construction, operation and maintenance services. Cabot committed to anchor shipments and would hold the remaining stake.

As envisioned, the pipeline is set to be in service in early 2015, initially transporting at least 500,000 Dth/d of Cabot’s Marcellus Shale output. It also would be expandable to meet future demand for takeaway capacity in northeastern Pennsylvania, said pipeline chief Randy Bernard.

If Cabot were the only shipper, its gas supplies would be sufficient to build the 24-inch diameter pipeline, Bernard said.

“The stated investment is around $701 million,” Bernard told analysts. “We have an open season on now, and that may lead to upsizing on that project to a 30-inch [diameter pipe] from 24, which would raise the capital by another $22 million or so…We haven’t negotiated rates on the pipeline but they would be consistent with regulated pipeline returns.”

The partnership also now controls the former Laser Gathering System, which it bought last year from Delphi Midstream Partners LLC (see Daily GPI, Dec. 5, 2011). Delphi began expanding its Pennsylvania system in early 2011 (see Daily GPI, Feb. 18; July 13, 2010). It also held the rights to construct and operate midstream infrastructure for acreage leased by Carrizo Oil & Gas Inc. in northeastern Pennsylvania, rights that the partnership now controls.

The Cabot JV and Laser system are “milestones” in the partnership’s “strategy to create the Susquehanna Supply Hub, a major natural gas supply hub in northeastern Pennsylvania,” said Armstrong. By 2015 the hub is expected to be capable of gathering and delivering more than 3 Bcf/d of gas into four major interstate gas pipeline systems.

Midstream operations chief Rory Miller said there were “a lot of moving parts” in building the infrastructure hub, which also includes the company’s new 33-mile, 24-inch diameter Springville gathering pipeline, which connects to Transco.

“With Springville, there is 300 MMcf/d in takeaway, which would be up to 625-650 MMcf/d over the course of the year. Laser now has 1.3 Bcf/d of capacity…and that’s going up…Constitution also has 500 MMcf/d…That will eventually add up to 3 Bcf/d of takeaway capacity,” said Miller. “Keep in mind one of the limitations out there. Producers are scrambling for takeaway capacity to fulfill that.

“It will take time to build. We exited the year on Springville at around 600 MMcf/d…The Laser story is one that’s unfolding. We just started volumes building up there…The earnings potential in 2012, 2013, are a shadow of what it’s going to be. We have a strong producer group behind those assets and they are ramping up quickly.”

Cabot’s management team, said Miller, “has been pretty transparent about their plans” to focus on the Marcellus. The region also has been one of WPX Energy’s “key areas,” and Carrizo’s volumes are backed financially through its JV with India’s Reliance Industries Ltd. (see Daily GPI, Aug. 6, 2010). “We’re very excited about the opportunities and we’re seeing producers working hard to take advantage…”

The partnership, with DCP Midstream Partners LP, also is building the Keathley Canyon (KC) Connector in one of the hottest prospect areas of the deepwater GOM (see Daily GPI, Jan. 20; Dec. 16, 2011). The development is an expansion of the central GOM Discovery gas gathering system, which is to include more than 200 miles of large-diameter pipe with more than 400 MMcf/d of gathering capacity. The expansion, scheduled to be in service by mid-2014, would begin in southeast KC and connect into Discovery’s 30-inch Outer Continental Shelf transmission system. Cost is estimated at about $600 million.

Williams increased the top end of its per-share earnings forecast for 2012 by a nickel and now expects to earn $1.15-1.60. Capital expenditures were increased for the year to $3.4-3.8 billion from $2.53-2.93 billion.

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