Investorideas.com - Energy Stocks: Trading Alert on Williams Companies (NYSE: WMB)
Energy Stocks: Trading Alert on Williams Companies (NYSE: WMB)
Energy Commentary from Karl Miller - Read Bio and More info
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May 14, 2010
On January 14, 2010, Mr. Miller published analysis titled "Natural Gas Pipelines: Some Get It and Some Don't" and issued a Buy opinion for Williams Companies (NYSE: WMB).
In his opinion, Mr. Miller cited that he believed WMB management and Board of Directors had been appropriately overhauled WMB, gotten its combined act together after years of languishing and put serious focus on its two core businesses; I) transporting natural gas on its mainline pipes and; II) natural gas exploration and production, with very stated high drilling success rates.
Highlights of WMB announced restructurings announced January 19, 2010 include:
Williams to modify and accelerate its MLP strategy; contribute its premier interstate gas pipeline, domestic midstream assets and interests to Williams Partners in $12 billion restructuring
Williams Partners to become leading diversified MLP with approximately $2 billion of 2010 segment profit plus DD&A (forecast pro-forma) and strong growth outlook
Williams to own approximately 80% of new, much larger Williams Partners, up from 24% of current partnership
New structure to significantly enhance growth prospects for both Williams and Williams Partners:
New self-funding Williams Partners will have reliable access to capital markets, lower capital costs, and greater ability to pursue development projects and acquisitions; expects investment-grade credit ratings
Williams can allocate more capital to exploration and production business for growth and diversification; expects to retain investment-grade credit ratings
Williams' previous '09-'11 recurring guidance is unchanged; Williams Partners announces distribution increase, 2010-11 guidance with '09 guidance unchanged
Following the restructuring and per the Company, most of Williams€™ interstate gas pipeline assets are owned by Williams Partners L.P. (NYSE:WPZ), one of the largest energy master limited partnerships in the country. Williams owns 84 percent of Williams Partners, including the controlling general partner interest, which provides WMB with a healthy and steady cash flow stream to utilize for their core oil and gas production business.
Highlights of Williams Partners L.P. are as follows:
Average Recommendation: OVERWEIGHT
Average Target Price: 44.00 Number of Ratings: 7
Current Quarters Estimate: 0.76
FY Report Date: 12 / 2010
Current Year's Estimate: 3.16
Last Quarter's Earnings: 0.61
PE on CY Estimate: 12.64
Year Ago Earnings: 2.88
Next Fiscal Year Estimate: 3.27
PE on Next FY Estimate: 12.21
Source: Marketwatch
Mr. Miller was clearly well ahead of the market in his analysis of the WMB restructuring, and now WMB is being rewarded by the leading market analyst with multiple upgrades, and the Company is rated a Buy across the board, while its MLP subsidiary WMZ is rated overweight, due to the restructuring, which released capital constraints and freed up a substantial amount of cash flow for both companies.
"WMB management has done a very good job of getting out in front of the market capital markets, having seen the writing on the wall that investors wanted the pipelines dropped into a separate Master Limited Partnership (WMZ), which would clean up the WMB balance sheet and allow the company to pursue joint ventures, discounted proven reserve acquisitions and put all of their operational focus on continued high drilling success rates in the U.S.", said Mr. Miller in discussions with him this morning.
"WMB is extremely cheap at the $21.38 per share at 9 times forward earnings (as of mid-day May 14, 2010), when compared to projected forward earnings of $2.38 per share management guidance for 2010. WMB should be trading in a $37 to $47 per share price range or 15 to 20 times earnings, respectively", Mr. Miller added.
Mr. Miller rates WMB is a strong buy, especially when you factor in the 84% ownership and dividend that is funneled up from WMZ.
full story
Investorideas.com - Energy Stocks: Trading Alert on Williams Companies (NYSE: WMB)
http://www.investorideas.com/companies/NaturalGas/Karl_Miller/news/5141.asp
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