Intrinsic value of Williams Partners - WPZ

Previous Close

$38.58

  Intrinsic Value

$5.53

stock screener

  Rating & Target

str. sell

-86%

  Value-price divergence*

-8%

Previous close

$38.58

 
Intrinsic value

$5.53

 
Up/down potential

-86%

 
Rating

str. sell

 
Value-price divergence*

-8%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of WPZ stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 37.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.18
  10.30
  9.77
  9.29
  8.86
  8.48
  8.13
  7.82
  7.53
  7.28
  7.05
  6.85
  6.66
  6.50
  6.35
  6.21
  6.09
  5.98
  5.88
  5.80
  5.72
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
Revenue, $m
  7,491
  8,263
  9,070
  9,913
  10,791
  11,706
  12,658
  13,647
  14,676
  15,744
  16,855
  18,009
  19,209
  20,457
  21,755
  23,107
  24,514
  25,981
  27,509
  29,104
  30,767
  32,504
  34,317
  36,212
  38,193
  40,264
  42,431
  44,698
  47,070
  49,554
  52,156
Variable operating expenses, $m
 
  9,361
  10,275
  11,230
  12,224
  13,260
  14,338
  15,458
  16,623
  17,833
  19,090
  20,393
  21,751
  23,165
  24,635
  26,165
  27,759
  29,420
  31,151
  32,956
  34,840
  36,806
  38,860
  41,006
  43,249
  45,594
  48,047
  50,614
  53,301
  56,114
  59,060
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  6,624
  9,361
  10,275
  11,230
  12,224
  13,260
  14,338
  15,458
  16,623
  17,833
  19,090
  20,393
  21,751
  23,165
  24,635
  26,165
  27,759
  29,420
  31,151
  32,956
  34,840
  36,806
  38,860
  41,006
  43,249
  45,594
  48,047
  50,614
  53,301
  56,114
  59,060
Operating income, $m
  867
  -1,098
  -1,205
  -1,317
  -1,433
  -1,554
  -1,680
  -1,811
  -1,947
  -2,089
  -2,236
  -2,384
  -2,543
  -2,708
  -2,880
  -3,059
  -3,245
  -3,439
  -3,641
  -3,853
  -4,073
  -4,303
  -4,543
  -4,794
  -5,056
  -5,330
  -5,617
  -5,917
  -6,231
  -6,560
  -6,904
EBITDA, $m
  2,587
  799
  877
  959
  1,044
  1,132
  1,224
  1,320
  1,420
  1,523
  1,630
  1,742
  1,858
  1,979
  2,104
  2,235
  2,371
  2,513
  2,661
  2,815
  2,976
  3,144
  3,319
  3,503
  3,694
  3,895
  4,104
  4,323
  4,553
  4,793
  5,045
Interest expense (income), $m
  0
  645
  736
  830
  927
  1,029
  1,134
  1,244
  1,359
  1,478
  1,601
  1,729
  1,863
  2,002
  2,146
  2,296
  2,452
  2,615
  2,784
  2,961
  3,145
  3,338
  3,538
  3,748
  3,967
  4,196
  4,435
  4,686
  4,948
  5,222
  5,509
Earnings before tax, $m
  439
  -1,743
  -1,942
  -2,147
  -2,360
  -2,583
  -2,815
  -3,056
  -3,306
  -3,566
  -3,837
  -4,113
  -4,406
  -4,709
  -5,026
  -5,355
  -5,697
  -6,054
  -6,426
  -6,814
  -7,218
  -7,640
  -8,081
  -8,541
  -9,023
  -9,526
  -10,052
  -10,602
  -11,179
  -11,782
  -12,413
Tax expense, $m
  -80
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  431
  -1,743
  -1,942
  -2,147
  -2,360
  -2,583
  -2,815
  -3,056
  -3,306
  -3,566
  -3,837
  -4,113
  -4,406
  -4,709
  -5,026
  -5,355
  -5,697
  -6,054
  -6,426
  -6,814
  -7,218
  -7,640
  -8,081
  -8,541
  -9,023
  -9,526
  -10,052
  -10,602
  -11,179
  -11,782
  -12,413

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  145
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  46,265
  51,004
  55,987
  61,189
  66,613
  72,260
  78,135
  84,242
  90,590
  97,186
  104,041
  111,165
  118,573
  126,276
  134,291
  142,634
  151,322
  160,374
  169,811
  179,652
  189,921
  200,641
  211,836
  223,534
  235,760
  248,545
  261,918
  275,911
  290,557
  305,890
  321,948
Adjusted assets (=assets-cash), $m
  46,120
  51,004
  55,987
  61,189
  66,613
  72,260
  78,135
  84,242
  90,590
  97,186
  104,041
  111,165
  118,573
  126,276
  134,291
  142,634
  151,322
  160,374
  169,811
  179,652
  189,921
  200,641
  211,836
  223,534
  235,760
  248,545
  261,918
  275,911
  290,557
  305,890
  321,948
Revenue / Adjusted assets
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
  0.162
Average production assets, $m
  38,103
  42,023
  46,129
  50,416
  54,885
  59,537
  64,378
  69,410
  74,640
  80,075
  85,722
  91,593
  97,696
  104,043
  110,647
  117,521
  124,679
  132,138
  139,912
  148,021
  156,482
  165,314
  174,539
  184,176
  194,250
  204,784
  215,803
  227,332
  239,399
  252,033
  265,264
Working capital, $m
  -1,285
  -611
  -671
  -734
  -799
  -866
  -937
  -1,010
  -1,086
  -1,165
  -1,247
  -1,333
  -1,421
  -1,514
  -1,610
  -1,710
  -1,814
  -1,923
  -2,036
  -2,154
  -2,277
  -2,405
  -2,539
  -2,680
  -2,826
  -2,980
  -3,140
  -3,308
  -3,483
  -3,667
  -3,860
Total debt, $m
  18,563
  21,038
  23,704
  26,487
  29,389
  32,410
  35,553
  38,820
  42,216
  45,745
  49,413
  53,225
  57,187
  61,309
  65,597
  70,060
  74,708
  79,551
  84,600
  89,865
  95,359
  101,094
  107,083
  113,341
  119,883
  126,723
  133,877
  141,363
  149,199
  157,402
  165,993
Total liabilities, $m
  24,812
  27,287
  29,953
  32,736
  35,638
  38,659
  41,802
  45,069
  48,465
  51,994
  55,662
  59,474
  63,436
  67,558
  71,846
  76,309
  80,957
  85,800
  90,849
  96,114
  101,608
  107,343
  113,332
  119,590
  126,132
  132,972
  140,126
  147,612
  155,448
  163,651
  172,242
Total equity, $m
  21,453
  23,717
  26,034
  28,453
  30,975
  33,601
  36,333
  39,173
  42,124
  45,191
  48,379
  51,692
  55,136
  58,718
  62,445
  66,325
  70,365
  74,574
  78,962
  83,538
  88,313
  93,298
  98,504
  103,943
  109,629
  115,573
  121,792
  128,298
  135,109
  142,239
  149,706
Total liabilities and equity, $m
  46,265
  51,004
  55,987
  61,189
  66,613
  72,260
  78,135
  84,242
  90,589
  97,185
  104,041
  111,166
  118,572
  126,276
  134,291
  142,634
  151,322
  160,374
  169,811
  179,652
  189,921
  200,641
  211,836
  223,533
  235,761
  248,545
  261,918
  275,910
  290,557
  305,890
  321,948
Debt-to-equity ratio
  0.865
  0.890
  0.910
  0.930
  0.950
  0.960
  0.980
  0.990
  1.000
  1.010
  1.020
  1.030
  1.040
  1.040
  1.050
  1.060
  1.060
  1.070
  1.070
  1.080
  1.080
  1.080
  1.090
  1.090
  1.090
  1.100
  1.100
  1.100
  1.100
  1.110
  1.110
Adjusted equity ratio
  0.464
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465
  0.465

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  431
  -1,743
  -1,942
  -2,147
  -2,360
  -2,583
  -2,815
  -3,056
  -3,306
  -3,566
  -3,837
  -4,113
  -4,406
  -4,709
  -5,026
  -5,355
  -5,697
  -6,054
  -6,426
  -6,814
  -7,218
  -7,640
  -8,081
  -8,541
  -9,023
  -9,526
  -10,052
  -10,602
  -11,179
  -11,782
  -12,413
Depreciation, amort., depletion, $m
  1,720
  1,898
  2,083
  2,276
  2,477
  2,687
  2,905
  3,131
  3,367
  3,612
  3,866
  4,126
  4,401
  4,687
  4,984
  5,294
  5,616
  5,952
  6,302
  6,668
  7,049
  7,447
  7,862
  8,296
  8,750
  9,225
  9,721
  10,240
  10,784
  11,353
  11,949
Funds from operations, $m
  4,789
  155
  141
  129
  117
  104
  90
  76
  61
  45
  29
  12
  -5
  -23
  -42
  -61
  -81
  -102
  -123
  -146
  -169
  -194
  -219
  -245
  -273
  -301
  -331
  -362
  -395
  -429
  -464
Change in working capital, $m
  851
  -57
  -60
  -62
  -65
  -68
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -92
  -96
  -100
  -104
  -109
  -113
  -118
  -123
  -129
  -134
  -140
  -147
  -153
  -160
  -168
  -176
  -184
  -193
Cash from operations, $m
  3,938
  212
  201
  192
  182
  171
  160
  149
  137
  124
  111
  98
  84
  70
  55
  39
  23
  7
  -10
  -28
  -46
  -65
  -85
  -105
  -126
  -148
  -171
  -195
  -219
  -245
  -272
Maintenance CAPEX, $m
  0
  -1,716
  -1,893
  -2,078
  -2,271
  -2,472
  -2,682
  -2,900
  -3,127
  -3,362
  -3,607
  -3,861
  -4,126
  -4,401
  -4,687
  -4,984
  -5,294
  -5,616
  -5,952
  -6,302
  -6,668
  -7,049
  -7,447
  -7,862
  -8,296
  -8,750
  -9,225
  -9,721
  -10,240
  -10,784
  -11,353
New CAPEX, $m
  -1,944
  -3,921
  -4,106
  -4,287
  -4,469
  -4,653
  -4,840
  -5,032
  -5,230
  -5,435
  -5,648
  -5,870
  -6,103
  -6,347
  -6,604
  -6,874
  -7,158
  -7,458
  -7,775
  -8,109
  -8,461
  -8,832
  -9,224
  -9,638
  -10,074
  -10,534
  -11,018
  -11,529
  -12,067
  -12,634
  -13,231
Cash from investing activities, $m
  -681
  -5,637
  -5,999
  -6,365
  -6,740
  -7,125
  -7,522
  -7,932
  -8,357
  -8,797
  -9,255
  -9,731
  -10,229
  -10,748
  -11,291
  -11,858
  -12,452
  -13,074
  -13,727
  -14,411
  -15,129
  -15,881
  -16,671
  -17,500
  -18,370
  -19,284
  -20,243
  -21,250
  -22,307
  -23,418
  -24,584
Free cash flow, $m
  3,257
  -5,426
  -5,798
  -6,173
  -6,558
  -6,954
  -7,362
  -7,783
  -8,220
  -8,673
  -9,144
  -9,634
  -10,145
  -10,678
  -11,236
  -11,819
  -12,429
  -13,068
  -13,737
  -14,439
  -15,175
  -15,946
  -16,756
  -17,605
  -18,496
  -19,432
  -20,414
  -21,444
  -22,527
  -23,663
  -24,855
Issuance/(repayment) of debt, $m
  -836
  2,620
  2,666
  2,784
  2,902
  3,021
  3,143
  3,268
  3,396
  3,529
  3,667
  3,812
  3,963
  4,121
  4,288
  4,463
  4,648
  4,843
  5,048
  5,265
  5,494
  5,735
  5,990
  6,258
  6,541
  6,840
  7,155
  7,486
  7,836
  8,204
  8,591
Issuance/(repurchase) of shares, $m
  614
  4,007
  4,259
  4,566
  4,882
  5,209
  5,546
  5,896
  6,258
  6,634
  7,024
  7,426
  7,850
  8,292
  8,753
  9,234
  9,737
  10,263
  10,814
  11,390
  11,993
  12,625
  13,287
  13,981
  14,708
  15,471
  16,270
  17,109
  17,989
  18,912
  19,880
Cash from financing (excl. dividends), $m  
  -677
  6,627
  6,925
  7,350
  7,784
  8,230
  8,689
  9,164
  9,654
  10,163
  10,691
  11,238
  11,813
  12,413
  13,041
  13,697
  14,385
  15,106
  15,862
  16,655
  17,487
  18,360
  19,277
  20,239
  21,249
  22,311
  23,425
  24,595
  25,825
  27,116
  28,471
Total cash flow (excl. dividends), $m
  2,580
  1,201
  1,127
  1,176
  1,226
  1,276
  1,327
  1,380
  1,434
  1,490
  1,548
  1,604
  1,668
  1,735
  1,805
  1,879
  1,956
  2,038
  2,125
  2,216
  2,312
  2,414
  2,521
  2,634
  2,753
  2,879
  3,011
  3,151
  3,298
  3,453
  3,616
Retained Cash Flow (-), $m
  1,428
  -4,007
  -4,259
  -4,566
  -4,882
  -5,209
  -5,546
  -5,896
  -6,258
  -6,634
  -7,024
  -7,426
  -7,850
  -8,292
  -8,753
  -9,234
  -9,737
  -10,263
  -10,814
  -11,390
  -11,993
  -12,625
  -13,287
  -13,981
  -14,708
  -15,471
  -16,270
  -17,109
  -17,989
  -18,912
  -19,880
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -2,806
  -3,132
  -3,390
  -3,656
  -3,933
  -4,219
  -4,516
  -4,824
  -5,144
  -5,476
  -5,822
  -6,182
  -6,557
  -6,948
  -7,355
  -7,781
  -8,225
  -8,689
  -9,174
  -9,681
  -10,211
  -10,766
  -11,347
  -11,955
  -12,592
  -13,259
  -13,958
  -14,691
  -15,459
  -16,264
Discount rate, %
 
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
 
  -2,600
  -2,671
  -2,638
  -2,576
  -2,486
  -2,371
  -2,233
  -2,076
  -1,904
  -1,723
  -1,537
  -1,351
  -1,169
  -994
  -832
  -683
  -550
  -435
  -336
  -254
  -188
  -135
  -95
  -65
  -43
  -28
  -17
  -11
  -6
  -3
Current shareholders' claim on cash, %
  100
  90.3
  81.9
  74.4
  67.7
  61.8
  56.4
  51.6
  47.3
  43.3
  39.8
  36.6
  33.6
  31.0
  28.5
  26.3
  24.2
  22.4
  20.7
  19.1
  17.6
  16.3
  15.1
  13.9
  12.9
  11.9
  11.0
  10.2
  9.4
  8.7
  8.1

Williams Partners L.P. is an energy infrastructure company. The Company has operations across the natural gas value chain from gathering, processing, and interstate transportation of natural gas and natural gas liquids to petchem production of ethylene, propylene, and other olefins. It operates through its Northeast G&P, Atlantic-Gulf, West segment. Under the Northeast G&P segment, it owns and operates fractionation facilities at Moundsville, de-ethanization and condensate facilities at its Oak Grove processing plant. The Atlantic Gulf segment includes the Company's interstate natural gas pipeline, Transcontinental Gas Pipe Line Company, LLC. The West segment includes its interstate natural gas pipeline, Northwest Pipeline, and natural gas gathering processing and treating operations.

FINANCIAL RATIOS  of  Williams Partners (WPZ)

Valuation Ratios
P/E Ratio 55.8
Price to Sales 3.2
Price to Book 1.1
Price to Tangible Book
Price to Cash Flow 6.1
Price to Free Cash Flow 12.1
Growth Rates
Sales Growth Rate 2.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -30.4%
Cap. Spend. - 3 Yr. Gr. Rate -10.1%
Financial Strength
Quick Ratio 0
Current Ratio 0.1
LT Debt to Equity 82.4%
Total Debt to Equity 86.5%
Interest Coverage 0
Management Effectiveness
Return On Assets 0.9%
Ret/ On Assets - 3 Yr. Avg. 0.7%
Return On Total Capital 1%
Ret/ On T. Cap. - 3 Yr. Avg. 0.9%
Return On Equity 1.9%
Return On Equity - 3 Yr. Avg. 1.6%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 76.9%
Gross Margin - 3 Yr. Avg. 70.7%
EBITDA Margin 28.8%
EBITDA Margin - 3 Yr. Avg. 22.3%
Operating Margin 11.6%
Oper. Margin - 3 Yr. Avg. 6.7%
Pre-Tax Margin 5.9%
Pre-Tax Margin - 3 Yr. Avg. 1.7%
Net Profit Margin 5.8%
Net Profit Margin - 3 Yr. Avg. 0.7%
Effective Tax Rate -18.2%
Eff/ Tax Rate - 3 Yr. Avg. -5.4%
Payout Ratio 587.2%

WPZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the WPZ stock intrinsic value calculation we used $7491 million for the last fiscal year's total revenue generated by Williams Partners. The default revenue input number comes from 2016 income statement of Williams Partners. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our WPZ stock valuation model: a) initial revenue growth rate of 10.3% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.9%, whose default value for WPZ is calculated based on our internal credit rating of Williams Partners, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Williams Partners.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of WPZ stock the variable cost ratio is equal to 113.3%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for WPZ stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Williams Partners.

Corporate tax rate of 27% is the nominal tax rate for Williams Partners. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the WPZ stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for WPZ are equal to 508.6%.

Life of production assets of 22.2 years is the average useful life of capital assets used in Williams Partners operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for WPZ is equal to -7.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $21453 million for Williams Partners - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 968.471 million for Williams Partners is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Williams Partners at the current share price and the inputted number of shares is $37.4 billion.

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COMPANY NEWS

▶ 5 Dividend Stocks That Pay Out Over $2.5 Billion a Year   [Oct-08-17 11:22AM  Motley Fool]
▶ Where Williams Companies Could Trade in the Next 7 Days   [Sep-29-17 11:57AM  Market Realist]
▶ Better Buy: Enbridge Inc. vs. Williams Partners L.P.   [Sep-26-17 02:18PM  Motley Fool]
▶ Upstream Energy Losers This Week: COG, AR, and EQT   [Sep-21-17 02:07PM  Market Realist]
▶ What Analysts Recommend for Kinder Morgan   [Sep-12-17 07:38AM  Market Realist]
▶ 5 Stocks That Look Good Short   [Aug-27-17 10:00AM  TheStreet.com]
▶ Williams Partners Likely to Keep Trading Sideways   [Aug-23-17 02:42PM  TheStreet.com]
▶ What Williams Partners Technical Indicators Tell Us   [Aug-22-17 02:06PM  Market Realist]
▶ Williams Companies Valuation: What It Means   [12:05PM  Market Realist]
▶ How Large-Cap MLPs Fared in 2Q17   [Aug-10-17 01:34PM  Market Realist]
▶ Williams Partners Expansion Projects in 2Q17   [08:57AM  Market Realist]
▶ What Analysts Recommend for Williams ahead of 2Q17 Earnings   [Jul-31-17 10:36AM  Market Realist]
▶ Will Williams Partners Coverage Ratio Improve in 2Q17?   [Jul-28-17 10:38AM  Market Realist]
▶ Why Analysts Expect Growth in Williams Partners Q2 Earnings   [Jul-27-17 05:18PM  Market Realist]
▶ PAA, WPZ, MMP, and CQP: Last Weeks Key MLP Rating Changes   [Jul-25-17 07:41AM  Market Realist]
▶ Williams Partners Announces Quarterly Cash Distribution   [Jul-24-17 02:36PM  Business Wire]
▶ Is Williams Companies a Buy at Current Price Levels?   [Jul-20-17 12:14PM  Market Realist]
▶ ETE, WPZ, MPLX: Last Weeks Key MLP Rating Changes   [Jul-17-17 04:05PM  Market Realist]
▶ Behind Williams Companies Recent Market Performance   [Jul-12-17 04:29PM  Market Realist]
▶ EPD, ETP, PAA, WPZ: What Do Current Valuations Indicate?   [Jul-10-17 05:06PM  Market Realist]
▶ Boardwalk Pipeline on the Street: Analyst Recommendations   [Jul-05-17 09:06AM  Market Realist]
▶ MLPs Rose 4.2% in the Last Week of 1H17   [12:43PM  Market Realist]
▶ Williams Rose 3.9% in June: Can It Gain Upward Momentum?   [Jun-30-17 03:27PM  Market Realist]
Financial statements of WPZ
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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