The Williams Cos., Inc. Q1 2008 Earnings Call Transcript

May. 1.08 | About: Williams Companies (WMB)

Williams Companies Inc. (NYSE:WMB)

Q1 FY08 Earnings Call

May 01, 2008, 09:30 AM ET

Executives

Travis Campbell - Head of IR

Steven J. Malcolm - Chairman, President and CEO

Don R. Chappel - Sr. VP and CFO

Ralph A. Hill - President, Exploration and Production

Alan Armstrong - President, Midstream Gathering and Processing

Phillip D. Wright - President, Gas Pipeline

Analysts

Rebecca Followill - Tudor Pickering

Faisel Khan - Citigroup

Sunil Jagwani - Catapult

Rick Gross - Lehman Brothers

Operator

Good day everyone and welcome to the Williams Companies first quarter 2008 earnings results conference call. Today’s call is being recorded.

At this time for opening remarks and introductions, I would like to turn the call over to, Mr. Travis Campbell, Head of Investor Relations. Please go ahead, sir.

Travis Campbell - Head of Investor Relations

Thank you very much, and good morning everybody. Welcome to Williams first quarter 2008 call. Thank you all for your interest in our Company. This morning Steve Malcolm, our CEO, will lead off, followed by Don Chappel, our CFO, also Ralph Hill, Alan Armstrong, and Phil Wright, will make some brief remarks.

But before, I turn it over to Steve Malcolm, please note that all of the slides, both those that are in the presentation today, and those in your appendix are available on our website Williams.com, in a PDF format. The first quarter press release and all the company’s schedules are also available on the website.

Slide number 2 and 3 titled, Forward-Looking Statements, disclose various risk factors and uncertainties related to the future operations and expectations. Actual results, of course, may vary significantly from our current expectations due to the factors disclosed in those slides. Please review those. Slide 4, Oil and Gas Reserve Disclaimers, is also very important, and we urge you to read that slide as well. Also included in the presentation today, are various non-GAAP numbers that have been reconciled back to Generally Accepted Accounting Principles. Those schedules follow the presentation and are integral to this presentation.

So with that, I’ll turn it over to, Steve.

Steven J. Malcolm - Chairman, President and Chief Executive Officer

Thanks, Travis. Good morning. Welcome to Williams first quarter call, and thank you for your continuing interest in our Company. By almost any measure or metric, we recorded another outstanding quarter.

Recurring adjusted earnings per share was up 84%, and consolidated segment profit was up 93%. Our integrated business model is hitting on all of its cylinders with E&P’s domestic production higher by 20%, over a year ago. Production now exceeds a Bcf a day. Production in our two largest basins, Piceance and Powder, were up 27% versus first quarter last year, and our resource potential continues to grow. As well, Midstream continued to capture strong margins and recorded segment profit, which was 69% higher than first quarter in 2007.

And Gas Pipes with higher rates on Transco and Northwest pipeline, and revenues from two expansion projects, was able to improve segment profit by 20%. Our operating performance continues to drive impressive financial results, and the future looks bright, as we’ve continued our disciplined investment around our best of class assets, and have increased our financial outlook for 2008 and 2009. And finally, we continue to pull incremental value levers, with the creation of Williams Pipeline Partners in January, and the continued repurchase of our shares.

So with that, I’ll turn it over to, Don Chappel.

Don R. Chappel - Senior Vice President and Chief Financial Officer

Thanks, Steve, good morning. Turn to slide number 8 please. Just a summary of our top level financial results. Net income of $500 million compared quite favorably to net income a year ago, up almost fourfold. Perhaps more importantly, our key earnings measure, recurring income from continuing operations after mark-to-market adjustments, was at $0.57 compared to $0.31 a year ago, an increase of 84%.

Let’s turn the page please, to slide number 9. Just to show some of the detail, I will focus my comments on recurring. The only significant item between recurring and reported this quarter is the gain recorded in E&P on the Peru asset sale. But, in terms of continuing operations, E&P reported $312 million of recurring segment profit, up 66% on the strength of 20% production increase, higher average realized prices, offset somewhat, by higher costs related to higher volumes, as well as higher costs and higher prices.

Midstream also had a terrific quarter, reporting $261 million in segment profit, up 79% from a year ago. Midstream’s results are up sharply, as a result of much higher NGL prices and margins. Solid production was offset somewhat, by $25 million of production that went into line pack inventory versus sales in this quarter, some lingering effects of the Ignacio fire, and some difficult weather in the West during the quarter.

Gas pipeline at $180 million was up 20% year-over-year as result of the full quarter effect of the Transco rate cases. Just looking down to the bottom line segment profit, after mark-to-market adjustment in total up $280 million or up 57%.

With that, I’ll turn it to Ralph.

Ralph A. Hill - President, Exploration and Production

Thank you, Don. I’m pleased to share our very positive first quarter results with you today, and I want to thank all of our dedicated employees for their excellent work to make these results happen.

Let’s turn to slide 11. Our first quarter ‘08 production was up 19% compared to first quarter 2007. Our operating profit this quarter was a record at $312 million, it was up 66% from the first quarter ‘07, and that does not include the $118 million non-recurring gain that we had on sales from international assets.

Looking at slide 12, as our major basins. Our Piceance Valley was up 25% over a year ago, we currently have 22 rigs operating in the valley. The Highlands team, volumes were up 72% over a year ago at 43 million a day and we have four rigs operating in the Highlands. Powder River volumes continued to explode. They are up 27% from over a year ago at 209 million cubic feet a day. And the Fort Worth volumes were up over 2 times from a year ago at 38 million a day and we have four rigs operating. Very solid results in each of our core basins.

Looking at some of our cost metrics, turning to slide 13. Production costs, which is defined basically on our investor relations sheet as lease and other operating expenses and operating taxes. As you can see, we continue to be one of the leaders in the industry. We were $1.08 per Mcf in our production costs. The industry average listed on this, which is the top 20 producers that we see, was approximately $1.59. So, we continue to have a significant cost advantage in our production cost.

Looking at slide 14, finding and development costs. Our three-year F&D ending the year in 2007 was $1.77 per Mcf. The group average, as you can see on this chart, was $2.89. On the one-year basis our F&D was approximately $1.93, and the industry’s average was about $3.09. We prefer to look at it on a three-year basis, and again we have a significant cost advantage in our F&D costs.

Slide 15, production growth. We are now the 12 largest producer overall and number four in production growth, as you can see on this chart. The left side of the chart shows the overall position and the right side of the chart shows that, we were up little over 21%, and this is based on the year end 2007 data for the year 2007. And recall a number of the producers listed in this top 20 with us, do have a number of acquisitions in their portfolio, and almost all of our growth is what we call organic growth through the drillbit.

Slide 16, growth in reserves. Again, we had a 232% reserve replacement for last year. You can see the top reserve replacements. The far right side of this column shows what it is without any acquisitions percentage. So we would move up several spots on this without acquisitions, which we virtually had no acquisitions for reserves. So again, very impressive work by the team in growing our reserves.

Slide 17, to update you on our, as we always do in this call, our 3P reserves and resource potential. We’ve increased our 3P reserves from last year by over 600 Bcf, and this is after producing 334 Bcf last year, as you’ll recall. Overall, our total 3P reserves now are approximately 11.4 Tcf. And if you look at our resource potential, we continue to be in that range about 22 Tcf. So impressive year for our 3P growth, and the 3P reserves exclude the majority of our new areas, such as the majority of Barcus Creek, and all of the paradox you went to in areas like that, that we are currently doing some exploratory drilling in, those are excluded from our 3P reserves.

Slide 18, is a new slide for us to show the geographically where our reserves are both on a proved and probable basis in the current production. I won’t go into this slide in detail, but it does show that, obviously as we continue to be, a majority of our reserves are in the Piceance, followed up by, on a potential basis, and our probable basis, in the Powder River with our San Juan and Mid-Continent group, bringing up the rest of our proved reserves.

And finally, slide 19. We continue to have significant value creation for Williams. Record set quarter for segment profit and production, 3P reserves 11.4 Tcf. Our strategy continues to be rapid development in a very safe manner for the premier drilling inventory. The rest of leader in production costs, successes, cost efficiencies, those all continue. So, I again thank our experienced and talented workforce for that. And we also look forward to continue to pursue and evaluate our new resource opportunities as this year continues on.

With that, I will now turn it over to Alan Armstrong.

Alan Armstrong - President, Midstream Gathering and Processing

Thanks, Ralph. Well, we did have another great quarter in Midstream as well, and our record first quarter segment profit of $261 million, beat the first quarter of 2007 recurring segment profit by 78%, and again, that’s on a recurring basis. We accomplished this in spite of a $25 million NGL inventory build as about 59 million gallons of NGLs went to build linepack during March. Roughly half of this will come back to us when Overland Pass Pipeline comes online as the required linepack and that NGL pipeline is about half of the MAPL system that we’re currently producing into.

Our first quarter ‘08 equity NGL production increased approximately 10% over first quarter ‘07, when you normalize for these changes in inventory. Our expansion into the Piceance Basin of Colorado is progressing as well. We’re moving ahead rapidly with the construction of our Willow Creek processing plant, the transfer of the Parachute pipeline from Gas Pipes to Midstream, and the conversion and completion of the PGX NGL pipeline that carries NGL production out of E&P’s Parachute processing complex today.

The benefits of William’s integrated strategy with E&P and Gas Pipes in the Piceance are abundantly clear, as we work to optimize this valuable resource play with all segments of our Company. In 2008, we continue to succeed at growing our deepwater volumes in the Gulf of Mexico, as evidenced by our executing new contracts which dedicated five new blocks to our discovery system. And we received the first deliveries of Bass Lite gas in first quarter ‘08, and are awaiting the startup of the Blind Faith spar in the eastern Gulf of Mexico. As we discussed last quarter, we have executed an NGL forward sales strategy that mitigates a portion of the risk related to our NGL sales price in 2008.

Moving to the next side, this graph shows the tracking of margins over the last five years. It also shows growth in our total domestic NGL production. And in the light blue bar, the amount of liquids we sold for our account, excluding discovery and oxable investments. To reiterate, our equity NGL production only shows the volumes we sold as opposed to that produced for our own account, and therefore excluded a swing of about 71 million gallons, which was sales from inventory of about 12 during the first quarter of ‘07 and, again, a delivery in the inventory of about 59. So that total swing was a total of 71 million gallons.

Volumes were also affected by about 20 days of downtime in January, at the Ignacio fire that happened in 2007 as our system of Four Corners recovered from that. Volumes are returning back up to normal as we enter into the second quarter now. The environment that drove record margins during the fourth quarter was certainly alive and well in January of ‘08. However, since then with increasing gas prices, NGL margins have come down somewhat. Several factors worked together to create the extraordinary environment we saw in 2008. As we mentioned before, the low gas prices in the Rockies was a major contributor.

As you can see there, that peak in the third and fourth quarter of ‘08, a big chunk of that was driven by very low gas prices there at the end of ‘07. The new gas transportation capacity out of the Rockies to relieve these constraints and current margins are being driven solely by high crude oil prices in a weak dollar, which has allowed for exports from North American polyethylene producers. If you would, please take note of the appendix slide, it details how we have forward sold the portion of our NGLs for 2008, and as you can see the forward sales represent about 28% of our 2007 equity volumes.

Moving to the next side, this slide provides insight in the investment opportunities on the horizon for Midstream. Large deepwater projects such as Perdido Norte, Blind Faith, Bass Lite and our Rockies expansions, especially the Willow Creek project, dominate the expansion capital in the in guidance portion of this slide for both 2008 and 2009. You’ll notice that this was lowered slightly by $50 million, and that is just because we remove the ‘07 assets that have already gone into service. We have several opportunities going to our Board for approval in the next couple of months, and therefore we expect this in guidance capital pie to grow dramatically this year.

The under negotiation pie has remained steady. The main change from last quarter is addition of a propylene distribution project that we’re working on in Louisiana. The pie labeled, In Development and Proposal, reflects a tremendous amount of opportunities available to us in the next five years. The capital range remained steady as these projects are in very early stages of their development. In an addition, you can see how the mix of spending by area is unchanged as well, but shows that we have a nice portfolio across a variety of our regions.

Some of the more significant growth projects that are in guidance, of course, you can see they’re listed below and you can see the first full year of OP from those assets. And then in addition, some of the projects that are not included in our guidance right now, but in the under negotiations pie, of about a little over $400 million worth of projects, including an expansion at Echo Springs and Canadian oil sands projects that we’ve spoken to previously that we hope to be moving into the in guidance, as I mentioned earlier.

Moving on to the next slide, summarize. To recap, in the first quarter of ‘08 we enjoyed strong operating profit growth driven by favorable commodity prices across most Midstream assets. Margin growth occurred in both NGLs and our olefin segment, and in both Canada, and the U.S. First quarter ‘08 put us off to a great start for 2008, as it set the record for our highest first quarter segment profit ever in this business.

Our recurring segment profit increased by 78%, continuing a trend that has been driven by higher than forecasted NGL margins, we are raising segment profit guidance again. The incredible year that was 2007 resulted in an industry leading pretax return on average assets for Midstream of over 27%. In fact, we posted the highest segment profit of any of our peers that we track, and these results were driven by record margins, especially in the Rockies and by our teams’ execution of several projects that needed to come on time with the Opal expansion being a good example of that.

We are very excited about our growth opportunities in several key areas, including Canadian oil sands, the deepwater Gulf of Mexico and the Rockies. These projects will lay a strong foundation for the future beyond our guidance period. With new deepwater volumes coming on in 2008, we hope to hold this lead position as we stay very focused on investing our capital in a very disciplined manner, and being the most reliable service provider in the midstream space for our customers.

And with that, I will turn it over to, Phil Wright.

Phillip D. Wright - President, Gas Pipeline

Thank you, Alan. I am pleased to report that if we could go to the next slide please, 26, that Gas Pipes is off to a very strong start in 2008.

Following the successful IPO of Williams Pipeline Partners LP, we and our partners at TransCanada announced that we’ve joined forces on a major project to bring Rockies gas to the West and Northwest. The Sunstone pipeline from the Opal, Wyoming hub to Stanfield is designed to offer Western markets access to abundant new Rockies supply, combined with the excellent optionality of the Northwest and GTN pipeline networks.

Also at West, we had a successful open season on our Sundance Trails pipeline project, which we’ve now included in our guidance.

And importantly, we received FERC approval for the Transco rate case, adding fuel to our profit improvement and strong return to free cash flow generation. This is also a testament to the excellent customer relations and skills of our commercial teams and our teams throughout the pipeline. We are well underway on our construction of Phases 3 and 4 of our Gulfstream expansions, which will enable us to serve the rapidly growing markets near Tampa Bay and the West County Energy Center on the east coast of Florida. And, as you know, we delivered a 21.3% improvement in segment profit.

Slide 27, please. Looking ahead to 2008 and 2009, we expect our maintenance capital levels to be lower than required in 2007. And as always, we’ve shown detail on the major growth projects included in our guidance, illustrating when we expect the project to be in service, a capital expenditure forecast, and the expected addition to segment profit in the first full year of each project. And I’m not going to go through each and every one of these. You can catch that as you please.

Next slide please 28. As you can see in this slide, there are many promising growth projects across our pipeline networks. In all my 32 years in the energy business, I have not seen the level of activity we’re experiencing now in the interstate gas transmission space. With the massive shifts we’re seeing in supply sources, the industry is in a manner of speaking, repiping America, and I can assure you, we at Williams are capturing our share. One quick note about this slide, the projects shaded in blue are not included in guidance.

Now there are a few projects that I want to highlight in a little greater detail. And if you compare this slide, this map, to the map I showed in our last quarter, you will note that we’ve included four new projects in our guidance. Our Mobile Bay South project will expand the Transco line from Station 85 in Choctaw County, Alabama to interconnect with Gulfstream near Transco Station 82 in Mobile County, Alabama. We plan to place this expansion into service by May of 2010.

The 85 North project will expand Transco’s main line from station 85 to markets in the Carolinas, with the in-service date of May 2011. We are still finalizing the capital range for the project, but it will be one of the largest expansions in the history of Transco. The Sundance Trail project is an expansion project on Northwest Pipeline connecting the Piceance Basin to the Opal Hub in Wyoming. The project will add 150,000 decatherms a day of capacity and the in-service date is planned for November of 2010.

Lastly, the Pascagoula expansion is 15-mile, 26-inch lateral, connecting the Gulf LNG Clean Energy Import Terminal to the Mobile Bay Lateral with a total capacity of 810,000 decatherms a day. Transco and the Florida Gas Transmission Pipeline will share undivided interests of 57.7% and 42.3%, respectively. Cost of this project is estimated at about $31 million with an in-service date of October 2011.

Last slide, please for me number 29. Summarizing the key takeaways, the establishment of our pipeline MLP positions us nicely to bring a low cost source of capital to capturing the many growth opportunities in front of us. We have general rate cases on both of our major business units, Northwest and Transco behind us. Organic growth opportunities abound and are bearing fruit for us, and all of this enhances our ability to deliver strong earnings and stable cash flow.

With that, I will turn it over.

Don R. Chappel - Senior Vice President and Chief Financial Officer

Thanks, Phil. Let’s turn to slide number 31, please. 2008 forecast guidance.

Segment profit is up as a result of some improvements in results in the business units, which I will touch on in just a moment. Jumping to the bottom line, diluted EPS on a recurring basis after eliminating mark-to-market effects is up about $0.10 to $1.70 to $2.10 from our prior guidance. Note that we’ve raised our assumption regarding energy prices somewhat from our prior guidance. However, I think you’ll find that our guidance still reflects very conservative assumptions as compared to current markets and really reflects more of a long-term point of view as to energy prices.

Turning the page to slide number 32 please, again focusing on the bottom line. We’re up about $0.10 to $1.80 to $2.30, again with similar price forecasts. Note also that, our results include the effects of certain legacy hedges, which are detailed on slide number 57. Some of those legacy hedges are at very low prices and are tending to hold back some of E&P’s earnings.

Next slide, please, number 33. This slide graphically depicts our enterprise position on natural gas. The red line is our enterprise net position, which is comprised of our net E&P production, less the financial hedges which are depicted in gold. The blue would represent the unhedged E&P volume, and the purplish color at the bottom would be the unhedged Midstream short position. The net of all that is, where the red line is at about $300 million unchanged per day in both 2008 and 2009.

Turning the page now to slide number 34 please some modest changes in our forecasted results by business segment. In 2008, Midstream is up about $75 million principally on strong margins. Gas Pipeline is reducing their guidance just slightly as a result of some investments we are making in a number of these capital projects that Phil spoke to, where we are expensing the development costs until the point that those projects are determined to be probable. The net of that raises our segment profit guidance about $100 million in 2008. In 2009, E&P is raising its guidance somewhat as a result of again, good strong production and somewhat higher price. And again, bottom line in 2009, up about $100 million.

Turning to slide number 35 please, capital spending, very little change from a quarter ago. However, I would note that Williams continues to be opportunity-rich, as each of our business unit leaders described. And we will continue to pursue value-adding opportunities and as such CapEx will continue to rise throughout the future quarters.

Turning next to slide number 36, please. This is cash forecast I like to walk through this together with you to give you some sense of how we’re thinking about this once again. We have unrestricted cash in the U.S. of $1.234 billion, add to that our forecast CFFO of $2.5 billion to $2.9 billion; back off the CapEx at $2.6 billion to $2.950 billion, and again, we expect that number to grow. We add in our asset sales, the net proceeds from the WMZ IPO, subtract the dividend, minority interest payments, and the balance of the share repurchase program, assuming that we execute on that, and some other items, and we bring down a cash balance of $600 million to $700 million, with a number of things that are yet to be determined.

I will just focus a couple of comments there. Again, we’re opportunity rich. We are out pursuing additional investment opportunities that will in fact add value, those will likely cause CapEx to grow and cash to deplete. Additionally, we will consider to the extent that we have additional cash that’s available and not earmarked for additional investment. We will look at share repurchase or debt repurchase, but again, no commitment on that at this point. And then additional dropdowns, we are committed to the growth of our two MLPs. We do expect to continue to grow those MLPs, but we’re not providing any guidance in that respect here today. I won’t walk through the same detail for 2009, but the thinking is much the same.

With that, I’ll turn it back to, Steve.

Steven J. Malcolm - Chairman, President and Chief Executive Officer

Thanks, Don, and looking at my last slide. Slide 38, I believe it is. Let me conclude with a few key takeaways from our meeting this morning. Obviously, our first quarter results represent a wonderful start to 2008. Secondly, the attractive commodity price environment is expected to continue, and will certainly benefit our results going forward. Thirdly, we have increased our earnings outlook for the next two years. And lastly, we continue to be very, very opportunity rich with respect to the organic opportunities to grow our businesses, and create long-term shareholder value.

So with that, we would be happy to take your questions.

Question and Answer

Operator

[Operator Instructions]

And our first question will come from Rebecca Followill with Tudor Pickering.

Rebecca Followill - Tudor Pickering

Good morning, couple of questions for you, Ralph. This year, this winter, you went through your first drilling in the Highlands. Can you talk about how that went and implications for going forward?

Ralph A. Hill - President, Exploration and Production

Yes. It was actually a very severe winter, and we made it through just fine, very safely, operated a rig both in Trail Ridge through the severe winter, and also at Allen Point. It was the second year for Trail Ridge and the first time ever at Allen Point. And we’re pleased with our results, we’ve learned quite a bit. But it does confirm to us that, we believe we can operate in those two areas year round.

So hopefully, as we digest what we learn this year, we will look to begin to add to the more than one rig in those areas for the winters coming up. But it went really well. And I guess if you wanted to get tested, this was a great year to get tested. It was a very severe winter up there, but it went well.

Rebecca Followill - Tudor Pickering

Thanks. And then also on your 3P reserve report, can you remind us again what is not in there? And how long of a lateral did you assume in the Highlands, I think in your last 3P report you were assuming a 2000-foot lateral?

Ralph A. Hill - President, Exploration and Production

Right.

Rebecca Followill - Tudor Pickering

What did you assume in this report?

Ralph A. Hill - President, Exploration and Production

And that lateral was more in the valley. But it was 2000 last time, the lateral this time is 3000-foot. But what’s not in there is the majority of the acreage, we just earned at the end of the year in the Barcus Creek area, which is just north of Ryan Gulch. And then none of our exploratory areas are in there, such as the Uinta or the Paradox or the Caney or any of those areas are in the 3P number.

Rebecca Followill - Tudor Pickering

Okay. And then last question for you on Paradox; any updates for us on where you stand on exploration there?

Ralph A. Hill - President, Exploration and Production

With our partner, we’re beginning to drill our first horizontal well there. We’ve done several vertical wells there. We do believe there is a gas presence, which is good, its shale. The key is being able to produce that. So we’re doing our first horizontal well to test the difference between the horizontal drilling and the vertical drilling there.

Rebecca Followill - Tudor Pickering

And what are you targeting, what formation?

Ralph A. Hill - President, Exploration and Production

It’s called a Gothic Shale.

Rebecca Followill - Tudor Pickering

Okay, perfect. Thank you.

Ralph A. Hill - President, Exploration and Production

Okay. Thank you.

Operator

[Operator Instructions] And we’ll go to our next caller, Faisel Khan from Citigroup.

Faisel Khan - Citigroup

Good morning. I am wondering if you could just walk me through in a little bit more detail in terms of how the NGL equity volumes ramped down from the fourth quarter of ‘07 to the first quarter of this year. I know you said some of the linepack issues on the Overland Pass Pipeline in the Ignacio plant fire. But can you just quantify it a little bit in terms of what went on?

Don R. Chappel - Senior Vice President and Chief Financial Officer

Sure. If you are looking at that slide, you would see that the equity sales on that went from first quarter of ‘07 of 345 to 308. And in the first quarter of ‘07, we were actually reducing our linepack on MAPL because we were selling some of our product to BP at the outlet of those plants, because they had a lower tariff on MAPL than we did. So that net production, if you will, actual equity production was 333, if you included what was actually produced for our account.

And then, we put 59 million gallons, looking at that 308 number for first quarter of ‘08 we actually put 59 million gallons in the inventory as we built linepack on MAPL because that sell went to BP ended at the end of February of ‘08. And so that net swing is 71 million gallons from period-to-period, which gives you about a 33 million gallon build net-net. And so it’s about a 10% improvement in equity production for liquids that were produced for our own account.

Faisel Khan - Citigroup

Okay. And so going forward though, we should see those volumes come back?

Don R. Chappel - Senior Vice President and Chief Financial Officer

The volumes, when Overland Pass starts up about half of that linepack will come back to us because the Overland Pass system doesn’t currently requires about half the linepack of Enterprise requires on their MAPL and seminal systems.

Faisel Khan - Citigroup

Okay. Then just on the NGL margin, if you could also just walk me through a little bit in terms of how the margins actually contracted from the fourth quarter of ‘07 to the first quarter of ‘08? Was it that the rapid price in natural gas relative to oil in the first quarter? Or was it that ethane and propane prices weren’t keeping up with the historical correlation?

Don R. Chappel - Senior Vice President and Chief Financial Officer

Yes, well, certainly, at the end of the quarter, we saw correlations between ethane and crude begin to slip some. So even though the crude to gas ratio has been pretty high, we’ve been noticing the ethane correlation to crude slipping somewhat. But probably the main driver, if you were looking to Williams NGL margins, the main driver has been the increasing gas prices in the Rockies, particularly at Opal.

And we had very, very low prices in the third and fourth quarter of last year relative to -- and crude was coming up, crude has stayed up and increased a little bit. Actually NGL prices have stayed relatively flat if you look at it in aggregate between ethane and the heavies. But our feedstock cost gas has gone up almost threefold.

Faisel Khan - Citigroup

Okay. And any change in the demand from your customers on the liquids side? Do you still see demand as fairly stable compared to the fourth quarter of last year?

Don R. Chappel - Senior Vice President and Chief Financial Officer

Yes. We’ve seen pools pretty hard. And the thing that I think has helped us a lot that hasn’t been real apparent is that, the U.S. dollar has been so weak that it’s allowed for a lot of polyethylene export from the U.S. into Europe. And so that’s actually kept demand on the light end producers here in the U.S. pretty heavy; because the producers in Europe are usually heavy in oil-based product, is what they crack to produce ethylene over there. So our ethylene here in the U.S. right now is lower cost than some of those European-based crackers.

Faisel Khan - Citigroup

Okay, great. Thanks. And on the E&P side of the equation, in the Sand one Basin, looks like you had about 134 million cubic feet a day in the first quarter I think last year you were doing closer to 150. Was the processing plant fire one of the reasons why the production volumes little bit down?

Don R. Chappel - Senior Vice President and Chief Financial Officer

Yeah, you’re right on there. Several things, the fire clearly affected our volumes beginning in late last year, in January and February. We also had some imbalance makeup that we did at that time with another producer. And then the weather was poor in the sense of very muddy. So it’s something to wait. We’ll shut there with the water -- when you deepwater, you do with water trucks and some other trucks couldn’t get to the well side. Thus we had to shut the wells in, so a combination of all three things hitting in the first quarter.

Faisel Khan - Citigroup

And how much do you think that impacted production volumes?

Don R. Chappel - Senior Vice President and Chief Financial Officer

We should have been just about flat to slightly up. So we were down by to the first quarter of last year, so.

Faisel Khan - Citigroup

Okay.

Don R. Chappel - Senior Vice President and Chief Financial Officer

It was about the entire effect you said between the 134 million and 150 million.

Faisel Khan - Citigroup

I got you. And on the Powder River, the large production increase over last year is that just, Big George Coal’s overtaken the Wyodak Coal’s or is it because there is lumpiness in terms of how the drilling occurs in the Powder River Basin?

Don R. Chappel - Senior Vice President and Chief Financial Officer

It’s just that Big George Coal’s are kicking in more and more. There has been a number of wells that we drilled and our partner drilled over the last couple of years, and they take anywhere from 12 months to slightly longer to deepwater. And the Coal’s are doing better than we thought, and the deep watering happening. And our partner also paid a lot of attention to hooking their wells up, and getting the water fall into, they could get the production on. So all those things together made the volumes just really pick up, but the Big George Coal’s are performing very well.

Faisel Khan - Citigroup

Okay. And then on the, is your share repurchase program did you purchased any share in the first quarter?

Steven J. Malcolm - Chairman, President and Chief Executive Officer

Yes, we did, Faisel. The total share repurchase program is worth $652 million program today, with $126 million in the first quarter.

Faisel Khan - Citigroup

Okay, great. And what did you say are you price sensitive at all to your share repurchase program or would you say that, you have the cash available, that’s something that you think about using on a regular basis?

Steven J. Malcolm - Chairman, President and Chief Executive Officer

We are price sensitive. So we continue to look at alternate use as a capital. And again, we have substantial reinvestment opportunity which, we believe will drive very attractive long-term value. And then we also have the share repurchase as an option.

Faisel Khan - Citigroup

Great. Thanks for the time, guys.

Operator

And your next question comes from Sunil Jagwani with Catapult.

Sunil Jagwani - Catapult

Yeah, hi. Good morning and congratulations. I wanted to ask about the E&P business in particular. I mean your growth rate in volumes grows at 30% is significantly higher than plenty of other companies in the market standalone E&P, and on the hybrids and your resource potential is again not any less.

Yet, I think it’s pretty obviously that the implied value of the E&P business a fraction of what some of the other companies seem to get. Can you refresh our memory as to what you might consider in terms of potential split of the E&P business?

Steven J. Malcolm - Chairman, President and Chief Executive Officer

Yeah. We’ve continued to like our integrated model created great long-term shareholder value over the last few years. I have done quite a bit of an analysis on the potential impact of some kind of split or spin. I’ve talked about that with you in the past. So we have evaluated that option with our Board with our advisors.

And to date still prefer the integrated model is the way to create long-term shareholder value. We’re growing the business fairly dramatically. And the opportunity is for us to continue do so persist. We will continue to evaluate the pros and cons, of a split of a spin, and I believe that we will always do the right thing for the shareholders.

Sunil Jagwani - Catapult

I mean it almost seems frankly insane to me that, being quite the I get an implied value of five or six times that is just a cash from the E&P business. And your peers are getting sixteen to seventeen times, which is three times as much and their GAAP is wider than it’s ever been and that’s why I asked the question. But I appreciate your answer, thank you.

Operator

[Operator Instructions]

And to the final question currently in queue Rick Gross with Lehman Brothers. Please go ahead.

Rick Gross - Lehman Brothers

My question was actually answered earlier. Thank you.

Operator

As there are no further questions currently in queue, I will conclude today’s question and answer session. For any additional or concluding remarks, I’d like to turn the conference back over to, Travis Campbell.

Steven J. Malcolm - Chairman, President and Chief Executive Officer

Yeah, this is Steve Malcolm. Delighted with our first quarter, we are very excited about the future, very much opportunity rich, and look forward to continuing to grow shareholder value. So we look forward to talking with you again. Thanks.

Operator

That concludes today’s conference call. Thank you all for your participation. You may now disconnect

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