KEY RATING FACTORS
Increasing Scale and Diversity: WPZ's rating reflects the scale and scope of its operations, the predictability of cash flow generated by its pipelines and fee-based midstream operations, and its conservative financial practices. Also considered is its relationship with The Williams Companies, Inc. (WMB, rated 'BBB-'; Outlook Stable) owner of WPZ's general partner (GP) and 62% of its limited partner interests. In
WPZ subsidiaries include its wholly-owned FERC-regulated interstate pipelines,
WPZ's Positive Rating Outlook considers expected lower consolidated business risk resulting from the growing fee-based component of its midstream operations as it expands in the Marcellus and other production basins. Also considered are the expected benefits of the proposed dropdown of certain Canadian operations from WMB to WPZ expected to close
Fourth-quarter 2013 earnings were negatively affected by lost production at its Geismar olefins plant and weak natural gas liquids (NGL) margins. The Geismar plant which has been shut down as the result of a fire, is expected to be operational in
Forward Expectations: WPZ's adjusted 2013 debt-to-EBITDA was approximately 4.0x. Benefiting from the Canadian asset dropdown and associated equity funding, WPZ's leverage could approximate 4.0x or below in 2014.
Favorable Liquidity: WPZ has access to a
Positive: Future developments that may, individually or collectively, lead to positive rating action include:
-- Increased scale and diversity of assets;
-- A greater percentage of revenues generated from pipelines and other fixed-fee assets;
-- Expectations for strong credit measures with sustained adjusted debt-to-EBITDA below 4.0x.
Negative: Future developments that may nonetheless potentially lead to a negative rating action include:
-- Increasing commodity risk;
-- Weaker credit metrics with sustained adjusted debt-to-EBITDA above 4.5x.
Additional information is available at 'www.fitchratings.com'
-- 'Corporate Rating Methodology, Including Parent and Subsidiary Linkage'
-- 'Scenario Analysis: Lifting the Crude Export Ban'
-- 'Rating Pipeline, Midstream and MLPs-Sector Credit Factors'
-- 'NGL Pipelines: Northeast Supply Drives New Projects'
-- '2014 Outlook: Midstream Services'
-- '2014 Outlook: Crude Oil and Refined Products Pipelines'
-- '2014 Outlook: Natural Gas Pipelines'
-- 'Crossover Credits in Natural Resources'
-- 'Credit Considerations for the GP/LP Relationship'
-- 'Funding U.S. LNG Export Facilities'
Funding U.S. LNG Export Facilities (Credit Issues for MLP and Corporate Sponsors)
Credit Considerations for the GP/LP Relationship
Crossover Credits in Natural Resources - Migration Catalysts 2003-2013
2014 Outlook: Natural Gas Pipelines
2014 Outlook: Crude Oil and Refined Products Pipelines
Scenario Analysis: Lifting the Crude Export Ban (
Corporate Rating Methodology: Including Short-Term Ratings and Parent and Subsidiary Linkage
Source: Fitch Ratings
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